Organizations that have historically identified and measured goal progress with the help of Key Performance Indicators (KPIs) often ask how they can achieve more rapid business growth. Many organizations that are beginning to investigate the benefits of using the Objectives and Key Results (OKR) methodology in their business wonder how KPIs are different from OKRs, and whether their business can, or should, use both methodologies to accelerate growth. What is a KPI?
First, a KPI can be thought of in this way: a Key Performance Indicator (KPI) is a quantifiable metric for evaluating progress by analyzing data tracked within the parameters of the KPI. The keys to KPIs are that they should almost always be quantifiable. Rarely should KPIs be of a qualitative nature. The most common KPIs are financially-focused, customer-focused, or project management-focused. Examples of KPIs include:
- Quarterly sales
- Net profit margin
- Cost per conversion
- Percentage of projects completed on time
As you can see, a KPI identifies what
you're going to measure. Key Performance Indicators are a good starting point to identify areas of focus that, when improved, will correlate to progress. But, KPIs on their own are not strong enough to determine how
goals will be achieved. KPIs don't inherently give leaders the framework needed to meet the growth goals that many business owners are after. In order to make KPIs relevant and profitable to an organization, targets need to be set within the KPIs and progress must be tracked with data.
According to kpi.org
, "Managing with the use of KPIs includes setting targets (the desired level of performance) and tracking progress against that target." You see, KPIs can be incredibly helpful for identifying what
you're going to measure. But when targets are identified, and the methods of tracking progress are identified, then we begin to talk about results.