KPIs or Key Performance indicators are a popular type of performance measurement for organisations mainly used to track the health of the company. Most organisations are already familiar with the concept of KPIs. So naturally, we ask the question, what is the difference between KPIs and OKRs?
What are KPIs?
KPIs are a way to measure various activities within an Organisation, activities such as acquiring new customers, customer retention, building products, running marketing campaigns, accounting and finance and so on. Stakeholders often want to quantify and measure the performance of these activities in order to achieve better results, have more accountability and learn from those activities to do better in the future.
By setting KPIs upfront, organisations are able to measure, assess and improve the performance of these activities. KPIs also help align the teams on what is being measured in that activity
Examples of KPIs
- Deals Closed in a Quarter
- Average deal size
- New customer acquisition
- Customer acquisition cost (CAC)
What are OKRs?
OKR (Objectives and Key Results) is a comprehensive Goal setting framework used by organizations to define measurable goals and track their outcomes.
An Objective communicates what we want to achieve. Objectives are concrete, action-oriented, and inspirational. When properly crafted, they offer context for what needs to be measured and help align all departments within the organisation.
Key Results communicate how we know if are getting there. Effective KRs are specific and time-bound. Most of all, they are measurable and verifiable.
- O: Become a leader in US and UK
- KR: 10% Increase in deals closed
- KR: Average deal size > 100k
- O: Generate Qualified Leads for sales
- KR: Improve website conversions by 10%
- KR: Reduce customer acquisition cost (CAC) by 5%
OKRs vs KPIs – Similarities and differences
Notice that the Key results in OKRs (Objective and Key Results) most likely started their life as KPIs. they are both specific and measurable. however, KPIs When wrapped within an OKR, give much more context around what we need to achieve and why. KRs in OKRs are not only specific and measurable but also ambitious.
Purpose of OKRs
Purpose of KPIs
The measurable part in OKRs and KPIs serve the same purpose, however, OKRs offer a more complete way more defining and communicating goals. which includes the measurements, but in the context of what we want to achieve. An organisation could have a number of KPIs and teams could try and focus on all of these, but they don’t clarify which KPIs are important, and how they help achieve the company goals and strategy.
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