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How OKRs Can Transform Your Performance Management Strategy

Tim Driscoll

March 6, 2020

Annual performance review and appraisals have been losing favorability and effectiveness for some time now. When managers and employees see the process as time consuming, too subjective, and unhelpful, performance review does little to actually motivate and improve performance on an individual basis.

Conversely, goal management is a tool that organizations have been using just as long, and are evolving the process to be more and more relevant and pinpointed. OKRs first hit the business world in the mid 20th century, but have been widely popularized by the tech start-up industry over the last 15 years, adopted by more and more businesses across all industries as a valuable tool to set aggressive goals while allowing room for agility and adaptability for the fast-paced nature of business today.

How can #OKR and #PerformanceManagement work together? @InspireSoftware has the answer for combining your business goals and your people goals in one place:Tweet This!

Smart organizations are discovering how to marry the two concepts to develop performance development strategies informed by business goals, with the space for autonomy, transparency, and adaptability across individuals, teams, and the organization as a whole.

Why Are OKRs Gaining Popularity?

Objectives and Key Results are a method of goal management that uses a simple framework for defining and tracking objectives and their desired outcomes. They are ambitious and sometimes lofty — accomplishing them to their fullest extent is designed to be challenging. Objectives are usually a distant end-goal, set along an annual timeline, and the path to reach them can be determined by achieving quarterly key results. This allows organizations to be more agile as challenges, obstacles, or major changes occur throughout the year.

Bonus Content: Download the Beginner's Guide to OKRs!

Objectives are statements of broad qualitative goals that describe “what we want to accomplish”, while Key Results are quantitative statements that measure achievement, and they tell the story of “how we will know when we’ve met the objective”.

Here is an example:

Objective: Add more restaurants to the Western region franchise chain so that we can capture more Western market share.

Key Results:

  • Select 30 franchise candidates by June
  • Train 15 of them before the year’s end
  • Sign contracts with at least 10 before January of next year
  • Open at least 5 stores by next June

The methods by which the company reaches their key results can be adapted as needed along the way, but the outcome remains the same. When each of the Key Results have been achieved, the company expects to meet their driving objective.

Why Are Performance Reviews Losing Popularity?

Annual performance reviews are typically end-of-year appraisals that rank employee performance. Reviews focus on the measure of performance as related to the responsibilities and expectations associated with an employee’s position. Reasons this type of performance management are losing favorability include:

  • Appraisals are too subjective, relying on the viewpoint of one or a few people that may or may not have a clear picture of the individual’s performance or understanding of their role.
  • Cadence is too infrequent, meaning much is lost between reviews and little of the conversation is retained and applied to the individual’s work.
  • Issues are often held until the review, meaning corrective conversations happen too far after the incident takes place, and conversations have little relevance at the time they happen.
  • Individuals feel disconnected from their managers and have little support throughout the year.

Bonus Content: Download the 5 Phases of Performance Whitepaper!

As the dynamic of the workplace changes and work styles transition from older to younger generations, these formal, infrequent conversations make less and less sense to effectively develop talent in the right direction that both satisfies an employee’s ambitions and motivation while also aligning with organizational needs.

Business-Centric vs. People-Centric

Organizations sometimes have a hard time prioritizing both their people and their business.

OKRs are often considered a business-centric tool. The purpose of OKRs is to define what the business needs to accomplish within a set timeframe. The general expectation is that as each objective is accomplished, the business will fare better as a whole in all aspects—customer satisfaction, revenue, product quality, etc. But there are inherent benefits when employees understand how they fit into and contribute to the organization's success. OKRs provide focus, alignment, collaboration, and transparency. When employees have visibility into how they and their teams are aligned with and contributing to organizational success, they are more likely to be — and remain — engaged.

Bonus Content: Download the Goal Guide!

Performance reviews are intended to be a people-centric process that is focused on individual performance and professional development. The emphasis is on the employee, how to help make them better at their job, help them reach their full potential, keep them engaged, and help them reach a fulfilling career through coaching, training, and continued learning. The problem a lot of organizations have with this kind of focus, however, is that individual goals don’t always align with strategic business objectives.

How Can You Make Your Business Be About Your People?

With the right leadership style, OKRs are an effective business tool that can be tailored to individual talent development needs. Inspire Software has OKR methodology baked right into the platform so that managers and individuals can plan and track individual and team OKRs that align with organizational objectives. By providing a transparent view into the greater objectives and strategy of the company, Inspire facilitates regular, one-to-one performance conversations that are focused around OKR progress. These conversations help highlight the employees contributions and their impact on the business outcomes executives are reaching for.

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OKRs can be big-picture or drilled down to the individual level, and when everyone’s OKRs — leadership, departments, teams, people — are visible and trackable, individuals can see how their work contributes to the greater good. The result is a business-centric strategy that is carried out through a people-centric plan.

Inspire makes goal management a core pillar of the platform, with leadership language embedded right into the software to facilitate better conversations and more successful OKR completion. We’d love to show you more about the ways Inspire can supercharge your OKR-setting strategy and help your organization consistently execute on what’s most important.