[Difference: Objective And Kpi. Business Goal, Objectives & Key Performance Indicators (KPI) Meaning.]

Are you planning to start a new business? If yes, are you strategic enough to start that business? Isn’t it a good idea to think carefully about how your business is different from other businesses you will compete with? You need to consider who you will target, what you will offer to your target market, and how tempting your offer will be so that customers can’t resist accepting the offer.

There are some fundamental concepts in business that you need to know like goals, objectives, KPIs, and so on. This article is based on objectives and KPIs, how they relate to each other, and what impacts they have on a business.

To explore the nature of objective and KPI, we first need to focus on the business goal, because it is the starting point to understand the other two ones – objective and KPI.

What is the business goal?

A business goal simply states what you want to achieve in your business. It should be aligned with your businesses’ vision and mission, and it should strengthen the values of your business. It should be understandable and flexible.

What are the objectives?

Objectives are closely related to business goals. They actually define the strategies and implementation steps that you can use to achieve your business goals.

What are the Key Performance Indicators (KPIs)?

A key performance indicator is a specific performance measure that will indicate your progress towards the achievement of a particular goal or objective. For example, a KPI might be to sell $5,000 of Product X in the next quarter. You can monitor your monthly progress by calculating how much of Product X has been sold in each month. A KPI provides a good quantitative measure by which you can monitor the achievement of your goals and objectives.

Difference between Objective and Kpi:

First of all, we set a goal in business. Then we make some steps that help us reach the goal. Those steps are objectives, and KPI tells us how well we are doing to reach our goal.

The following table shows some differences between objective and KPI:

KPI Objective
KPI is based on results Objective is based on Intention
What will be the KPI depends on Objective Objective doesn’t depend on KPI
KPI can be used by everyone Objective is used by only a department or organization.
KPI is always precise Objective is always descriptive

Let’s see some examples…

  1. A digital marketing agency has set a goal that will make a profit of $3 million this year. To reach that goal, they need to keep the overall cost below $1 million. They will also need 10000 potential clients. So their objectives for the employees are two-fold – to keep the cost below $1 million and to reach 10000 potential customers. These objectives have a final goal and that is – to reach a $3 million profit. In this scenario, KPI is the tool that tells us how much progress we are making in the project. It shows the results.
  1. An HR department has realized that the company is suffering from the extra burden of a high level of business expenditure. They set the goal that they will reduce the cost. So they set the objective that they will hire new freshers and fire older but useless employees. In this case, the number of new recruits will be a KPI. This KPI is based on the objective of recruiting freshers.

Relationship between Objective and KPI:

Business objective defines Key Result Areas (KRA) and Key Performance Indicators (KPI). If the objective is changed, then KPI will be changed automatically. For example, a company was deciding to keep experienced employees a couple of years ago. Then the turnover rate is decided as a KPI. But now the company is trying to recruit new employees. In this case, the KPI will be changed, and the number of freshers will be a KPI. So we can see that KPI and Objectives are closely interrelated.

As a result of the above-mentioned considerations, you should be very careful when you are trying to formulate your business goals, objectives and key performance indicators.