Guide with a comparison table
OKR vs KPI, and where hoshin kanri fits
Short answer
A KPI measures the ongoing health of a process and stays on the board for years; an OKR names a change you want in one quarter and is scored and retired when the quarter ends. Hoshin kanri is the annual method that decides which few changes matter and agrees them level by level, so OKRs and KPIs both fit inside it.
Last updated:
- Quarter 1OKRs
- Quarter 2OKRs
- Quarter 3OKRs
- Quarter 4OKRs
- JanKPI review
- FebKPI review
- MarKPI review
- AprKPI review
- MayKPI review
- JunKPI review
- JulKPI review
- AugKPI review
- SepKPI review
- OctKPI review
- NovKPI review
- DecKPI review
The comparison
What is the difference between an OKR and a KPI?
A KPI is a measure of how a process is doing, tracked on a fixed rhythm with a target or a control range, and kept for years. An OKR is a quarter-long statement of change: an objective and two to four key results with a baseline and a target. The key result usually borrows a KPI and gives it a finish line.
| Aspect | KPI | OKR | Hoshin kanri |
|---|---|---|---|
| What it is | A measure of how a process is doing | A quarter-long statement of change: one objective, two to four key results | The annual method for choosing a few breakthrough goals and agreeing them at every level |
| The question it answers | Is the process healthy today? | What must change this quarter, and did it? | Where are we going over three to five years, and what does this year deliver toward it? |
| Time frame | Daily, weekly or monthly, kept for years | One quarter, then scored and retired | A three to five year direction, a plan for the year, a review every month |
| Shape | One number with a target or a control range | An objective in words, key results as numbers with a baseline and a target | Four lists on an X-matrix: breakthrough objectives, annual objectives, improvement priorities, targets, with owners |
| Who sets it | The process owner, usually once | The team, lined up with the level above | Leadership drafts, every level answers through catchball |
| How it travels | Rolls up through a KPI tree from line to plant to company | Each level writes its own OKRs that support the level above | Cascades level by level with a reply from each |
| What a miss means | Act today: a countermeasure at the tier meeting | Learn: score it, say why, write the next one | A red month on the bowling chart gets a countermeasure; two reds get an A3 |
| The tool | KPI board, tier board, bowling chart | A one-page OKR sheet per team, reviewed weekly | X-matrix for the plan, bowling chart for the review |
| Fits best | Every process you need to keep healthy | Work where the route to the goal is not known yet | Companies that need a few-year direction agreed across plants and functions |
Most plants already have all three in some form: KPIs on the boards, an annual plan from the budget or a hoshin exercise, and quarterly priorities the leadership team agreed in a meeting and wrote on a whiteboard. The confusion starts when the same number appears in all three places with three different targets, or when a quarterly priority has no number at all.
The cost of that confusion is real. In a 2018 MIT Sloan Management Review study of 124 organizations, only 28% of the executives and middle managers responsible for carrying out strategy could list three of their company's strategic priorities. Three vocabularies for one goal is one way that happens (Sull, Sull and Yoder, MIT Sloan Management Review, 2018 (opens in a new tab)).
The third vocabulary
Where does hoshin kanri fit, and the X-matrix?
Hoshin kanri is the lean method for choosing a company's few breakthrough objectives, agreeing them with each level through catchball and reviewing them monthly. It sets the three to five year direction and the year's objectives; OKRs are a quarter-sized step toward them and KPIs are the monthly measures that show whether the plan is working.
The X-matrix is the one-page hoshin kanri plan: breakthrough objectives at the bottom, annual objectives on the left, improvement priorities on the top, the KPIs that measure them on the right, and a grid in each corner marking which supports which. OKRs do not appear on it; they are the quarterly slices of the annual objectives.
The full method, a filled X-matrix for one plant and the free templates are on the hoshin kanri guide. The X-matrix section explains the four lists and the corner grids.
Choosing
When should you use OKRs, KPIs or hoshin kanri?
Use KPIs for every process you need to keep healthy. Use hoshin kanri when the company needs a few-year direction agreed across plants. Use OKRs when a team needs to pick what must change this quarter. In a plant that runs tier meetings and kaizen, all three usually run at once, at three different rhythms.
