One of the common confusions in the management by objectives methodology is the difference between KPI and OKR (Objective Key Results).
The word KPI is an abbreviation of “Key Performance Indicators” are values or outputs measured to assess how effectively business results are achieved. The word “key” in this context means the most important or top priority.
By analogy, let’s say you have a dream of living a healthy life until the age of 90 (STRATEGY). Your doctor will occasionally advise you to follow a diet, recommend surgery in some cases, in short, he/she will guide you throughout this journey. You can think of your doctor as the OKR that will guide you throughout this journey. The values constantly measured during the process, such as your heart rate, blood pressure, cholesterol level, etc., are your KPIs.
The Difference Between KPI and Key Results:
Key Results (KRs) within OKR are the success criteria for the steps to be taken during the journey. Going back to the example, “Getting Fit” is an OKR for the “Strategy” of “Living a long and healthy life,” and reducing body fat by 3%, which is planned to achieve fitness, is defined as the success indicator (KR). The constantly measured body fat percentage is your KPI.
In summary, KPIs indicate whether your business is on the right track to reach your OKRs, while OKRs are tactical tools that plan and implement the steps to achieve your medium-term and long-term goals. It is essential to set both your KPIs and OKRs, focus on improving the KPIs, and define related OKRs, prioritize them, and implement them in your business to bring your strategy to life and manage your teams efficiently.