What’s the difference between OKR vs KPI? A quick and fast guide

Note: this article is a more developed version of the answer I gave to the question “What is the difference in ROI, KPIs, OKRs metrics?” (see original here). While some of the content might be similar (because I wrote it originally), I think it deserves a little more explanation.

However, we won’t delve very deep on this since it would take a lot more than just a post. Instead, you’ll find some selected bibliography at the end of this article should you need further reading.

Whats is OKR? Definition and Examples

OKR is an acronym for Objective & Key Results. In its simplest definition, a company establishes a goal, and a series of variables (usually between 3 and 5) to measure whether the goal has been achieved or not. In other words, it is a simple Boolean formula with a yes or no condition.

“The key result has to be measurable. But at the end you can look, and without any arguments: Did I do that or did I not do it? Yes? No? Simple. No judgments in it”

L. John Doerr

OKR is a framework used by the biggest companies in the world, including Google, LinkedIn, Uber, AirBnB and many more. Its apparent simplicity does not prevent it from being an amazing tool.

How to use OKR: simple example

As mentioned earlier, OKR consists of a goal and a set of measurable initiatives or actions. These initiatives should be easily and objectively measurable using specific variables.

For example, consider an OKR with the goal of brand growth. This is a complex goal as it can be measured in various ways:

1. Qualitatively: Measuring user perceptions and subjectivity.
2. Quantitatively: Using absolute figures.
3. Indirectly: Assessing indirect indicators that may not seem directly related to the brand.

However, in OKR, we focus on quantitative measurement. Taking brand growth as an example, we can measure various actions or initiatives, such as:

• Number of visits to a website or mobile application
• Sales quantity
• User engagement
• Total sales over a period

Suppose our baseline is 100 sales, and we aim to increase it to 150 sales per year. At the end of the year, we review our sales figures: Did we achieve 150 sales?

If yes, the goal has been achieved. If not, the goal has not been met.

As we can see, it is a straightforward Boolean condition: yes or no. It’s simple and uncomplicated.

OKR usually goes hand in hand with KRI (Key Risk Indicators), but it’s not a requirement.

However, how to master this business strategy, how to define objectives and key results is somewhat more difficult. For a deeper dive, see the recommended bibliography and resources on OKR at the end of this post.

What is KPI? Definition and Examples

KPI stands for “Key Performance Indicators”, which measure key indexes for a project. Despite the similarity in measuring values, KPIs and OKRs are not the same.

OKR is straightforward, focusing on clear objectives and measurable results. In contrast, KPI is more complex, measuring multiple variables simultaneously, including qualitative, quantitative, and summative variables.

Since KPIs are performance indicators, they can be part of an OKR strategy. In other words, the measurements needed to determine if an OKR objective has been achieved can be KPIs.

KPIs evaluate the success of an organization or specific activities (such as projects, programs, products, and other initiatives). Success can be the repeated achievement of operational goals (e.g., zero defects, 10/10 customer satisfaction) or progress toward strategic goals. Therefore, choosing the right KPIs requires a solid understanding of what is important to the organization. The relevant KPIs often depend on the department measuring performance – for example, finance KPIs will differ from sales KPIs.

KPIs evaluate the success of an organization or of a particular activity (such as projects, programs, products and other initiatives) in which it engages.

Often success is simply the repeated, periodic achievement of some levels of operational goal (e.g. zero defects, 10/10 customer satisfaction), and sometimes success is defined in terms of making progress toward strategic goals. Accordingly, choosing the right KPIs relies upon a good understanding of what is important to the organization. What is deemed important often depends on the department measuring the performance – e.g. the KPIs useful to finance will differ from the KPIs assigned to sales.

Since there is a need to understand well what is important, various techniques to assess the present state of the business, and its key activities, are associated with the selection of performance indicators. These assessments often lead to the identification of potential improvements, so performance indicators are routinely associated with ‘performance improvement’ initiatives.

https://en.wikipedia.org/wiki/Performance_indicator

Another characteristic of KPIs is their applicability across a wide range of projects and industries, from manufacturing to digital media, offline sales to artificial intelligence, and more. Consequently, many different frameworks exist for managing KPI measurement, some specific to respective industries.

How to use KPI (with examples)

There are many ways to evaluate KPIs in an organization, depending on the organization’s type. However, the following constituent elements are common to most KPI frameworks:

• Input: The baseline values to be entered.
• Output: The values measured as indicators of effectiveness.
• Activity: The actions taken to achieve the desired performance.
• Time: The time span for the KPI.

The time element is crucial. While we might set a KPI to span a year, it requires measuring and obtaining results over shorter intervals to allow for adjustments if needed. For example, partial KPIs can be measured quarterly, monthly, or even weekly. Today, large companies using big data and machine learning can measure KPIs by the minute. But that’s a different story.

