KPI vs OKR: Goal-Setting Framework for SMEs

The Goal-Setting Dilemma

You know you need better goal-setting. Your team is working hard, but you’re not sure if they’re working on the right things. You’ve heard about KPIs and OKRs, but you’re not sure which one to use—or if you need both.

The Framework Confusion

Many SMEs struggle with goal-setting because they don’t understand the difference between KPIs (Key Performance Indicators) and OKRs (Objectives and Key Results). They’re both valuable, but they serve different purposes.

At MMC Financial Planning, we’ve helped dozens of Malaysian SMEs implement both frameworks. The key isn’t choosing one over the other—it’s understanding when to use each and how they work together. Here’s your guide to making the right choice for your business.

Understanding KPIs: Measuring What Matters

KPIs (Key Performance Indicators) are metrics that measure how well you’re performing against your business objectives. They’re ongoing measurements of critical business activities.

What KPIs Are

Key Characteristics:

Measurable: Quantifiable metrics with clear data sources
Ongoing: Tracked continuously (daily, weekly, monthly)
Actionable: Indicate performance that requires attention
Strategic: Tied to business objectives
Comparable: Can be benchmarked against targets or history

Example KPIs:

Monthly Recurring Revenue (MRR)
Customer Acquisition Cost (CAC)
Net Promoter Score (NPS)
Employee Turnover Rate
Gross Profit Margin

When to Use KPIs

Best Use Cases

KPIs are ideal when you need to:

Monitor Ongoing Operations: Track day-to-day business health
Measure Efficiency: Understand how efficiently you’re operating
Track Trends: See patterns over time
Benchmark Performance: Compare to industry standards
Maintain Standards: Ensure consistent performance

Examples:

Sales team tracking monthly revenue
Operations tracking production efficiency
Customer service tracking response times
Finance tracking cash flow

KPI Examples by Function

Understanding OKRs: Achieving Ambitious Goals

OKRs (Objectives and Key Results) are a goal-setting framework that helps organizations set and achieve ambitious, measurable goals. They’re time-bound and focused on outcomes.

What OKRs Are

Objectives

Qualitative, inspirational goals

Key Results

Quantitative, measurable outcomes

Time-Bound

Typically quarterly cycles

OKR Structure:

Objective: What you want to achieve (qualitative, inspirational)
Key Results: How you'll measure success (quantitative, specific)

Example:
Objective: Become the #1 choice for SMEs in Malaysia
Key Results:
  - Increase market share from 5% to 8%
  - Achieve NPS score of 70+
  - Grow revenue by 40%

What Makes a Good Objective:

Qualitative: Describes what, not how
Inspirational: Motivates and energizes
Time-Bound: Achievable within timeframe
Memorable: Easy to remember and communicate
Aligned: Supports company strategy

Examples:

“Transform customer experience”
“Dominate the local market”
“Build a world-class team”
“Achieve sustainable profitability”

When to Use OKRs

Best Use Cases

OKRs are ideal when you need to:

Drive Strategic Change: Achieve significant business transformation
Align Teams: Get everyone working toward same goals
Set Ambitious Goals: Push beyond business-as-usual
Focus Efforts: Prioritize what matters most
Measure Progress: Track achievement of strategic objectives

Examples:

Entering a new market
Launching a new product line
Transforming customer experience
Building new capabilities
Achieving breakthrough growth

OKR Examples

KPI vs. OKR: The Key Differences

Understanding the differences helps you choose the right framework.

KPI:

Measures ongoing performance
Tracks business health
Monitors operations
Maintains standards

OKR:

Achieves specific goals
Drives change
Focuses on outcomes
Inspires action

The Key Insight

KPIs measure how well you’re doing what you do. OKRs define what you want to achieve. They’re complementary, not competing frameworks.

When to Use KPIs, OKRs, or Both

Use KPIs When:

Monitoring Operations: You need to track day-to-day performance
Maintaining Standards: You want to ensure consistent performance
Measuring Efficiency: You need operational metrics
Early Warning: You want alerts when things go wrong
Benchmarking: You need to compare to industry standards

Example: A manufacturing business tracking production efficiency, quality metrics, and on-time delivery rates.

Use OKRs When:

Strategic Change: You’re pursuing significant transformation
Team Alignment: You need everyone focused on same goals
Ambitious Goals: You want to push beyond current performance
Focus: You need to prioritize what matters most
Growth: You’re scaling or entering new markets

Example: A startup entering a new market with goals to capture 10% market share and achieve RM5M revenue in first year.

Use Both When:

The Hybrid Approach

Best Practice: Use Both Together

KPIs: Monitor ongoing operations and business health
OKRs: Drive strategic initiatives and ambitious goals

How They Work Together:

KPIs tell you how healthy your business is (baseline performance)
OKRs define what you want to achieve (strategic goals)
KPIs measure progress toward OKRs (tracking achievement)
OKRs inform which KPIs matter most (focus areas)

Example Structure:

KPIs (Ongoing):

Monthly Revenue: RM500K (target)
Customer Satisfaction: 85% (target)
Employee Turnover: <10% (target)

OKRs (Quarterly):

Objective: Expand into new market segment
Key Results:
- Increase revenue to RM750K/month (KPI target raised)
- Achieve 90% customer satisfaction (KPI target raised)
- Launch 2 new product lines

Implementing KPIs in Your SME

Step 1: Identify Critical Metrics

Selecting Your KPIs

Questions to Ask:

What drives your business success? (Revenue, customers, efficiency?)
What are your strategic priorities? (Growth, profitability, retention?)
What problems do you need to monitor? (Cash flow, quality, turnover?)
What do stakeholders care about? (Investors, customers, employees?)

