Measuring your business performance is a vital aspect of business growth. Understanding what works and what does not is essential for your business for it aids in driving change towards the right direction. The two most commonly used measurement tools are OKR and KPI. These two business performance frameworks are crucial for your business but differ in the following three ways.

Difference in definition

When comparing OKR vs KPI, KPIs are measurements used in a given framework. They are the key performance indicators that demonstrate the progress your business is making towards goal achievement. KPIs are an excellent monitoring tool that promotes the setting of clear and achievable targets.

KPIs use measurable numbers to reflect revenue targets and the periodic growth of different business metrics. You can set annual, monthly, hourly targets depending on, and what you wish to monitor.

On the other hand, OKR is a planned framework. It represents the objectives and key results in a business framework. Businesses use this goal-setting framework to create well-thought-out objectives and the key results expected for each objective.

OKRs use specific metrics to track and communicate the desired outcomes in a business. They help create focus on the areas that essentially need improvement and promote the delivery of valuable business results.

Differences in the role they play in a business

Good KPIs

• Measure the intended business metrics to aid in better decision making
• Offer comparisons that allow you to gauge the degree of performance over a certain period
• Help in tracking personal performance, project performance, and resource utilization
• Provide clear evidence of the objective progress to aid in a better understanding of the current position of the business in terms of goal attainment.

Good OKRs

• Give clear direction on what teams and individuals should do to achieve corporate goals
• Promotes better accountability, transparency, and key results measurement
• Boost individual engagement through the good setting process
• Allows for better resource allocation through the setting of objectives.

It is important to note that OKRs identify a goal (objective) and a means to identify goal attainment (expected key results) and the KPIs provide the indicators that will aid in identifying the progress the business is making towards realizing all the set objectives.

What to consider when creating OKR vs KPI

Avoid being vague when creating KPIs. The best thing to do is provide meaning and context for every KPI. Context can be provided by tying KPIs to every objective for better progress measurement and comparison.

The KPIs are reviewed by business executives. This is because they are key in assessing the value and impact of the business.

When creating OKRs, you should start by defining the overall objectives of the organization, then the department, team, and individual goals should follow suit. OKRs are best used for rapid business growth and should be created when you are well-prepared for the changes.

Conclusion

The above key differences between OKR vs KPI create a better understanding of how these two frameworks work, and why they are essential for business growth. We hope you can now use them to grow your business.