When you hear about KPIs and OKRs, you may believe that these notions are very similar to one another. But the truth is that there are some differences, and all you need is to understand the purpose of each idea and how you can make the most out of it. In this article we will study what OKRs and KPIs are, so you will finally be able to understand the difference between these two.
What is a KPI?
The KPI is aa key performance indicator. You want to use KPIs when you are assessing the performance of a certain action, project, person, organization and so on. Most of the time, the KPIs are measured against targets, they are directed towards resources and you can link them to strategic objective. It’s imperative to have KPIs that are measurable, as that’s incredibly important.
There are a variety of KPI examples, as you might imagine. For example, in healthcare these would be the average treatment charge, patient waiting time and so on. A sales department will use the calls made, sales revenue and customer lifetime value as their KPIs. Retail stores are more about KPIs like sales per employee, revenue per square foot, which is the best selling product and so on. Basically, KPIs need to be very easy to measure, as you will have a much better insight into what you can do and the overall return on investment.
What is an OKR?
The OKR is an acronym for objective and key results. Simply put, the objective is connected to the key results. While KPIs are measurements within a framework, the OKR is a strategic framework on its own. OKR does rely on metrics in order to track goal achievement. The results are graded numerically, so you do receive a very good performance evaluation for that objective.
Usually, OKRs are timelined, very ambitious, quantifiable and they can be scored in an objective manner. A lot of businesses use the OKR framework, such as LinkedIn, Spotify, Amazon and so on. A good set of OKR examples would be the main objective to become a market leader in the industry. Then you have key results like recording a certain revenue, boosting the staff numbers and increasing the market cap. Normally you want to attach numbers to the OKRs, as you want to avoid vagueness. Once you do that, you can obtain great results, and the value will be great every time.
Conclusion
Both OKRs and KPIs have their own role. Most of the time, you want to use KPIs in order to measure performance and ensure that you obtain the best results. You can also rely on KPIs for data acquisition which can eventually help you improve things that don’t work as well. With OKRs however, you are setting goals and create the framework where you can use KPIs. It’s important to use both these notions, but you have to understand the role that each one has within your business for the best outcome!