OKRs vs KPIs: Understanding the Difference

Both OKRs (Objectives and Key Results) and KPIs (Key Performance Indicators) are essential tools for measuring business performance, but they serve fundamentally different purposes. Understanding when and how to use each framework can dramatically improve your organization's ability to execute strategy and drive results.

What Are KPIs?

Key Performance Indicators (KPIs) are metrics that measure the ongoing health of your business. Think of them as the vital signs of your organization—they tell you whether your business is healthy and operating within normal parameters.

Characteristics of KPIs

Continuous Measurement: KPIs are measured continuously over time. They don't have an end date—you track them month after month, quarter after quarter.

Business Health Indicators: KPIs measure the current state of your business. Examples include monthly recurring revenue (MRR), customer acquisition cost (CAC), net promoter score (NPS), and website uptime.

Operational Focus: KPIs typically measure operational efficiency and business-as-usual metrics. They answer the question: "How are we performing right now?"

Stability: Good KPIs remain relatively stable over time. While the targets may change, the metrics themselves stay consistent.

Example KPIs

• Monthly Recurring Revenue (MRR)
• Customer Churn Rate
• Average Response Time
• Website Conversion Rate
• Employee Satisfaction Score
• Gross Profit Margin

What Are OKRs?

Objectives and Key Results represent ambitious goals and the measurable outcomes that indicate progress toward those goals. OKRs are about change—moving from where you are to where you want to be.

Characteristics of OKRs

Time-Bound: OKRs are set for a specific time period, typically quarterly or annually. They have a clear start and end date.

Aspirational: OKRs should be ambitious and push your organization beyond the status quo. They represent what you want to achieve, not just what you need to maintain.

Change-Focused: OKRs drive transformation and improvement. They answer the question: "What do we want to accomplish this quarter?"

Temporary: Once an OKR is achieved (or the quarter ends), you set new OKRs. They're designed to be replaced.

Example OKRs

Objective: Launch our product in the European market

Key Results:

• Achieve regulatory compliance in 5 EU countries
• Acquire 1,000 European customers
• Reach 500,000 EUR in European revenue

The Fundamental Difference

The core distinction between OKRs and KPIs lies in their purpose:

KPIs measure stability and health. They tell you if your business is running well.

OKRs drive change and growth. They tell you if you're moving toward your strategic goals.

Think of it this way: KPIs are your car's dashboard—they show you current speed, fuel level, and engine temperature. OKRs are your GPS destination—they show you where you're trying to go and how close you're getting.

When to Use KPIs

Use KPIs when you need to:

Monitor Business Health: Track the ongoing performance of critical business functions.

Maintain Standards: Ensure consistent delivery of products or services.

Identify Problems: Detect when something is going wrong before it becomes critical.

Report to Stakeholders: Provide regular updates on business performance to investors, board members, or executives.

Manage Operations: Keep day-to-day operations running smoothly.

KPI Best Practices

1. Keep the number manageable (5-10 company-wide KPIs)
2. Make them easily measurable and automated where possible
3. Review them regularly but don't change them frequently
4. Set realistic targets based on historical performance
5. Ensure everyone understands what each KPI measures

When to Use OKRs

Use OKRs when you need to:

Drive Strategic Initiatives: Push your organization toward important strategic goals.

Create Focus: Align the entire company around a small number of critical priorities.

Encourage Innovation: Set ambitious targets that require creative problem-solving.

Track Progress on Projects: Measure advancement on specific initiatives with clear end points.

Change Behavior: Shift how your organization operates or what it prioritizes.

OKR Best Practices

1. Set ambitious objectives (aim for 60-70% achievement)
2. Limit to 3-5 objectives per quarter
3. Include 2-4 key results per objective
4. Review progress weekly
5. Celebrate learnings from both successes and failures

How OKRs and KPIs Work Together

The most effective organizations use both frameworks in tandem. Here's how they complement each other:

OKRs Set the Direction

Your OKRs define what you want to achieve this quarter. They provide focus and alignment across the organization.

Example: "Launch in the European market" is an OKR—it's time-bound, ambitious, and represents a significant change.

KPIs Ensure Stability

Your KPIs ensure that while you're pursuing ambitious goals, you're not breaking the core business in the process.

Example: While pursuing European expansion, you still monitor your existing market's customer churn rate (a KPI) to ensure you're not neglecting current customers.

OKRs Can Graduate to KPIs

When you successfully achieve an OKR and want to maintain that new level of performance, the key result can become a KPI.

Example: If your OKR was "Improve customer satisfaction" with a key result of "Achieve NPS of 50+," once you hit that target, maintaining an NPS above 50 might become an ongoing KPI.

Common Mistakes to Avoid

Treating KPIs as OKRs

Mistake: Setting "Maintain 95% uptime" as an objective.

Problem: This is operational maintenance, not an ambitious goal.

Solution: Keep this as a KPI and set OKRs that drive improvement, like "Become industry leader in reliability" with a key result of "Achieve 99.99% uptime."

Using Only One Framework

Mistake: Only tracking KPIs or only using OKRs.

Problem: You either lack direction (KPIs only) or ignore business health (OKRs only).

Solution: Implement both frameworks—KPIs for monitoring, OKRs for driving change.

Setting Too Many Metrics

Mistake: Tracking 50 KPIs and 20 OKRs simultaneously.

Problem: Overwhelming teams with too many priorities leads to lack of focus.

Solution: Limit to 5-10 key KPIs and 3-5 OKRs per quarter.

Practical Example: SaaS Startup

Let's see how a SaaS startup might use both frameworks together:

KPIs (Ongoing Health Metrics)

• Monthly Recurring Revenue: $500K
• Customer Churn: <3% monthly
• Average Response Time: <2 hours
• System Uptime: >99.9%
• Net Promoter Score: >40

Q1 OKRs (Strategic Goals)

Objective 1: Establish product-market fit in the enterprise segment

Key Results:

• Close 10 enterprise deals (>$50K ACV)
• Achieve 90+ NPS from enterprise customers
• Reduce enterprise sales cycle from 6 months to 3 months

Objective 2: Build a scalable customer success function

Key Results:

• Implement automated onboarding for 80% of new customers
• Reduce time-to-value from 30 days to 10 days
• Achieve 95% customer health score across the portfolio

Notice how the KPIs monitor ongoing business health while the OKRs drive specific improvements and strategic initiatives.

Making the Choice

When deciding whether something should be a KPI or an OKR, ask yourself:

Is this something we need to maintain? → KPI

Is this something we need to achieve or improve? → OKR

Do we measure this continuously? → KPI

Does this have a specific end date or target state? → OKR

Would we keep measuring this in the same way next year? → KPI

Is this a one-time push to reach a new level? → OKR

Conclusion

OKRs and KPIs are not competing frameworks—they're complementary tools that serve different purposes. KPIs keep your business healthy and running smoothly, while OKRs push you toward ambitious goals and strategic growth.

The most successful organizations master both. They use KPIs to maintain operational excellence and business health, while using OKRs to drive innovation, change, and strategic progress.

Start by identifying your critical KPIs—the metrics that tell you whether your business is healthy. Then set quarterly OKRs that push your organization toward important strategic goals. Review your KPIs regularly to ensure stability, and review your OKRs weekly to track progress toward your ambitious targets.

By understanding and leveraging both frameworks, you'll create an organization that's both stable and dynamic—one that maintains excellence while continuously improving and innovating.