There are other elements such as mechanisms, controls, reporting frequency, ownership, and compliance, but the most common and indispensable are the four mentioned above.

Returning to our OKR example of measuring brand growth, we can now outline the KPI for brand image:

• Initial image (input): 100
• Target image (output): 150
• Activity or mechanism: PR campaign
• Time: 1 year

Once these items are defined, we can create charts to visualize these KPIs over time and even generate predictions.

Data visualization is fundamental to KPI tracking. It’s very difficult, if not impossible, to execute a KPI strategy without visualizing data. Visualization allows us to see exactly what is happening and guides our next steps.

What is ROI? Definition and examples

ROI stands for “Return on Investment”. It’s the simplest of these three concepts and doesn’t require much explanation.

According to Wikipedia, we can define ROI as follows:

Return on investment (ROI) is a ratio between net profit (over a period) and cost of investment (resulting from an investment of some resources at a point in time). In economic terms, it is one way of relating profits to capital invested.

https://en.wikipedia.org/wiki/Return_on_investment

In simpler terms: if we invest 10 and earn 30, the ROI is 20.

While ROI is straightforward to understand, it can become complicated in some cases, such as when accounting for service bills, real estate, or certain financial operations.

ROI is influenced by KPI actions. For example, the ROI table below:

In the above example, the business started with a $100 invertion, which returned $80. Therefore, the ROI is -$20 (or in other words: a $20 loss).

However, you can see that there are differences in investment. Since the business owner is really smart, he noticed that taking some specific action will improve his ROI. So you can see how when the ROI was negative, low, or stable, the business owner did nothing. However, when ROI improved (from whatever action he took, such as a growth hacking campaign, a SEO strategy or a costs strategy), he invested more, which returned even more money (in absolute amounts).

Since we said KPI relies on DataViz, let’s add a graphic for easy visualization

If you compare the KPI graphic above, it’s easy to relate how KPI actions influenced the ROI, as we can see in this graph.

To explain all 3 playing together

Usually, OKR comes first. It sets a plan for a business on a quarterly basis (most commonly, although some companies may set different time frames), which includes:

1. Objective: What do you want to achieve?
2. Key Results: How do you know you reached it?
3. Initiatives or Steps: What do we need to do to reach the objective?

Then we have KPI or Key Performance Indicators, which are metrics developed to measure the success of a project. For example, if we define a successful value for a variable as 100, we use KPI tools to determine if that value has been reached. If it hasn’t, we need to review the activities and redefine the plan to reach this value.

Finally, ROI (Return on Investment) is simply a metric that can be set as a KPI. It measures the financial return relative to the cost of investment.

In Summary:

1. OKR: Framework setting objectives and key results.
2. KPI: Toolkit to measure the success of those objectives.
3. ROI: One of the many variables that can be measured by KPIs.

KPI and OKR in UX: The HEART framework

So, how do these terms relate to UX?

The simplest answer: everything relates to UX.

The most comprehensive answer: UX is based on research and data. Many believe UX is purely visual, but the visual is only the end product. UX can encompass physical, olfactory, tactile, auditory, psychological, procedural, residential, urban, clinical, and more.

As a data-driven science, measurement metrics of all kinds—especially business, usability, behavior, and marketing—are fundamental to UX research.

As an example of the type of business metrics interpolated with UX research, we can take almost any UX framework. In this case, we will see an example with HEART.

The HEART Framework

HEART is a user experience framework developed by Kerry Rodden, a lead UX researcher at Google (now YouTube). Unlike previous frameworks focused on business or marketing, HEART focuses on UX. It measures:

1. Happiness
2. Engagement
3. Adoption
4. Retention
5. Task Success

(Thus, the acronym HEART)

You can use KPIs in a HEART-based process, but OKR is a different story since the values you need are usually financial.

Example:

Using HEART, you can measure the usability of an app. You can define KPI values you want to achieve in terms of usability. If these values are not reached, you can modify the application until they are met.

However, in an OKR process, a common scenario might be simply defining, “we need an application to reach the goal”.

KPI, OKR and ROI Bibliography and Resources

Developing a UX KPI based on the user experience questionnaire by A. Hinderks, M. Schrepp, F. Domínguez Mayo, M. Escalona, J. Thomaschewski

Development of a framework for UX KPIs in Industry – a case study. by Larsen, Lars Bo; Øvad, Tina; Stec, Kashmiri; Nellemann, Lucca Julie; Czapla, Jedrzej. OzCHI 2020: 32nd Australian Conference on Human-Computer Interaction (HCI). 2021.

Lean UX. Mindset & delivery by Dong, Chuqing, ARC III – Scuola del Design, 2019

User-eXperience (UX) meets Return-on-Investment (RoI) Gocheva, E., Göring, K., Hinderks, A., Kneisel, B. O., Krämer, C. & Siegmund, O., 2012

The ROI of HCI by Churchill, Elizabeth, 2017