Growth doesn’t happen by accident. It takes careful planning, the right opportunities, and the right goals.
Growth also requires effective systems for setting those goals and tracking progress. After all, what use is a goal if you don’t know when or if you reached it?
Organizations turn to various metrics and measurements to track their business’s performance (KPIs), and a growing share of businesses are using the OKR goal-setting framework to craft better, more powerful, more achievable goals.
If you’re hearing people toss around these two terms (OKR and KPI), it’s easy to get a little lost in the alphabet soup. Today’s post will help you untangle these two performance management concepts and learn how to leverage both for increased success in your business.
What is an objective and key result (OKR)?
An objective and key result (OKR) describes goals in terms of desired outcomes. OKRs target areas for growth or improvement by tying a specific goal to a specific set of results that will reveal progress toward the objective.
The typical OKR is structured with a single objective or goal with multiple key results nested underneath. Usually, you can measure incremental progress toward the key results, giving a sense of how far toward goal achievement you are at any point in time.
Many of the era’s largest and most successful enterprises use OKRs, and you’ll find them consistently throughout the tech sector. Google didn’t invent the concept (that title goes to John Doerr, founder of What Matters) but is recognized as the earliest widespread adopter.
What is a key performance indicator (KPI)?
Key performance indicators, or KPIs, are the quantitative project metrics that a team or organization selects and uses to measure the success of a project, product, service, or any other deliverable or initiative. In other words, organizations can set KPIs to measure nearly anything: profit, efficiency, turnover, the success of a specific marketing campaign, number of customer interactions, and plenty more.
Organizations use KPIs to measure all sorts of data points, all for the same central purpose: measuring performance. This tool doesn’t explain why a project or team performs or fails to perform. It simply shows whether they did and, ideally, motivates teams and individuals toward stronger performance.
A KPI is often stated alone, such as “10,000 unique website visitors per month.” Sometimes you’ll see KPIs fleshed out with additional clarifying points, such as why, how, who, and when — these elements give some direction and ownership to a KPI, but they also start to stretch the definition of the term a bit.
OKRs vs KPIs: Key differences
If you’re scratching your head at this point and thinking, “These sound a little bit similar,” you’re right. Both OKRs and KPIs involve similar elements, and you may see overlap between what the concepts touch on in a given department or team. But it’s important to know that the two are not at all interchangeable. Note these key differences.
Growth and aspiration vs. description
OKRs focus on growth and may even be “moonshot” ambitious goals. The objective component points to what isn’t — yet, anyway. Then the key results describe outcomes the organization wants or needs to achieve but (usually) hasn’t yet.
KPIs, on the other hand, are more a description of what is: an organization is hitting its KPIs, and it’s notable when they stop hitting them or start exceeding them.
Framework vs. metric
One helpful way to view OKRs and KPIs is by looking at what kind of concept each acronym represents. OKR is a strategic framework for understanding business progress and setting future goals; KPIs aren’t. KPIs are individual metrics or measures of performance. You won’t usually think of a KPI as a framework.
This can get a little confusing because frameworks use metrics to function. In fact, some key results within some OKRs will look an awful lot like KPIs — because they are.
Think of KPIs as performance metrics that usually need to fit into a framework. Think of OKRs as one of those frameworks.
Single point of data vs. complex set of inputs
Last, think of each KPI as a single point of data: number of widgets sold, customer retention rate, average wait time, etc. Each of these might take some number-crunching to determine, but each is a single data point that doesn’t tell you much on its own.
OKRs, on the other hand, involve both direction/volition (what we want to accomplish) and a complex set of outcomes fed by sometimes complex inputs.
How OKRs and KPIs can work together
OKRs and KPIs are both valuable and can become even more powerful when you properly align your project goals and KPIs. Because they both touch on results or outcomes, not just activity, it’s possible to use OKRs and KPIs synergistically.
The simplest way to use these two systems in tandem is to rely on KPI data when goal-setting or creating an OKR. When you set OKRs, they don’t come out of nowhere — they arise out of a need or desire to improve something. KPIs reveal how you’re doing right now at that something, giving you the context to know where to focus your OKR and the data to know what a realistic definition of success looks like.
