KPIs and OKRs are different tools for tracking business performance. KPIs measure ongoing metrics like sales or customer retention, while OKRs set ambitious goals and the measurable results that prove you hit them. Small businesses often confuse the two, but using both together gives you a complete picture.
KPI versus okr, what's the difference really? Are they just fancy acronyms? Why are they used in the same sentence? Are they synonyms? Are they antonyms? Who knows? Well, by the end of this video I hope you know because we're going to be going through the definition of each of these terms and the key differences to help you, you know, feel like a smart business person. Also be able to comfortably understand and use these terms in day to day conversation. Foreign we are going to start off today by talking about KPI because I think that's the easier of the two to understand. KPI is an acronym just like OKR and KPI stands for key performance indicator. And break that down piece by piece. A key performance indicator is something that is important, hint key and is indicative of meaning. It tells you something about performance. Yeah, I know I basically just used the word to define the word, but honestly that's exactly what it is. A key performance indicator is a metric that you can use to understand how well you are doing at whatever it is you care about. So for example, if we were a race car driver, our time around the loop might be a very good metric. That time is our key performance indicator because the speed is our main unit of performance. Another key performance indicator for a race car driver might be the speedometer, the you know, miles per hour, kilometers per hour on that car itself because that is telling us how far and how fast we are going. Well, just, just how fast actually. But you know what I mean, the pace, anything that lets us measure our performance and is one of those key driving measures. The most important of the most important is considered a key performance indicator. The tricky thing about ca APIs is the key part and that's why I'm stressing it so hard here. A lot of the times folks will think that every number they see is important. And yes, numbers can be important. But to really have that hierarchy of key performance indicator versus other random number, we need to have some discretion and only the numbers that truly tell us how we are performing and truly matter reach that KPI status. Everything else is just a metric or a vanity metric, or just something that's good to know but not necessarily reaching that precipice of KPI. Otherwise it's just a PI, I suppose, something like that. Examples of KPI besides the two I already gave would be something like the number of leads that you book sales calls with or perhaps the customer satisfaction rating that you have or the reviews you have on your Google profile. Each of those numbers are metrics because they're measurable things you're looking at. But if those particular things such as customer satisfaction score, if that is something that is a key driver of your success, if you know that that's going to have a lasting impact on how successful your department is, then you might say that is a key performance indicator. That is what a KPI is. Now let's flip over to okr. OKR is another acronym meaning, you know, words that stand for something and OKR stands for objective and key results. Despite being three letters back to back, just like KPI, OKR is actually two different words or two different parts. The first, the O, is the objective that is referring to an overarching destination or goal, some kind of big vision that you are chasing. An objective is kind of like your end destination, the big vision, the place that you are heading. One example that I think might be helpful to think about when it comes to objective is to think about beating a video game. All right? You ever finish like Final Fantasy or Mario Kart or some kind of game? Hell, it could be Pac Man. I don't care if you've ever played a game, you know there's the ultimate victory where you beat the whole game. For me, that's a good way to think about objective. You are trying to get to the destination and that destination might move as your ambitions change. But for now, let's just say it is reaching the end of Pac Man. Alright? Below the objective we have key results. These are two letters that are combined into one term. Key results are like the goal posts we need to get past in order to achieve that ultimate objective. So again, if our objective was to beat the whole video game, our key result might be to beat the first boss to level up our wood cutting skills and to get on to the next Fantasy Land level. Those are the things we have to do to get to that end destination. Those key results that we pass along the way, those save points we walk through, those are our key results. A key thing to remember about key results, no pun intended, is that key results are things that you can influence but you do not directly do. For example, a key result would not necessarily be play a hundred hours of the video game. That's not really a key result. That is more of a metric that we might measure as a key performance indicator which we'll get into in a moment, but it's not really a key result. Instead, a key result might be beat the first boss. That is something that we can influence, we can work towards, but we can't just do it and Check a box. We have to really work and beat that first boss to get to that next level. For a more business context of what a key result might be, a key result could be something like we want to have 10 new clients. Well, we can't force 10 new clients to come work with us. That's the result. To get to that key result, we need to take many actions, such as having 100 sales calls or cold prospecting or whatever the heck it is we have to do to achieve that result. Key results tend to be some kind of lagging indicator that we can influence, but not just directly do on our own. Okay, that's objective and key result. How does this relate back to KPI? Well, KPIs are things that measure our performance, the things we do. And as we've just talked about, the OKR goal setting framework definitely is a ripple effect of the things we do. The actions and tasks lead to those key results which ultimately lead to the objectives. So while these two are definitely not synonyms for each other, they mean very different things. It is very possible that you would have KPIs that lead in to a key result or KPIs that measure your tasks or initiatives. These two things are complementary, but not necessarily one replaces the other. So I know this was a quick overview and I would love to hear you guys continue the conversation in the comments. I know I missed things here. I know I probably overgeneralized. Drop a comment below, let me know what metaphors or explanations helped this topic. Click for you because that might also help others. And if you enjoyed this video, please do like and subscribe as well. And check out our newsletter link below if you'd like to get more conversations like this into your daily weekly diet through our newsletter. Okay, so that is it for this video. Thanks so much for watching and until next time, enjoy the process.
