OKRs vs. KPIs: What’s the Difference, and How Do They Work Together?

Picture this: You’re heading out on a road trip to the sunny beaches of California. While your destination is clear, there are a handful of different routes you could take to reach that final destination. You need a map to guide your journey, and a dashboard to make sure your car is running smoothly.

This road trip illustrates the relationship between OKRs (Objectives and Key Results) and KPIs (Key Performance Indicators) in business. On the surface, OKRs serve as your roadmap, defining where you want to go. KPIs are your vehicle’s dashboard, measuring health and performance along the way. Similar to a roadtrip, you need to use OKRs and KPIs together for effective program management keeping a team aligned and continuously moving toward an end goal.

In this post, we’ll explore what each of these terms means, how they differ, and how teams should use them in tandem to achieve success.

What Does OKR Stand For?

Just like the map to your road trip, OKRs (Objectives and Key Results) guide your team toward its destination, tracking measurable progress along the way. When used correctly, this framework helps organizations define clear, measurable objectives while tracking progress with key results. The objective serves as a vision of an ideal destination, and the key results measure the steps or progress along the way. OKRs truly enable your strategy to steer your execution.

OKRs keep teams focused on an end goal and ensure efforts are concentrated on the project at hand. Companies utilizing Scaled OKRs with Hyperdrive report increased revenue, improved team morale, reduced waste, and happier customers.

Take Hyperdrive’s OKR assessment to gauge how OKRs can help your organization.

How to Write an Effective OKR

The formula for writing an OKR is simple: We will (Objective) as measured by (Key Result).

Powerful objectives articulate a team’s “why” and provide inspiration or motivation to reach the end goal, tugging at the edge of a team’s capabilities. Objectives should also be action-oriented and utilize positive language to motivate and inspire a team.

Examples of effective objectives include:

• Develop a positive reputation amongst stakeholders
• Increase customer engagement

Key results should utilize simple and clear metrics that provide insight to a team’s journey. Metrics fall into one of five categories:

• Baseline: Establish a baseline KPI for monthly customer attrition
  • Transition: Increase customer satisfaction scores from 65% to 75%
  • Positive: Increase social media engagement by 10%
  • Negative: Reduce time to onboard a new employee by five days
  • Threshold: Maintain utilization rate between 70-80%
  • Milestone: Deliver project by November 30

When executed correctly, writing effective OKRs builds business agility, ultimately empowering teams to thrive during uncertain times.

What Does KPI Mean?

If an OKR serves as your roadtrip destination and map, consider KPIs, or Key Performance Indicators, your vehicle’s dashboard. Similar to fuel, temperature, and oil pressure gauges a car’s performance in real-time, KPIs track specific elements in your team’s business strategy. KPIs might measure sales performance, customer satisfaction, or employee productivity. They can also help monitor the health of your company or portfolio, ensuring you’re running smoothly on the way to your OKR goal.

Can OKRs and KPIs Work Together?

Not only can OKRs and KPIs work together - they are best utilized when used in tandem. Consider the following scenario:

A team’s OKR to increase customer engagement by increasing site traffic by 30% would utilize the following KPIs as metrics to determine success:

1. Website traffic volume: total visits and unique visitors
2. Traffic sources: percentage of traffic from organic search, paid ads, social media, etc.
3. Average session duration: length of time a visitor spends on the site
4. Lead generation: growth in newsletter sign-ups, downloads, or other lead forms
5. Search engine ranking positions: keywords ranking higher due to improved SEO strategies

These KPIs measure success, output, quantity, or quality of the team’s ongoing efforts. Teams should utilize KPIs to track the performance of measures already in place and can adjust the OKR as needed.

Adjusting OKRs when KPIs show you’re off track

Just as the best road trips encounter bumpy roads and detours, the strongest teams can face unexpected challenges when navigating their OKRs. If your KPIs show you’re not on track, reassess and adjust your OKRs considering the following four steps.

1. Revisit Your Key Results
   Evaluate your key results to gauge whether they’re too ambitious or misaligned with reality. Adjust the numbers or timelines to reflect what’s achievable while maintaining a stretch goal.
   For example, if your KPI shows lower-than-expected customer acquisition rates, consider adjusting your key result from “Acquire 1,000 new users” to “Acquire 750 new users while increasing retention by 10%.”
2. Analyze Your Actions
   Ask whether your team is focused on the right efforts, looking for blockers or misaligned resources. Shift priorities or strategies to better align actions with outcomes.
3. Stay True to the Objective
   While key results may need tweaking, the objective—your ultimate goal—should remain steadfast. For instance, if you’re aiming to “Enhance customer satisfaction,” you can explore alternative key results, such as improving response times or expanding support channels.
4. Leverage Transparency
   Share updates across teams to keep everyone informed and aligned. Transparency in OKR adjustments fosters collaboration and ensures everyone stays on the same page.

Adjusting OKRs isn’t a failure—it’s a sign of agility. When your KPIs signal a problem, think of this as your GPS prompting a reroute to ensure you still reach your destination. This is also a great opportunity to create a new OKR that will focus on (and measure) getting the KPI back into spec.

Teams should also consider adjusting KPIs throughout a project when external factors pose disruptions or threats. Harvard Business Review explains adjusting your KPIs to changing circumstances is crucial for success. As the world around us changes due to innovation, disaster, or legislation, different KPIs may become more useful in measuring performance.

Final Thoughts

Just as drivers have multiple ways to reach a destination, teams can take multiple paths to reach their end goal. However, finding the most efficient route measured by various metrics along the way results in an overall better experience for teams and their customers. Utilizing OKRs and KPIs together creates an improved experience through its powerful framework that helps businesses stay on course, even when hitting unexpected obstacles. This ability to cohesively pivot while staying aligned helps maintain momentum and ultimately sets teams apart from their competitors.