- Start with KPIs
The line is unstable and nobody agrees on the numbers
Put the handful of daily measures on a tier board with targets everyone can see. Until the KPIs are trusted, an OKR built on them will be argued about rather than worked on.
- Add OKRs
The KPIs are green and the plant is still not improving
Green KPIs mean the process is holding. If the plant has to change, pick two or three numbers that must move this quarter and write an objective over them. The OKR gives the quarter a direction the boards cannot.
- Run hoshin kanri
Several plants, several functions, one direction needed
When the question is which few things the whole company works on for three years, you need the X-matrix, the catchball round and the monthly bowling chart. OKRs then become each plant's quarterly step, and the KPIs stay where they are.
Nesting by rhythm
How do you use OKRs, KPIs and hoshin kanri together?
Nest them by rhythm. The hoshin plan is drawn once a year on an X-matrix and sets the annual objectives. Each quarter, a plant or department writes OKRs that are its step toward those objectives. Every month, the KPIs on the bowling chart show whether the plan is on track, and the tier boards show the same numbers daily.
- Quarter 1Q1 OKRs: the first step toward the annual objectives
- Quarter 2Q2 OKRs: set from the Q1 scores
- Quarter 3Q3 OKRs: set from the Q2 scores
- Quarter 4Q4 OKRs: the last step, and the input to next year's plan
- JanKPI review
- FebKPI review
- MarKPI review
- AprKPI review
- MayKPI review
- JunKPI review
- JulKPI review
- AugKPI review
- SepKPI review
- OctKPI review
- NovKPI review
- DecKPI review
- Hoshin plan, once a year
- OKRs, every quarter
- KPIs on the bowling chart, every month
- 1
Once a year: the hoshin plan
Leadership sets or confirms the breakthrough objectives, writes the annual objectives as numbers, and picks the improvement priorities. Each plant answers through catchball. The result is the X-matrix and the twelve-month plan line for each KPI on the bowling chart.
- 2
Every quarter: the OKRs
Each plant, then each department, writes two to four OKRs that are its step toward the annual objectives for the next 13 weeks. The key results use the same KPIs as the bowling chart, with a quarter-end target. The improvement priorities become the initiatives under the OKRs.
- 3
Every month: the bowling chart
Plan against actual for each KPI, green or red. A red month gets a countermeasure from the owner; two reds in a row get an A3. The OKR scores at quarter end are read next to the bowling chart, so nobody is surprised by either.
- 4
Every day: the tier boards
The same KPIs, at the level each team can act on. The tier boards look at yesterday; the bowling chart looks at the year; the OKRs look at the quarter. One set of numbers, three rhythms.
A worked example
One company objective, written three ways
The same goal, deliver on time, in full, as it appears on the hoshin plan, in one plant's first-quarter OKR and as the monthly KPI. The numbers are illustrative; what matters is that the three columns agree.
- Schedule attainment, Lines 1 to 3: 86% to 92%
- Line stoppages for material: 22 a month to 10 a month
- Average changeover, Lines 1 to 3: 40 minutes to 34 minutes
| Row | Jan | Feb | Mar | Apr | May | Jun |
|---|---|---|---|---|---|---|
| Plan | 91% | 92% | 92% | 93% | 93% | 94% |
| Actual | 91%, on plan | 91%, off plan | 93%, on plan | not yet | not yet | not yet |
- 1
Read the hoshin column first
It says where the company is going (98% by 2028), what this year must deliver (91% to 95%), the one piece of improvement work that will get it there and the target that proves the work is working. One owner. This is what goes on the X-matrix.
- 2
The OKR is Plant 2's first quarter of it
Plant 2 cannot move company OTIF directly, so its objective is the thing it can move: making the schedule on its three lines. The key results are its own numbers for 13 weeks: schedule attainment from 86% to 92%, a step toward the 95% December target, plus the two causes it will attack.
- 3
The KPI is what everyone watches every month
OTIF has a plan line that ramps from 91% in January to 94% by June and 95% by December. February is red (91% against a plan of 92%), March is green. The red month gets a countermeasure; it does not change the plan.
