Objectives and Key Results (OKRs) is an agile and collaborative goal-setting framework that was first developed in the 1970s by former Intel CEO, Andy Grove. It wasn’t until 2017 that OKRs really took off however when Google-investor, John Doerr, popularised them in his best-selling book ‘Measure What Matters’ - a fascinating read that promotes OKRs as ‘The Simple Idea That Drives 10x Growth’.
Doerr’s book, which details how Google used OKRs as a strategic business planning tool, created widespread interest amongst business leaders who were keen to know whether the ‘Google method’ might support growth in their own organisations.
Here we’ll take a deep dive into OKRs, their benefits, and potential pitfalls.
An overview of OKRs
First and foremost, OKRs offer a framework for setting challenging and ambitious performance objectives that are closely tied to measurable results (or as we prefer to call them, milestones). Central to the framework’s success are clearly defined and well-communicated priorities and responsibilities.
Here’s an example of a good OKR:
Objective:Develop and launch a new website to promote marketing services by 1st February 2022
Milestone 1: Purchase website domain by 31st September
Milestone 2: Instruct website agency to complete all design and development by 10th November
Milestone 3: Ensure all website copy is ready to uploaded into the Content Management System (CMS) by 1st December
Milestone 4: Publish content and launch website on 20th January 2022
Enabling agile performance management
OKRs are also renowned for their adaptability - a factor that has driven soaring levels of adoption in recent years as organisational leaders have made the switch to agile performance management.
But what is it that makes OKRs especially agile?
First off, they facilitate multi-discipline groups that come together with a shared purpose. They’re designed to be regularly reviewed (at least once per quarter) - a characteristic that makes them particularly well suited to fast growth businesses where change is constant and goals need to be continually adapted in line with the changing environment (a point that explains why OKRs have proven particularly popular in the technology sector).
In this way, OKRs can be thought of as the antithesis to once-per-year ‘set it and forget it’ performance objectives, which often fall by the wayside as business plans inevitably change. And of course, in the current environment, that’s never been more true. Organisations need to be more agile than ever - and for many, OKRs are providing the necessary strategic framework.
Milestones and self-motivation
At OpenBlend, the thing we like most about OKRs is that their benefits extend beyond objective achievement, to include employee engagement and even intrinsic motivation – an individual blend of work/life drivers that supports long-term performance success.
Here’s how it works: OKRs are designed to be set collaboratively, with input from both manager and employee. This gives the individual (or the team) an opportunity to help shape their own objectives, which supports an all-important need for autonomy, which as Dan Pink would tell us, is a primary factor for self-motivation. Secondly, because OKRs are designed to support the achievement of short-term objectives, employees who succeed in meeting their milestones and/or goals will receive regular recognition and positive reinforcement - a well-known driver for employee engagement and motivation. In fact, as well as boosting engagement, recognition is also key to increasing productivity and retention - a point that highlights the critical value of ongoing recognition, not just in performance management terms, but in the context of wider business performance too.
So the importance of regular recognition is no longer the question here. Rather, HR and business leaders need to be asking how best to deliver this, and for many, OKRs provides the requisite framework.
Detaching pay from performance
Notably, and as Doerr explains his book, OKRs are also designed to drive performance rather than serve as a measure of performance to inform reward. At OpenBlend, we very much advocate for detaching performance from compensation in this way, and here’s why:
- By separating reward from performance, employees will be more likely to admit (and learn from) their mistakes, as well as reveal their knowledge and skills gaps without fear of remunerative penalty.
- When pay is tied to performance, an employee is likely to set themselves easier, less aspirational goals. Why? Because the stakes are immediately higher. The employee knows that if they fail to achieve their objective on time, their reward may be reduced - or even withheld - on the premise of poor performance. And in that scenario, who wouldn’t be more inclined to play it safe?
- OKRs are designed to take pay out of the performance conversation, and while the framework does have its drawbacks (we’ll come on to those in a minute), this is one element that gets our firm stamp of approval.
OKRs: putting goals on the C-suite agenda
OKRs stand out for other reasons, too. Unlike employee performance goal-setting frameworks such as SMART, OKRs are often thought of as a strategic business planning tool rather than an HR-specific performance management methodology (though we’d always argue the two are inextricably linked).
The significance here is one of positioning: talk ‘strategic business planning’ and the CEO’s ears prick up. Talk about employee performance though, and people are more likely to default to HR. OKRs - and in particular, the Google case study - have been instrumental in helping to change this narrative and highlight the bottom line value of good performance management.
OKRs and hybrid work
Of course, one of the biggest questions here is whether a performance management framework from the 1970s can support high performance in the hybrid working world.
Our view? Yes it can, so long as the key elements of clarity and collaboration are maintained with the support of coaching and modern performance management technology. In fact, with the right systems in place, we see no reason why OKRs wouldn’t work just as well in a hybrid setting as they would in an in-office environment.
Here’s some of the characteristics that make OKRs a good option in the new world of work:
- OKRs put clarity front and centre, removing any of the extra guesswork that a remote working employee may need to do in order to understand the organisation’s priorities - and more specifically, how their own objectives tie into the achievement of those. But they enable employees to shape their deliverables.
- By focusing on the end goal and the milestones needed to get there, performance is no longer tied to office working hours (and in our opinion, that was always a terrible measurement of success anyway). Instead, there is much less focus on hours worked and greater emphasis on the thing that really matters: whether the employee is on track to achieving their goals.
- OKRs are adaptable enough to flex to the individual’s needs and wants. If a hybrid worker wants to stick with quarterly performance reviews, that’s fine. If their colleague prefers monthly or bi-weekly check-ins, that’s fine too - and in the hybrid working world, this flexibility is more important than ever.
OKRs: common criticisms
Clearly, there are lots of advantages to the OKR model yet we’d stop short of saying they’re perfect. Some of the potential drawbacks that HR and business leaders will need to manage and mitigate, include:
- Being too prescriptive: by design, OKRs set out key results or milestones that lead the individual or team to achieve an end objective. For some people, this predetermined step-by-step approach can be too prescriptive and can even serve to reduce motivation by narrowing the margin for creativity and autonomy.
- Overload and overwhelm: this one may sound obvious, but unless priorities are clearly outlined by both employee and manager, it’s all too easy to set a seemingly endless list of OKRs, creating a fast-track route to overwhelmed and burned out employees.
- Extra workload: many managers will perceive OKRs - or rather the need for regular check-ins - as yet another thing they have to manage on top of their already busy workloads. Communicating with managers is vital here. Let them know that a check-in need not be a full-blown performance review that requires an hour’s prep work and form-filling. Make it known that these should be a quick 15 minute catch-ups that, with the support of a modern performance management system, make it easy for both parties to connect, flag any issues, and stay on track to achieving the end goal.
Are OKRs right for your organisation?
So for those contemplating a switch to OKRs, our advice would be this: what works for one organisation won’t necessarily work for yours. Consider the specific needs of your organisation and your employees. Take time to understand people’s work life drivers (the basic needs that must be fulfilled in order for them to perform). When it comes to good, holistic performance management, this is what matters most. So rather than talking in terms of OKRs or SMART, or indeed some other performance management methodology, let’s keep our eyes on the real prize: a happy, healthy, engaged and high performing workforce. That’s the destination we’re all working towards. The mode of transport we use to get there is a matter of personal choice.