OKR Vs KPI: What's the Difference? [2023 Update]
Key performance indicators (KPIs) and objectives and key results (OKRs) are both commonly used in businesses to track and measure progress towards goals. However, there are key differences between OKRs and KPIs that are important to understand in order to effectively use them in an organization.
What is a KPI?
A KPI is a measurable value that demonstrates how effectively an organization is achieving key business objectives. It is a quantifiable metric that is used to track progress towards specific goals. KPIs are often used to track financial performance, such as revenue or profit, but can also be used to measure other aspects of a business, such as customer satisfaction or employee engagement.
Example
For example, in the retail industry, a common KPI is:
KPI: Same store sales growth
This KPI measures the year-over-year increase in sales at existing stores. This KPI is important for retailers to track because it indicates how well the company is performing compared to the previous year and helps identify trends that may be impacting sales.
What is an OKR?
An OKR is a framework for setting and achieving goals. It is made up of an objective, which is a clear and specific statement of what the organization wants to achieve, and key results, which are specific, measurable, and time-bound targets that will demonstrate progress towards the objective. OKRs are typically used to align a company's overall strategy with the goals and objectives of individual teams and employees.
Example
For example, in the technology industry, an OKR for a software development team might be:
Objective: To develop a new feature for the company's flagship product
Key Results:
- Develop and launch a new feature within 6 months
- Achieve a 10% increase in user engagement within 3 months of launch
This OKR helps the team align their work with the company's overall strategy and allows them to track their progress towards achieving the objective.
KPI Vs OKR - Difference Explained
KPIs and OKRs have different purposes and are used in different ways. KPIs are used to measure performance and track progress towards specific goals, while OKRs are used to set and achieve goals by aligning an organization's overall strategy with the goals and objectives of individual teams and employees.
Here are three industry-specific examples of how key performance indicators and OKRs differ:
Healthcare Industry:
KPI: Patient Satisfaction Rate - Measure of how satisfied patients are with their care and experience in the facility.
OKR: Reduce Wait Times - Objective of reducing the amount of time patients spend waiting to be seen by a healthcare provider. Key results include reducing wait times by 20% and increasing patient satisfaction by 10% within the next quarter.
E-commerce:
KPI: Conversion Rate - Measure of the number of website visitors who make a purchase.
OKR: Increase Online Sales - Objective of increasing the number of sales made through the company's website. Key results include increasing online sales by 20% and improving website conversion rate by 15% within the next quarter.
Finance Industry:
KPI: Return on Investment (ROI) - Measure of the profitability of an investment.
OKR: Increase Investment Returns - Objective of maximizing returns on investments. Key results include increasing ROI by 25% and decreasing investment risk by 10% within the next quarter.
In conclusion, it is important to understand the difference between KPI and OKR to make sure that you are using the right tool for the job. KPIs are used to measure performance, while OKR is used to set and achieve goals. Both can be used to track progress towards specific goals, but they serve different purposes.