Let’s look at web traffic as an example.
You might know you want to increase web traffic (that’s your objective, though it needs some help at this stage). But how do you know that? What data informs that idea?
Likely, it’s the KPI you’re already tracking that measures web traffic.
Then as you refine your OKR, you’ll need to involve some numbers. How do you determine what your goal level for traffic should be? What’s an ambitious yet attainable figure? (For some companies, it will be 1,000 monthly views. Other organizations will need to add a zero or three to that number.)
Once again, you’re headed back to your KPI. If you’ve been tracking it for a while, you’ll have months or years of historical data telling you what you achieved in the past.
Benefits of creating good OKRs
Creating strong, measurable, actionable OKRs may seem daunting at first, but it’s worth the effort. Consider these benefits to your team or organization that result from creating and tracking effective OKRs:
Creates an aligned vision that motivates team members toward a defined shared goal
Provides milestones or a roadmap that breaks down how to meet the objective and show incremental progress
Allows you to iterate and refocus on a quarter-by-quarter basis
Benefits of tracking KPIs
Your business is already performing at some level, which means that the data feeding any KPI you might want to measure already exists. But to turn raw or uncollected data into an effective KPI, you need to track that data effectively over time:
Gain historical data on key metrics that can inform and define goals and OKRs.
Set baseline performance for any KPI you’re targeting.
Identify dips in performance by measuring against historical data and baselines.
The core idea running through each of these is this: KPIs are only useful when tied to reality and placed into context, and tracking is the only way to accomplish both.
For more on seeing the big picture through realistic KPI tracking, download our ebook: The realist’s guide to big picture project management KPIs.
We’ve said enough about the differences and similarities between OKRs and KPIs. It’s time for some examples!
Let’s head back to that website traffic example. This time we’ll turn it into a fully operational OKR.
“Increase website traffic” is a basic and somewhat functional objective, but it could be better. Let’s add some more detail here:
Objective: Increase unique monthly website visitors by 25% over the previous quarter.
By narrowing the scope, defining the type of traffic, giving a measurable target, and setting a timeframe, we’ve made our objective much easier to understand and measure.
There’s no magic number of key results that you must include with an objective, but generally you see three to five. We’ll stick to three for this example.
Key result 1: Inventory and catalog all current SEO tactics and initiatives; refine underperforming tactics.
Key result 2: Land in the top 3 Google and Bing results for two target keywords.
Key result 3: Increase blog publishing schedule to three per month (nine per quarter).
You could go further, diving into social media traffic, new customers acquired via web traffic, or even marketing qualified leads — but resist the urge to go overboard. Keep your KRs closely tied to the objective. Save your MQLs for another objective.
Each of these key results is concrete and measurable. You know when you’ve inventoried your SEO strategies, you know how many blogs you did or didn’t publish, and you can easily verify whether you’ve landed those top search engine ranking placement (SERP) spots. Also, each KR supports the objective by driving more traffic to the site.
For more examples of OKRs, check out our comprehensive guide on OKRs.
You should customize KPIs to the needs and context of your business and the goals and objectives you’re trying to reach. Here are a few examples of KPIs you might measure related to website traffic:
Monthly unique visitors
Click-through rate (CTR)
Number of top-3 SERPs
Average page views per blog post
Customer lifetime value
Again, none of these KPIs on its own will chart a course for your future. But if you want to set that course (using a goal-setting framework such as OKRs), you’ll certainly need the right metrics.
Track the progress of your OKRs and KPIs with Teamwork
As you grow in your implementation of OKRs, KPIs, or both, tracking them effectively becomes critical. The OKR framework and your KPI metrics become nearly meaningless if not tracked, but they become a powerful force for change with proper tracking.
Effectively tracking these elements requires the right software tools. Teamwork is the project management software platform built for creative teams, client work, and anyone who wants a robust yet accessible project tracking solution.
Best of all, Teamwork includes powerful support for tracking OKRs and KPIs. Ready to see Teamwork in action for yourself? Get started with our OKR template today.