What is a KPI?

Key Performance Indicators (KPIs) are defined as performance metrics that evaluate the success of an organization or of a particular activity. KPIs can apply to projects, programs, products, and a variety of other initiatives. They can measure the success of anything from sales goals to social media metrics.

The exact origin behind KPIs is unknown, but the act of measuring performance dates back to the third century when the emperors of the Wei Dynasty (221-265 AD) rated the performance of official family members. Today, KPIs have been adopted by countless organizations and used to evaluate and forecast success.

However, a KPI is only as valuable as the action it inspires. Often, companies try to adopt KPIs used by other companies and use them as their own, then wonder why their goals are never met. Just as every employee is different, every organization is different. KPIs should be tailored to your specific organizational objectives, how you plan on achieving them, and who can act on this information.

Let’s take a look at an example. Let’s say your KPI was to increase Marketing Qualified Leads (MQLs) by 30%. Here’s how you define it:

KPI for MQL Growth

What: Increase MQLs by 30% this year
Why: Achieving this target will allow the business to become profitable
How: Hiring additional sales staff, improving existing marketing strategies, adopting a new tool, creating more content, etc.
Who: VP of Marketing is responsible for this metric
When: The KPI will be reviewed on a quarterly basis

What is an OKR?

Objectives and Key Results (OKRs) are defined as a metric that outlines company and team “objectives” along with the measurable “key results” that define the achievement of each objective. OKRs represent aggressive goals and define the measurable steps you’ll take towards achieving those goals. They’re typically used to set quarterly goals, but can also be used for annual planning. The rising popularity of OKRs is mainly attributed to Intel and Google, who have adopted this technique for their planning.

OKRs are set at the company, team, and individual level. Here are a handful of OKR examples:

Company OKR 1:

  • Objective: Become the #1 most-downloaded iOS Productivity App
  • Key Result 1: Conduct survey to identify 10 most-requested features and launch 5 of the top most-requested features by Dec 15
  • Key Result 2: Conduct 10 user tests to identify UX issues
  • Key Result 3: Show at least 50% improvement in satisfaction with UX (via customer survey)
  • Key Result 4: Earn 200 5-star ratings by Dec 31

Company OKR 2:

  • Objective: Increase brand recognition and awareness
  • Key Result 1: Increase media engagement by 20%
  • Key Result 2: Launch customer referral program by Jan 1
  • Key Result 3: Extend social media reach and visibility to two new target markets
  • Key Result 4: Expand thought leadership program by placing guest articles on four industry-related sites with an Alexa ranking of at least 30,000

Marketing Team OKR:

  • Objective: Increase social media engagement by 35%
  • Key Result 1: Research and identify three most popular social media sites among two new target audiences and develop engagement strategy by Jan 1
  • Key Result 2: Participate in six Twitter chats involving industry leaders
  • Key Result 3: Respond to new Facebook comments within three hours
  • Key Result 4: Increase number of followers on Facebook and Twitter by 20%

Individual OKR:

  • Objective: Increase number of social media connections by 25%
  • Key Result 1: Increase posting frequency on Twitter to 8x daily and Facebook to 3x daily
  • Key Result 2: Establish social media presence on two new sites: LinkedIn and Quora
  • Key Result 3: Join 5 LinkedIn groups with at least 2,500 members each and leave comments on the 10 most popular discussions in each group
  • Key Result 4: Gain 15 followers on Quora by posting three answers and one question every week

The difference between KPIs and OKRs

One of the key differences between OKRs and KPIs is the intention behind the goal setting. KPI goals are typically obtainable and represent the output of a process or project already in place, while OKR goals are somewhat more aggressive and ambitious.

However, while OKR goals should be bold, they shouldn’t be unreachable. The idea behind this strategy is that by crafting aggressive OKRs, you can push your team (and yourself) to perform that much better.

Which one is better?

At this point you’re probably wondering, “what’s the difference between OKR and KPI?” and you wouldn’t be the only one. When evaluating whether to use OKRs vs. KPIs, it’s really up to you and what you’re looking to measure.

For example, if you’re looking to scale or improve upon a plan or project that’s been done before, KPIs might be the better option. They’re straightforward and allow you to add a measurement system to your ongoing projects and processes.

However, if you have a larger vision or are looking to change your overall direction, OKRs might be the better alternative. They have greater depth that will allow you to stretch your goals even further and allow you to be a bit more creative on how you plan to reach those goals.

Importance of Measuring Performance

Regardless of which technique you choose, the bottom line is: the only way to improve is to measure and review performance. If you don’t take the time to set objectives, or you’re setting them but not reviewing them at the end of the year/quarter, you miss a prime opportunity to learn and improve. Remember, you can actually learn from failures and successes, so make it a top priority to implement performance metrics. You may be surprised how quickly you and your team reach them.