OKRs & Performance Management: What To Know

At first glance, Objectives and Key Results (OKRs) seem a natural fit for a performance management process. OKRs communicate strategy through clear, measurable goals; performance management makes sure it’s delivered efficiently.

But look closer and this happy union isn’t all that it seems. Where performance management encompasses many different concerns about engagement, development, and retention, OKRs are focused on strategy. Where management leans heavily on contextual nuance and interpersonal dynamics, OKRs boil it down to hard numbers. And where performance management starts with the performance of the individual, OKRs give purpose to teams and entire organizations.

None of this prevents OKRs from informing performance management conversations, of course, but it does foreshadow some serious incompatibilities. Before you drop your performance management process and replace it with OKRs, let’s look at where they fit — or don’t — into Planning, Coaching, and Appraisal.

Planning

Using OKRs to paint your organization’s strategic picture is about as easy as it gets. Just write:

We will __(Objective)__ as measured by __(Key Results)__.

This format offers a nice balance between an aspirational Objective and the concrete Key Results that measure it. It’s also simple, saving time and pedantry about how goals are written and keeping the conversation focused on what you actually need to achieve.

An OKR-focused planning process is also a great opportunity to build engagement. Instead of pushing goals from the top down, individual teams self-organize and set OKRs in support of broader, organizational objectives. Employees at every level have a say in their team’s objectives — they’re writing them, after all! — and feel more invested in their delivery.

Finally, OKRs are totally transparent across the organization. Once your OKRs are set, anyone should be able to discover them, uncover their dependencies, and understand their place within the big-picture objectives the company is out to achieve.

Which is all to say: using OKRs to structure and align your planning conversations will keep them focused on improving performance and delivering results.

Pitfalls

Setting great OKRs takes practice, and early in the transformation towards a more dynamic, outcome-based culture, it’s easy to go off the rails. Some frequent mistakes when planning with OKRs include:

• Focusing on tasks rather than outcomes. There’s a tendency to skip from an outcome to the specific steps you expect will be needed to achieve it. Don’t overspecify. A watertight plan at the start of the process will choke out creativity and innovation as new information becomes available down the line.
• Not sharing OKRs publicly. OKRs are all about transparency, and hiding them away makes it impossible to builds accountability or alignment.
• Waiting on “Cascading” OKRs. The most effective OKR rollouts start with executive buy-in, but once high-level company objectives are set and clearly communicated, teams shouldn’t have to wait for departments (or anyone else up the org chart) before setting their own.
• Having too many OKRs. Planning allocates resources where they’re needed most. Organizations, teams, and people that split time between too many objectives are necessarily less focused on the ones that really matter.
• Setting easy and/or unrealistic OKRs. Objectives should always stretch the organization, and if they’re achievable through “business as usual” they probably aren’t hard enough. Nor should they feel impossible. Employees know absurdity when they see it, and goals set too far over the horizon won’t fool (or motivate) anyone.

Coaching

90% of performance management is spent doing (and tracking, and tuning, and doing more of) the work. Coaching keeps employees focused on the end result while enhancing performance and developing talent along the way. Here, too, OKRs can help.

First, OKRs give both managers and their reports clear expectations about what needs to happen and who’s accountable for it. One of the big obstacles to effective coaching — clearly communicating goals — is already done.

A second challenge is identifying where coaching is needed. OKRs can also help reveal concerns that won’t appear on any personal growth plan. Since OKRs are updated frequently, managers can recognize slow progress or low confidence and coach through trouble before it explodes into a full-blown crisis.

OKRs won’t build relationships or do the actual coaching, of course, but they can frame the conversation and help your managers offer more personalized, situationally-appropriate feedback.

Pitfalls

Effective coaching is a holistic process of relationship-building and personal growth. Strategic OKRs are an important lens for coaching conversations, but they’re just one dimension of employee performance. When considering and offering feedback, be sure to avoid:

• Only coaching to a number. Key Result metrics won’t reveal what’s happened, what’s next, or whether an Objective will be achieved — useful data to have on hand when trying to share constructive feedback.
• Confusing Strategic OKRs with development goals. As much as you might wish otherwise, employees’ development goals won’t always align with the outcomes the organization needs to achieve. They’re still worth collecting and revisiting in coaching conversations, but mixing them with the company’s strategic objectives blurs the crystal focus on what we all need to achieve.

Appraisal

Then there’s the reckoning: how did the organization’s performance measure up against the original plan? Between promotions and pink slips, performance reviews are a particularly stressful time for employees. Here, OKRs aren’t a panacea. They may offer one data point on individual performance, but they should never be the sole basis for hiring, firing, or advancement.

On the positive side, OKRs offer a clear structure for assessing whether you delivered on your plans. Teams hit their KRs or they didn’t. A quick retrospective can yield valuable insights for adjusting future performance management conversations.

But without exhausting, time-consuming, person-by-hour accounting, it’s painfully difficult to tie a KR’s result back to individual performance. OKRs will show who was accountable and whether a KR actually happened, but they offer little insight into the web of support behind the result.

Another reason to separate OKRs from compensation decisions is the familiar maxim attributed to the economist Charles Goodhart, that:

“When a measure becomes a target, it ceases to be a good measure.”

Fully-completed Objectives are missed opportunities: could you have stretched further? By definition, yes. Even a “miss” on an ambitious goal may yield better results than full delivery of a modest one. Evaluating employees’ performance on whether OKRs are achieved creates a natural race to the bottom. Rather than stretching your team, tightly coupled performance reviews encourage 100% delivery — and lowball key results.

Pitfalls

While OKRs are a good tool for measuring organizational performance, they’re a crude window on the individual contributions that enable it. Using OKRs to measure people discourages the sort of ambitious thinking that OKRs are meant to inspire. In general, OKRs and individual performance reviews won’t mix.

Conclusion

As you’re considering incorporating your organization’s strategic OKRs into your performance management process, it may be helpful to set internal guidelines about where and how they should be used. For instance:

★ Do: create annual OKRs representing the company’s strategic plan
★ Do: embrace bottom-up planning across the organization
★ Do: publicly share every team’s quarterly OKRs
★ Do: update KRs weekly, without exception
★ Do: incorporate OKR progress into coaching conversations

At the same time, you’ll want to set clear expectations where they aren’t a good fit.

★ Don’t: use OKRs as task lists or prescriptions
★ Don’t: let too-easy OKRs trigger a race to the bottom
★ Don’t: let OKR “cascades” block front-line planning
★ Don’t: base performance reviews solely on OKR achievement

OKRs are a lightweight way to drive accountability and alignment. Using them to buttress the Planning and Coaching phases of performance management can keep the focus on strategic results and enable more valuable conversations across the organization. OKRs won’t fix broken processes, but they’ll keep strategic outcomes front and center in everything you do. And that’s exactly what performance management is out to achieve!