Many business leaders do not realize the impressive history that KPI and OKR systems have. In particular, OKR is famous for being used by Google to help propel them to success. On top of that, huge companies like Uber, Twitter, and LinkedIn have also found success while using the OKR system.

Many people compare the OKR system to the KPI system. The differences between KPI vs OKR mean that the right one for you depends on your situation.

So what exactly are the differences between the systems? Which system is the right choice for your business? Read on to learn all about the most important things to understand about KPI and OKR business frameworks!

What Are KPIs?

KPI is an acronym that stands for a key performance indicator. That means that it focuses on specific measurements that are intended to indicate performance. And in particular, these indicators are supposed to measure performance in the most important areas of a business.

Key performance indicators are part of a strategy that leans on the indicators to inform actions. For example, a company might have a key performance indicator that measures how many sales calls their sales team makes.

If that number is especially high, they might decide that they should be focusing their resources on something other than encouraging their sales team to make more calls. If the number is low, they might decide that they need to help their sales team make more calls.

Key performance indicators can also be used in a slightly more sophisticated way. It is possible that the sales call key performance indicator will show a very high number.

But if you compare that with a second key performance indicator that measures the efficacy of calls, you might discover a problem. It might be that the sales team is making plenty of calls, but the calls are not very effective.

There are many different ways that this kind of situation can occur. But using key performance indicators can help business leaders discover this issue. They can then investigate further and hopefully improve their sales success.

That is the intended result of key performance indicators.

What Are OKRs?

OKR is an acronym that stands for objective and key results. It is a more comprehensive strategic framework than key performance indicators. In fact, you can think of key performance indicators as a simple tool, whereas OKR is a more complete system that informs how you should use your various tools.

OKR systems start with high-level business goals. These goals are the objectives. Each objective will then have a number of key results associated with it.

These key results are supposed to measure progress toward the overarching objectives.

On top of that, the key results should have a number of traits. First of all, it is important that you can quantify and measure the key results. In fact, every result should be able to be rated on a numerical scale ranging from 0 to 100 or from 0 to 1.

Additionally, these key results need to have specific deadlines and timelines associated with them. That way, business leaders have to face when a strategy is failing. They cannot simply keep saying that the strategy will work sometime in the future.

Lastly, the key results in the OKR system need to be ambitious. They need to push business leaders to bring the best within them to meet the goals.

KPI Best Practices

Key performance indicators work best when there are not too many of them. If you have a whole page full of key performance indicators, it can be easy to lose yourself in excessive data.

On top of that, it is important to organize key performance indicators. Your key performance indicators all need to be assigned to specific goals or initiatives.

One of the biggest mistakes that people make with key performance indicators is becoming static with them. Putting together a KPI system can take a significant amount of work. People get attached to their system and don’t want to update it.

However, it is important that you are prepared to change your key performance indicators. As your system makes contact with reality, you will discover that you need to update it to improve it.

OKR Best Practices

In the OKR system, it is best to start with only a few overarching objectives. Each objective can then have all the key results it needs.

On top of that, the OKR system does not attempt to predict the future. OKR experts recommend that you set up a new OKR system every month or quarter. That way, you do not get attached to outdated plans.

It is also important to get everybody on board with the OKR system. If the business leadership is not unified, the system may not provide the benefits it is capable of.

Comparing the Systems

One of the most important differences between OKR and KPI systems is that the OKR system aims more at organizational growth. If you want your business to grow, then you might want to focus on an OKR framework.

Once you understand the OKR definition and have grasped how OKR goals work and how examples of KPIs function, you might want to find out more about how to set up one of these systems for yourself. This is a great post to read to help you set up a maximally effective OKR system.

Understand the Differences Between KPI vs OKR

We hope learning about the differences between KPI vs OKR has been helpful for you. Many business leaders are looking for a framework to help them order their business initiatives. However, they often end up going with whichever framework they come across first.

Taking just a little bit of time to understand the essence of KPI and OKR systems can help you find the right framework for your situation. To learn more about the latest developments in business, check out our other articles!