KPI vs OKR: Examining the Key Uses and their Use Cases
Many business strategists talk about the importance of KPI and OKR to your company’s overall success. If you don’t understand what these terms mean or their differences, however, you won’t be able to effectively employ these two important strategies.
Here’s how to understand the differences in KPI vs OKR and how to utilize each strategy to improve your business.
What is a KPI?
KPI is an acronym that stands for Key Performance Indicators. A KPI is a measurable aspect of one’s business that can be used to help gauge the overall performance of the business. For example, a KPI for a burger restaurant might be the number of hamburgers sold, while a KPI for a dentist office might be how many regular clients are retained, or how many new clients are brought in.
Every business will have different KPIs, and there will likely be several KPIs you can use to measure the success of your business.
What is an OKR?
OKR is an acronym that stands for Objectives and Key Results. It’s similar to KPI but it isn’t exactly the same thing. OKR focuses on a company’s goals and objectives, and these can be both long term and short term. A short term objective might be something like, “Get more clients this summer,” while a long term objective might look like, “Lower annual operating costs and increase profitability by 50%.”
Whether short term or long term, an OKR has two components: the objective, and the key results. There may be only one key result, or you may have several key results for each objective. For example, if your objective is “Attract more clients,” a key result might be, “Book more appointments.”
The KPI OKR Connection
This is where both the connection and the difference between OKR vs KPI becomes apparent: KPIs can be used to determine whether or not the Key Results aspect of the OKR has been achieved. Let’s take a look at an example. A beverage manufacturer wants to become a leader in the industry. Becoming a leader in the industry is the company’s objective, the “O” component of the OKR.
A Key Result, the “KR” in the equation, might be to have a larger distribution network than competitors. A KPI that measures the number of distributors and their reach could show if this Key Result has been achieved.
So, while a KPI can be used to measure whether or not an OKR has been reached, it’s not entirely the same thing. While an OKR might be abstract and somewhat subjective, such as “a successful business,” or “happy employees that stick around,” a KPI tends to be concrete and measurable.
Increasing Success with KPI and OKR
An OKR without the KPI component might be harder to achieve, simply because you won’t have as clear of an idea whether or not those key results have indeed been achieved. Now that you understand the differences and connection between KPI vs OKR, you’ll be able to successfully employ both strategies to better evaluate and grow your business.
