The question of OKR vs KPI tends to come up in a couple of different situations. Sometimes an organisation is moving from tracking KPIs to starting to work with OKRs, and wants to understand how the two relate. Other times someone is simply trying to make sense of the two terms, since they often appear in the same circumstances and it is not obvious how they differ.
In its essence, a KPI (key performance indicator) is just a metric the business follows, while an OKR is a goal constructed of an Objective together with two to four Key Results, which are metrics with targets. So they are not really competing, and they are not two words for the same thing. In most organisations they live side by side, and the more useful question is how they fit together.
This article goes through what a KPI is, what an OKR is, how they actually differ, when to use each, and how OKRs and KPIs work together in the same quarter.
OKR vs KPI: the core difference
If you put the two side by side, the difference between OKRs and KPIs becomes quite obvious.
| Facet | KPI | OKR |
|---|---|---|
| What it is | A metric you follow | A framework and a way of formulating goals |
| Structure | A standalone metric, often with a target | An objective plus two to four key results |
| Purpose | Follow how something is performing | Move the needle on something that matters right now |
| Time horizon | Ongoing and continuous | Time-boxed to a cycle, often a quarter or a year |
| Examples | Gross margin % | Drive profitability in our business KR: Improve our Gross Margin from X% to Y% KR: Lower advertising cost per sale from X to Y |
Neither is better than the other. A KPI is the right tool for keeping a steady eye on the business, and an OKR is the right tool for creating focus and driving change. Most of the misconceptions come from mixing the two up.
What a KPI is
A KPI is a metric, not a framework.
KPI is just an acronym for something you measure in the organisation. It can carry a target, but it says nothing about why the metric matters or how you would go about moving it.
A KPI, a key performance indicator, is a metric the business follows to see how something is performing. It could be the number of website visitors, sick leave as a percentage of total time worked, gross margin, or churn. You can put a target on a KPI, and often you do, but on its own it carries no objective and no strategy behind it. It is just a metric followed because it is important to the business.
Many of the metrics an organisation follows are what is sometimes called health metrics. A health metric is something you don’t actively push, but keep track of to make sure it doesn’t slide. A good way to think about it is your own pulse or blood sugar: those are measurements that should stay within a certain band, and you only need to take action if they drift out of it. Measuring something and following its development does not mean you actively work to change it, and it does not mean it is a metric that should be changed or pushed.
What an OKR is
OKRs is a framework, not just a metric.
An OKR pairs an objective with its key results and wraps them in a way of working with goals: formulating, aligning, checking in, and following up over a cycle. That is the part a KPI does not carry.
An OKR is something else. It is a goal constructed of two parts: an objective, which is what we want to achieve, and a set of key results, which are the measurable outcomes that tell us whether we got there. The two always belong together. If you want the full picture, the guide on what OKRs are covers the anatomy in depth, and how to write OKR objectives goes deep on the objective itself.
My go-to explanation is that key results are very similar to KPIs, and many times a KPI gets promoted into being a key result. What it means to be a key result is that you have a target and a specific focus, connected to a strategy, to really move the needle on that metric. A KPI can sit quietly as a health metric, just something you watch to make sure it does not slide, while a key result is always a metric with a target, something we are trying to create change in.
This is also why an OKR is more than a set of principles for writing goals. It is a full framework with a structure for how you work with goals in the organisation: how you formulate them, align them, check in on them, and follow them up. A KPI has nothing of this. Some organisations work with KPIs as their core way of measuring and pushing the business forward, which is a common, even though a bit simplistic way to work with goals. Organisations that work with OKRs many times track KPIs in parallel to their OKRs, but with the core difference that the OKRs are what gets focus and discussion time in meetings.
When to use each
Take sick leave as a percentage of total time worked. For most organisations this is not something you try to actively lower, but you do need to keep track of it, because if it starts to slide you might need to take action. That is a typical KPI, and it should stay a KPI as long as it is stable.
OKRs enter the picture when there is a shift or will to change. Maybe there are a few very hectic years and the percentage of sick leave goes up. What you do then is put it up as a key result. With the key result you have a target for how to get it back down, and you can actively deploy projects and activities to make sure you get sick leave back on track. When the quarter or year is over, depending on the time scope you set for the key result, sick leave can go back to working as a KPI for the business, as long as it is under control.
This way, OKRs and KPIs live side by side in most organisations.
Running both in the same quarter
Because a metric can be either a KPI or a key result depending on what you intend with it, most teams run both at the same time. Picture a marketing team. There are a lot of duties around the business and a lot of KPIs to follow their performance in different areas.
