Business Students: What Is the Difference Between KPI and OKR?

You've no doubt heard plenty of the acronyms used in almost every company, from KPI to OKR and beyond. Learning these concepts can be tricky, especially when KPI and OKR seem so closely intertwined. How do they align with your business goals and company strategy? What is the OKR methodology and do you need to invest in OKR tools? How, exactly, is the OKR framework different from your KPI? Here's how you break the two down.

KPI Defined

KPI is also known as "key performance indicator." Your KPI is a metric that can measure overall performance, stretch goals, and employee engagement. At the end of the quarter, many businesses review their KPIs and realign them for the next quarter.

Typically, these are less ambitious goals and more like indicators and metrics that help you measure your success factors. A common KPI is used to determine the time period and efficiency with which team members respond to customer requests. In the service industry, another common metric is the revenue per employee which helps you spot which sales goals and company objectives are being met and which are falling short.

KPIs help you focus effort on the right goals and are used by startups and veteran businesses alike. It's always in your best interest to have a general timeframe for these indicators as to how measurable they are can have the biggest impact on your success rate. These can be used to assess bonuses allotted for each person or team lead in your organization and set a template for defining and measure other key results. While that sounds fairly straightforward, it's in the overlap with OKRs that things start to get a little complicated.

What is an OKR?

OKR is broken down into two key concepts: objectives and key results. An OKR framework is a method for the management of company objectives and goals. Like KPIs, OKRs are typically on a quarterly schedule though sometimes, annual objectives are used for an entire organization.

Within a quarter, several objectives are selected. These are then divided up into key results. Usually, there are between two and five key results in an OKR. You can break an OKR down into several levels. You can have a company OKR for the entire organization, departmental OKRs, and individual OKRs. No matter the timeframe, whether it's a quarterly OKR or longer, your OKR will likely tackle more ambitious goals than the KPI counterpart.

However, your key results need to be just as measurable as KPIs. While those ambitious goals can be more qualitative, you cannot measure success with ill-defined key results markers. Otherwise, there's no way to check the impact of the OKR methodology on your company objectives. Some companies use an OKR program or OKR software as a template for a good OKR. It's also possible to find an existing template of an OKR framework though you'll likely need to tweak one to fit your unique company OKR model.

So how do OKRs and KPIs differ?

OKR vs. KPI

To put it simply, OKRs define which success drivers can be manipulated for any given goal. KPIs, on the other hand, verify results. As such, while there is some theoretical overlap between OKRs and KPIs, they are not identical concepts. KPIs are commonly leveraged for control purposes as opposed to management. OKRs, however, focus more on the human component and convey goals amongst organization members.

 Both startups and established businesses should have an existing template for their OKR process as well as how they measure key results and KPIs. This helps create a pathway to more measurable success and gives your organization a driving force to move forward and sustainably grow.

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