The 5-7 Rule: Focus on 5-7 KPIs maximum. Too many dilutes focus.

Categories to Consider:

Financial (Revenue, Profit, Cash Flow)
Customer (Satisfaction, Retention, Acquisition)
Operational (Efficiency, Quality, Delivery)
People (Turnover, Engagement, Productivity)

Step 2: Set Targets and Thresholds

How to Set Targets:

Historical Data: Based on past performance
Industry Benchmarks: Compare to standards
Strategic Goals: Aligned with business objectives
Stretch Goals: Ambitious but achievable

Example:

Current: RM400K/month revenue
Target: RM500K/month (25% increase)
Stretch: RM600K/month (50% increase)

Step 3: Track and Review

Regular Monitoring

KPIs should be reviewed regularly—daily for operational metrics, weekly for key metrics, monthly for strategic metrics.

Review Process:

Collect Data: Automated where possible
Calculate Metrics: Use consistent formulas
Compare to Targets: Identify variances
Analyze Causes: Understand why
Take Action: Address issues
Report: Share with stakeholders

Implementing OKRs in Your SME

Step 1: Set Company OKRs

Top-Down Alignment

Start at the Top:

Define Strategic Objectives: What does company want to achieve?
Set Key Results: How will you measure success?
Communicate: Share with entire organization
Cascade: Departments create supporting OKRs

Example Company OKR:

Objective: Become the leading provider of financial solutions for SMEs in Malaysia

Key Results:

Achieve RM50M in annual revenue
Serve 1,000+ active clients
Achieve 90% customer satisfaction
Expand to 3 new market segments

Step 2: Cascade to Departments

Each Department Creates OKRs:

Sales: Supporting revenue and customer goals
Marketing: Supporting market expansion
Operations: Supporting efficiency and quality
HR: Supporting team and culture goals

Example Sales OKR:

Objective: Drive revenue growth and customer acquisition

Key Results:

Achieve RM15M in sales (supports company RM50M)
Acquire 300 new customers (supports company 1,000)
Increase average deal size by 25%
Improve sales conversion rate to 30%

Step 3: Review and Score

OKR Scoring

Common Mistakes to Avoid

Avoid These Pitfalls

These mistakes can turn powerful frameworks into demotivating exercises.

Too Many KPIs: Dilutes focus (stick to 5-7)
Setting KPIs as OKRs: Confusing metrics with goals
OKRs Too Easy: 100% achievement means not ambitious enough
No Alignment: OKRs not connected to strategy
Set and Forget: Not reviewing or updating
Too Complex: Overcomplicating the frameworks
No Buy-In: Team doesn’t understand or care
Using for Performance Reviews: Creates gaming and fear

Real-World Example: The Transformation

Growth Solutions Sdn Bhd

We were tracking dozens of metrics but had no clear focus. MMC Financial Planning helped us implement a hybrid approach—KPIs to monitor our operations and OKRs to drive strategic initiatives. We reduced our KPIs to 6 key metrics and set quarterly OKRs that aligned the entire organization. The result? We achieved 3 out of 4 OKRs in the first quarter and saw a 40% improvement in our key operational KPIs. The clarity and focus transformed how we work.

Tan Wei Jie

CEO

The MMC Approach to Goal-Setting

At MMC Financial Planning, we help Malaysian SMEs implement effective goal-setting frameworks:

Our Goal-Setting Framework

Phase 1: Assessment

Current goal-setting review
Strategic objectives definition
Performance measurement analysis
Organizational alignment assessment

Phase 2: Framework Design

Choose KPIs, OKRs, or both
Select key metrics and objectives
Set targets and timelines
Design review and scoring processes

Phase 3: Implementation

Roll out framework
Train teams on usage
Set up tracking systems
Establish review cadence

Phase 4: Optimization

Regular reviews and updates
Continuous improvement
Refine based on learnings
Maintain alignment

Next Steps: Choose Your Framework

The right goal-setting framework depends on your needs. Here’s how to decide:

This Week

Assess Your Needs: Do you need monitoring (KPIs) or goal achievement (OKRs)?
Review Current Approach: What’s working and what’s not?
Define Objectives: What do you want to achieve?
Research Frameworks: Understand KPIs vs. OKRs better

This Month

Choose Framework: KPIs, OKRs, or both
Design Structure: Select metrics or set objectives
Get Team Input: Involve team in design
Plan Implementation: Rollout strategy and timeline

Ready to Set Better Goals?

Whether you choose KPIs, OKRs, or both, the key is having a framework that aligns your team and drives performance. The best framework is the one you’ll actually use.

Remember: KPIs measure performance, OKRs drive achievement. Use KPIs to monitor your business health and OKRs to achieve ambitious goals. The best SMEs use both.

Get Help Implementing Goal-Setting Frameworks

Learn About Organizational KPI Alignment

KPI vs. OKR: Which Goal-Setting Framework is Right for Your SME?

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