Over the past 15-20 years, digitalization has brought significant changes to our business life. Yet, there remains some disagreement as to the difference between OKR and KPI. Therefore, at the heart of the matter lies a contributing factor which is OKR vs KPI.
In the first place, one point which is believed to be absolutely pivotal is the fact that the topic OKR vs KPI is controversial. Therefore, it is important to emphasize that what is an OKR and what is KPI.
OKR (OBJECTIVES AND KEY RESULTS) DEFINITION
The acronym OKR stands for Objectives and Key Results, a goal-setting framework widely used by many companies. Instead, an OKR consists of an Objective and up to 5 Key Results. Each OKR can also have initiatives.
You can use it to set, track, evaluate your company goals and key results. Furthermore, you can set them weekly, monthly, quarterly, or yearly. Therefore, it is a simple and powerful goal system that creates an alignment and focuses on the effort shown on the measurable goals.
The main purpose is to achieve measurable results by aligning individual and team objectives with the goals of the organization.
It is a short-term goal-setting and results tracking system designed to provide more agility to the strategic management and performance system.
Objectives are mainly the steps to achieve a goal. Besides, they have a short timeframe and a narrow definition. On the other hand, goals are the main targets that your company wants to achieve. They have a long timeframe and have a broad definition.
Key Results are brief statements that are clearly defined, specific, and measurable. Therefore, they make it easier for employees and their leads to monitor progress. For best results, Key Results must have the following characteristics:
KRs are specific. Organizations that have used OKRs succesfully to see it that they use specific language that is common to all their employees when drafting their key results and objectives.
KEY PERFORMANCE INDICATOR (KPI) DEFINITION
A Key Performance Indicator(KPI) is a quantitative value that indicates how effectively a company is reaching their key business objectives. Organizations use KPIs at multiple levels to evaluate their success at reaching targets. High-level KPIs may focus on the overall performance of the business, while low-level KPIs may focus on processes in departments such as sales, marketing, HR, support and others.
KPIs are performance metrics that demonstrate how effectively a company is pursuing its key business objectives. KPI goals are obtainable and measure the process or a project already in place.
OKR Vs KPI
KPI goals are obtainable and represent the output of a process or project already in place, while OKR goals are somewhat more aggressive and ambitious and in setting them higher than what is achievable right now, they make your company and employees stretch farther than it was previously thought possible. This helps promote individual and company growth.
OKR has greater depth than KPI and provides a better framework for taking on new projects, ventures, even new directions for your business.
A KPI that needs improvement will be a starting point for creating an OKR, and it will become a Key Result of an Objective. Accordingly, an OKR vs. KPI comparison is as different as chalk and cheese they both contain keys, but one is a combination that contains the other. Because of their complementary scope, OKRs and KPIs are natural companions.
To be more specific, when defining new OKR, your KPI dashboard can serve as a source of inspiration. A KPI may tell you that you have a problem, but you’ll need an OKR to actually fix it. Therefore, good Objectives contribute to your company’s Ultimate Goal or fix problems that prevent you from realizing your dream.
In other words, to put it differently, OKR and KPI can work perfectly together. KPI helps monitor performance and identifies problems for improvement; OKR helps solve problems, improves processes, and drives innovation.