- 4
Check the numbers agree
The OKR's schedule attainment target (92% by March) sits under the hoshin target (95% by December). The KPI plan reaches 95% in December, the same as the annual objective. If the three columns disagree, the plan is three plans.
A fourth word
OKR vs SMART goals: what is the difference?
SMART is a test for writing one goal well: specific, measurable, achievable, relevant and time-bound. OKR is a structure that joins one objective to several key results and reviews them each quarter. A good key result passes the SMART test; a SMART goal on its own has no objective above it and no quarterly rhythm.
| Aspect | SMART goals | OKRs |
|---|---|---|
| What it is | A test for one goal: specific, measurable, achievable, relevant, time-bound | A structure: one objective and two to four key results, reviewed every quarter |
| Scope | One goal at a time | A set of goals for a team, lined up with the level above |
| Ambition | Achievable is one of the five letters | Stretch is expected on most objectives; 0.7 is a good score |
| Rhythm | A deadline, checked when it arrives | Weekly check, mid-quarter review, score at quarter end |
| Where each belongs | Writing any single key result or annual objective so it can be checked | Choosing and reviewing what a team changes this quarter |
Use both: write each key result so it passes the SMART test, then put the key results under an objective and review them on the quarterly rhythm. The SMART goals post and the free SMART goals template cover the writing; the OKR guide covers the structure.
What goes wrong
Common mistakes when the three meet
Three targets for one number
OTIF at 95% on the X-matrix, 96% in the OKR and 94% on the board. Pick the annual target once, on the hoshin plan, and derive the quarter and month figures from it.
OKRs as a second goal system
A plant with a hoshin plan does not need a parallel OKR programme with its own meetings. The OKRs are the quarterly step inside the plan, reviewed at the meetings that already exist.
KPIs with no owner, OKRs with no number
A KPI nobody owns goes red quietly. An OKR with no baseline cannot be scored. Both fail the same way: nobody can be asked what happened.
Skipping catchball because OKRs are bottom-up
Teams writing their own OKRs is a strength, until two departments write OKRs that pull the same line in two directions. The catchball round is where that gets caught, whatever the goals are called.
Sources
- Sull, Sull and Yoder, No One Knows Your Strategy, Not Even Your Top Leaders, MIT Sloan Management Review, 2018 (opens in a new tab)124 organizations, 4,012 respondents: 28% of the executives and middle managers responsible for carrying out strategy could list three of their company's strategic priorities.
- What Matters: OKR meaning, definition and examples (opens in a new tab)Objectives, key results, quarterly grading, and the point that OKRs are not KPIs.
- Lean Enterprise Institute: hoshin kanri (opens in a new tab)The lexicon entry: PDCA to launch and manage key initiatives, linking each level's work to the company's goals.
In LeanSuite
OKRs, KPIs and hoshin kanri in LeanSuite
In LeanSuite the three live in one place, measured by the same KPIs.
The goal and its KPI
A goal for the year has an owner, a pillar, a Why it matters statement and the KPI it is measured by, with a target and a frequency. Its page shows a monthly table of target against actual from January to December, and the goal shows Met or Missed each month from that KPI.
The X-matrix view
The goals have an X-matrix view for the year: breakthrough objectives at the bottom, the year's goals on the left with the KPI that measures each, the kaizen projects that move them on top and the KPIs on the right, with correlation dots and a lead and support person for each. Selecting any item shows what it is connected to.
The KPIs and the bowling chart
The KPIs behind the goals are the plant's own, with KPI trees that roll up from department to plant to company, KPI boards and the bowling chart. A red KPI opens an action, an A3 or a project.
The cascade and the quarterly step
A company goal is cascaded to the facilities you choose, or from a facility to its teams, with a reply-by date, and each one adopts it as written, writes its own version or marks it not applicable. A facility's or team's own version is where a quarterly objective and its key results go, measured by the same KPI, with the kaizen projects tagged to it.
See it on your own goals
Try the interactive demo in your browser with sample data, or pilot LeanSuite on your own lines for 90 days, with the setup done by our team.
