What would your response be if you were enquired about the goal of implementing a performance management system (PMS) in your organization? Would you focus on the process or the outcome? Apparently, every organization aims to maximize workforce potential and enhance business efficiency. Undoubtedly, you must also be harboring similar priorities at the heart of your performance strategy.
Business performance cannot be attained unless employees' performances are aligned, monitored, developed, evaluated, and rewarded in relation to the firm's overall objectives. This article analyses if the objectives and key results (OKR) approach can be the answer to every performance-related challenge.
Objectives & Key Results (OKR) vs. Management By Objectives (MBO)
OKRs is an approach for defining and monitoring measurable goals where an 'objective' is a declaration of direction and intent, and 'the key result' is the statistic used to track your progress towards your objective. This framework links the achievable objectives with the key results to measure progress, so the goals are tied to the team's daily activities. Tulasi Pochampally, Senior Director of People Operations in Planful, Hyderabad, mentioned, "the difference between the OKR and MBO lies in their applicability; while OKR is progressive, MBO is not."
The OKR approach to goal formulation is the reverse of the conventional management by objectives (MBO) systems, which tend to be top-down, annual, hierarchical, and compensation-linked. OKR methodology works on the notion of outcomes over procedures. It advocates that teams must be given a free hand to achieve objectives assigned to them rather than being orchestrated with precise action steps to achieve those.
Understanding OKR In Relation To KPIs
The dissimilarities between OKR and Key Performance Indicators (KPIs) have been the cause of confusion among the HR fraternity. This deserves a clear comprehension of the two tools. Priyanka S., Vice President-Human Resources of IDBI Capital Markets & Securities, explains that "OKRs necessitate time and explicit verbiage, are preceded by a purpose, are time-bound, have strategy execution framework, and are structured in a hierarchy that establishes a connection between organizational, team, and individual goals and the desired results."
On the other hand, KPIs (Key Performance Indicators) are explicit operating metrics used to measure and communicate the progress of a given activity. These are ongoing and typically authored and managed from the top down, while OKRs are outcome-oriented and cascade from the top while authored locally by teams.
Two Schools Of Thought on OKR
While teams can benefit from a variety of goal-setting approaches, some industry practitioners vouch for the OKR to help teams agree on flexible objectives that are quantifiable, time-bound, and substantiated. The ability to map several key results (KRs) to each objective is one of OKRs' main benefits. Pochampally stated, "OKR is the progressive performance management which works on real-time feedback as against the annual checks."
Other practitioners are of the opinion that when used to evaluate individual contributors, it can fall short even though it is successful for gauging team success. Individuals might not find objective indicators relevant to assessing their effectiveness in relation to the larger business goals. Priyanka opined, "OKRs promote individualism rather than collaboration. OKRs are not a universally applicable one-size-fits-all solution. I've experienced how OKRs may be abused to set objectives for people or teams using unrelated indicators."
Should Leaders Implement OKRs?
While your team can benefit from a variety of goal-setting approaches, OKRs can help you and your team agree on flexible objectives that are quantifiable, time-bound, and substantiated. The ability to map several key results (KRs) to each objective is one of OKRs' main merit.
Execution Is Paramount
Thomas Edison famously remarked that "vision without execution is hallucination." It is this principle that shaped the OKR framework- good ideas with poor implementation will forever remain just the ideas. Priyanka quipped, "Some organizations following the trend implement the OKR framework without properly assessing how managers' working with teams or individual contributors will be affected. It leads to overly high expectations that may fail, causing disenchantment, contributing to high turnover rates and poor organizational performance."
The most significant lever in execution is goal setting and extending goals to objectives and key results, or OKRs. It concentrates our attention, sets responsibility, and emphasizes the actions that genuinely propel forward growth. Every team member in the organization must connect personal ambitions to the organizational goals, understanding that their efforts directly contribute to the company's performance.
Fundamental Precepts Of OKR
Focus On Outcome, Not Activities: OKRs must encourage discussions about what matters most in a particular quarter and intrinsically offer context and express the company's and team's biggest priorities for the following quarter, as well as how human capital will be allocated to execute those goals. Priyanka suggests, "HR must reflect on the senior management's long-term objectives and top priorities while concentrating on the company's core competencies. Consistency in following up with the company to ensure that OKRs are well-defined and recorded is one of the principles to adhere to for effective OKR implementation."
Measure Milestones: Impactful OKRs must specify what teams are striving to accomplish in a particular quarter and how they will assess milestones for progress toward the goal. This approach guarantees that all business sections are working in unison toward the same objective outcomes. Priyanka emphasizes taking action and explains, "Setting definite, breakthrough goals, achieving the majority of them, aligning to the organization's momentum, pausing to reflect on successes, and then repeating the cycle, in my opinion, are the keys to successful OKR implementation that HR should be mindful of."
When done right, OKR can be a powerful pulse of business that reflects its overall health in terms of business priorities set right and predicting symptoms requiring finetuning of actions to achieve desired health of the company.