For this marketing team in particular, Q1 it is the big yearly company event that the team is in charge of. Metrics like the number of website visitors, digital leads, and brand awareness get demoted to KPIs for the quarter, still followed, but not actively pushed. In the OKRs, the team instead picks up the metrics that matter for the event:
Objective Make the annual customer event drive real business
- Reach an event evaluation score of 8.5 or higher
- Grow confirmed attendees from 180 to 250
- Generate 1.2 MSEK in pipeline from the event
Most of these are not ordinary KPIs at all, they are key results created for this particular event. In Q2 the focus can shift again. Maybe the team finds a focus it really needs to work on in its digital channels, and puts up website traffic as a key result, combined with metrics like social media following or its reach in non-paid channels. This way KPIs can be picked up and work as key results, or they can just stand to the side and be tracked to make sure ongoing business is healthy.
This is the balance between OKRs and KPIs. It is healthy to have a number of KPIs to keep track of on an ongoing basis, and at the same time, when you create goal focus, you pick some of the KPIs to try to move the needle on them, and sometimes you invent new measurements as goals to drive the business forward.
Key results vs KPIs: where they overlap
Since a key result and a KPI can look identical on paper, it is worth being clear about where they overlap. In new teams working with OKRs, it is very common to have almost half the key results picked straight from current KPIs, and that is fine. The risk is a different one: that you see OKRs as just KPIs in a new costume.
That mix-up is common, precisely because there are so many similarities and because KPIs are so often a part of OKRs. Some organisations even get it a little wrong and try to do OKRs by just putting a label on top of a set of current KPIs.
Turning every KPI into a key result is its own trap. Focus is a core challenge for most organisations, and OKRs are all about helping organisations find their focus. If you try to drive change in all your KPIs at the same time, you have a much lower chance of anything moving, and you gain no focus at all.
Another common challenge is organisations discussing which KPIs to turn into OKRs. OKRs should be created from strategy and priorities. Once the priorities and strategy are clear and you look at how to measure progress on them, already-defined KPIs often come in handy as the metrics to measure, and you put a target onto them. But you always start from what you want to achieve and how you can measure it, not from the list of metrics you already track.
Where OKR and KPI sit among other frameworks
Readers comparing OKRs and KPIs often have MBO, SMART goals, the balanced scorecard, and KRAs in the same mental bucket. The cleanest way to sort them is to separate the frameworks from the acronyms.
A KPI is another name for a metric. A SMART goal (specific, measurable, achievable, relevant, time-bound) is a goal that follows some principles on how it is formulated, not a way of working with goals across an organisation. A KRA (key result area) is a broad area of responsibility where results are expected, more a way of describing scope than a method.
OKRs, the balanced scorecard, and MBO are more worked-out frameworks for how you actually work with goals. I would say the balanced scorecard is maybe the most detailed framework of them all, with one fairly clear way of working with it. MBO (management by objectives), the oldest of them, is looser, more a set of outlines than a strict method. OKR sits somewhere in between: it can be implemented in many different ways but still carries quite a few core principles on how to get it right.
What sets OKRs apart is that it is both at once. It is a framework for working with goals, and, a bit like SMART, it also carries rules for how to actually formulate the goals. That combination, a way of working together with a way of writing the goals, is something a KPI on its own will never give you.
Making the shift from KPIs to OKRs
If your team works only with KPIs today and wants to start adding OKRs, the transition is shorter than it sounds. It starts with strategy and priorities, and often the list of KPIs you already have is a good indication of what is important to the business.
Go through the strategy and look at which of these KPIs are the most important to shift right now. Most organisations see a clear change in results just by putting the focus on a subset of their priorities. When you have singled out a couple of metrics to be the focus for a set period of time, you also put a label on them that explains, in terms of the strategy, why these metrics in particular are in focus right now. That label is the objective, and you have your first OKR.
So the transition itself is quite short in terms of formulation. What follows is the part that makes OKRs what they are: those goals need to be tracked, followed up on, discussed, evaluated, and continuously improved over the year. A very short first step is to single out the metrics that matter most right now, put a label on them that says why they matter, call that the objective, and then commit to following up. From there, the guide on how to write great OKRs takes you deeper.
FAQ
What is the difference between an OKR and a KPI?
A KPI is a metric the business follows to see how something is performing, with no built-in objective or time horizon. An OKR is a goal made of an objective together with two to four key results, and it is time-boxed to a cycle. Put simply, a KPI is a metric you follow, and an OKR is a goal you actively drive.
Can a KPI be a key result?
Yes, and it often is. When you decide to actively push a KPI towards a target within a cycle, you promote it into a key result under an objective. When the cycle is over and the metric is stable again, it can go back to being an ordinary KPI.
Should we replace our KPIs with OKRs?
No. KPIs and OKRs do different jobs. You keep a set of KPIs running continuously to follow the health of the business, and you use OKRs to create focus and drive change on a chosen few metrics for a period. Most organisations run both at the same time.
Is it a mistake to turn every KPI into a key result?
Yes. OKRs are about focus, and if you try to pick all your KPIs at the same time you have a much lower chance of anything moving. Choose the few metrics that matter most right now and leave the rest as KPIs.
What is a health metric?
A health metric is a KPI you keep track of to make sure it does not slide, a bit like your pulse or blood sugar. You are not trying to push it, you are watching in case it drifts out of its band so you can take action.