OKR vs KPI: The Key Differences Explained

In this piece, I break down the key distinctions between OKRs and KPIs and explore when best to use each for effective product goal-setting

Last week, I published this article on setting OKRs and I have received a lot of feedback and follow up questions personally, but the most recurring question has been- ‘‘How do OKRs differ from KPIs?’’. I hope that by the end of this piece, I’ll have made the distinction between OKRs and KPIs clearer for you.

OKRs (Objectives & Key Results) are the driving force behind a company’s direction. They provide clarity to where you are going and they help you measure success on how close you are to your destination.

Most companies typically fail at meeting their OKRs. From my experience, achieving your OKR will likely mean that your team is firing across all cylinders — sales, support, product, marketing, customer support, and even legal!

Surprisingly, I have seen strange ‘Objective’ statements like “release zero new bugs”. A guaranteed way to achieve that objective is to stop releasing new software. But despite “no new bugs” making a terrible objective, it remains an important rubric of business health.

My point is, a lot of metrics are important to observe but are not well fitting OKRs. Rather than trying to club them where they don’t belong, consider adding a second tool — KPIs (Key Performance Indicators).

Where OKRs are responsible for guidance and direction, KPIs ensure nothing goes off track. KPIs give teams a certain freedom. By this I mean that you can track practically any metric — site stability, conversion rates, user retention — all of which can be used as a KPI.

KPIs are important metrics to monitor and protect, but not something you’re trying to change right now.

I have personally used KPIs when working on fast paced teams. We use them in keeping track of relevant KPIs to help uncover problems as they emerge.

I must caution here that choosing OKRs and KPIs must be done thoughtfully. Doing so will help your organization balance the difference between short-term and long-term wins. For instance, your team might have an OKR to increase Average Revenue Per User (ARPU). Without balancing KPIs like Average Recurring Revenue (ARR) or Retention, the wins of one quarter may be at the expense of long term success.

Going by the above example of ARPU and ARR, any short-term focus on boosting revenue must always be balanced with churn or customer sentiment (CSAT/NPS) KPIs to validate if we are doing something with unintended consequences.

In summary, remember that OKR are goals you need to attain, and the KPI are the numbers you need to protect.