OKRs vs KPIs: what's the difference (and why you need both)

Your business has goals and you have KPIs, but do the two things connect??

It’s pretty common to have KPIs in your role – key metrics you are expected to hit that measure your performance. In my line of work (marketing and / or start-ups), KPIs are usually things like:

• Generate X number of monthly leads?
• Increase on-site conversion by X% per month
• Lower the customer acquisition cost to $X by X

What’s often missing is how these metrics link to the overarching goals of the business. How many times have you heard or even said "I don't know how what I'm doing impacts the business."

In past editions of The Start-up CMO we’ve covered some pretty broad topics like being a better listener and setting your non-negotiables, so this time let’s get into the nitty gritty and talk goal setting. Specifically, OKRs.?

WTH are OKRs?

I’m a big fan of OKRs. I think Andy Twomey introduced this concept to me PC (pre-Covid) and I’ve carried it with me into subsequent roles. I’ll put my hand up and admit I’ve been laissez faire about setting OKRs for all of my direct reports in the past; it’s hard when it’s not a company-wide initiative or doesn’t come from the top down. More on this in a sec.

If you haven’t come across OKRs before, they consist of two elements: objectives and key results.

Objectives are the North Star, the big-picture goals that set the direction. They're ambitious, inspiring statements that should connect to your company's mission and vision. They are the 'where are we going?'

Key Results are specific, measurable, time-bound milestones or targets that define the progress towards your objectives. They are the 'how will we know when we get there?'

OKRs don’t replace KPIs – they work with them. OKRs are the goals and the milestones along the way, KPIs are the metrics you use to track performance. They are the 'what do we need to do to get there?'

I’m nearly finished James Clear 's multi-multi-multi award-winning book Atomic Habits (better late than never, right?) and one thing that jumped out at me straight away is his focus on the systems and processes that help you work towards your goals. Having goals means very little if you don’t have a consistent process to?get you there.

That's why the combo of OKRs + KPIs is so powerful: we know the goal, we know what progress will look like, and we know the steps we need to take to make that progress.

Techies + Start-ups Love OKRs

Here are a few companies who have embraced the power of OKRs to achieve remarkable results, you might’ve heard of them:

Google (the concept of OKRs was made popular by John Doerr, who introduced the methodology to Google in the early 2000s), Intel, Airbnb, Spotify, LinkedIn…?

The reason companies like these love OKRs is because they have the power to align different teams towards the same ‘North Star’ business objectives, but with specific, relevant and measurable milestones that ladder up to those objectives.

I’m going to borrow from Jasper Polak’s Twitter thread on how this breaks down, because honestly it’s perfect:

OKRs in action

This OKR from Airbnb is a great example is a great one:?

Objective: Enhance the customer experience and expand the global reach of our platform.

• Key Result 1: Achieve a 20% increase in bookings for unique and personalised travel experiences.
• Key Result 2: Expand into five new international markets, establishing strategic partnerships with local hosts.
• Key Result 3: Increase the average rating of guest stays by 0.2 points through improved customer support and satisfaction.

You can see how the above Key Results can trickle down through multiple teams. Here’s how I imagine Key Result 1 might be broken down into projects with their own KPIs…

• The brand team would focus on creating content that features unique and personalised travel experiences (haven’t we been seeing these TV ads doing the rounds…?)
• The digital marketing / web team would look at hero-ing these specific products on the site.
• The marketing team would prioritise campaigns highlighting unique and personalised travel experiences (e.g. eDMs, social campaigns…)

OK, I think I need OKRs

If you don’t have OKRs or KPIs in your role and it’s something you think you’d benefit from, book that meeting with your team leader now and let them know you’d like to create these together.?

Managers: if you haven’t sat down with your team and set goals for them, you owe it to them to do this now. If you’re reading this in real time, the new financial year is around the corner which is the perfect time to pencil in these chats!

TL;DR OKRs are a goal-setting framework that works hand-in-hand with KPIs. Objectives are your compass, Key Results are your map, and KPIs are the steps you take to get there. OKRs are great because they connect what you're doing every day to the big business goals, so you can see how your puzzle piece fits into the bigger picture.