Read more on OKRs, KPIs and hoshin kanri
- X-matrix: what it is, how to read it and how to build oneThe one-page hoshin plan the OKRs sit under, read quadrant by quadrant.
- Bowling chart: what it is, how to read one and how to build itThe monthly KPI scorecard, with a worked sample.
- OKR meaning and OKR examples for manufacturingHow to write and score OKRs, with eight worked examples by function.
- Cascading goals and goal alignmentHow a goal reaches each facility, department and person, and how to see unaligned work.
- Hoshin kanri: meaning, the 7 steps and a filled X-matrix exampleThe method in full, with a filled X-matrix and free templates.
- X-matrix in lean manufacturing: strategy alignment toolHow the four lists and corner grids line work up with strategy.
- Hoshin kanri review cycles: monthly and quarterlyWhat each review checks and who attends.
- Manufacturing KPIs: formulas and targetsThe plant KPIs behind most key results and bowling chart rows.
- KPI tree: what it is, how to build one, and a manufacturing exampleHow to split a KPI into the measures a team can change.
- Strategy map: examples, the four perspectives and how to build oneThe cause-and-effect picture, and how it differs from an X-matrix and OKRs.
FAQ
Questions about OKRs, KPIs and hoshin kanri
A KPI measures how a process is doing, on a fixed rhythm, with a target or a control range, and it stays on the board for years. An OKR is a statement of change for one quarter: an objective in words and two to four key results with a baseline and a target, scored and retired at quarter end. A key result usually borrows a KPI and gives it a finish line.
Yes, and most good key results are. Schedule attainment is a KPI; schedule attainment from 86% to 95% by the end of March is a key result. The KPI keeps being tracked after the quarter; the key result is retired once it is scored.
Hoshin kanri is the annual method: it sets three to five year breakthrough objectives and this year's objectives, names the improvement priorities and targets on an X-matrix, agrees them through catchball and reviews them monthly on a bowling chart. OKRs are quarterly: an objective and a few key results for the next 13 weeks. In a plant that runs both, the OKRs are the quarterly steps toward the annual objectives.
Yes. Draw the hoshin plan once a year, write OKRs each quarter as the step toward the annual objectives, and track the KPIs every month on the bowling chart. The key results use the same KPIs as the bowling chart, so the three never disagree about the number.
The X-matrix is the one-page hoshin plan: breakthrough objectives, annual objectives, improvement priorities and the KPIs that measure them, with a corner grid showing which supports which. OKRs are not drawn on it. Each quarter's OKRs take an annual objective from the left side and the improvement priorities from the top and turn them into a 13-week step with key results.
SMART is a test for writing one goal well: specific, measurable, achievable, relevant and time-bound. OKR is a structure that joins one objective to several key results and reviews them every quarter. A good key result passes the SMART test. A SMART goal on its own has no objective above it and no quarterly review rhythm.
Both. A bowling chart is the monthly scorecard of a hoshin plan: one row per KPI with the planned and actual value for each month, green when the actual meets the plan and red when it misses. The rows are KPIs; the plan line comes from the hoshin targets. A red month gets a countermeasure and two reds usually get an A3.
Every plant needs KPIs; they are how the process is kept healthy day to day. OKRs are added when the KPIs are trusted and the plant has to change something rather than hold it. Hoshin kanri is added when several plants or functions need one direction for a few years. Most plants that run all three run them at three rhythms: daily and monthly KPIs, quarterly OKRs, an annual hoshin plan.
In LeanSuite a goal for the year has an owner, a pillar, a Why it matters statement and the KPI it is measured by, and shows Met or Missed every month. The goals have an X-matrix view for the year with breakthrough objectives, annual objectives, the kaizen projects that move them and the KPIs, with correlation dots. KPI trees roll up from department to plant to company, the bowling chart shows plan against actual, and a red KPI opens an action, an A3 or a project. A goal cascades to facilities or teams with a reply-by date, and each one's own version is where a quarterly objective goes.
One set of numbers, three rhythms?
Bring your X-matrix, your OKRs or your KPI board, and we will show you on a call how the three sit together in LeanSuite.