The technology have integrated far deeper in our daily lives than we can perceive. The businesses are no exception at all. The modern businesses face modern problems which requires modern solutions. For any business having everything in order is critical. When all employees and resources are aligned with the high-level organizational goals and objectives, only then the highest performance can be achieved. Usually businesses have enough resources, but they are either not properly using them or simply there is too much waste in the system. It could be both non-human and human resource which is underutilized or utilized incorrectly. The biggest challenge for the HR department is to ensure all the required skillsets and talent is made available all the time to all departments within the organization. However, that is not just achallenge, in fact that is the prime goal of the HR. In order to achieve this goal, the HR will have to face many challenges and obstacles. Furthermore the HR is also responsible to keep improving the workforce by implementing strategies and plans for training, motivation, and performance management.
The HR is also responsible for hiring new staff to fill in the gaps that may arise down the road. This all can be done only if the HR will have clear visibility of the performance of the existing resource and understand the gaps between the workforce or skillset that are needed to meet the requirements.Businesses and enterprises in Dubai and all around the UAE are using a variety of performance management system to maximize the productivity and performance which ultimately translates into higher profitability and revenue. The biggest advantage of using an agile performance management system or CPM (continuous performance management) is that it provides a very effective framework for goal management. It improves visibility, accountability and help aligning teams and individuals with high-level organization goals.
The OKRs also help businesses achieve autonomy and let teams work autonomously by making them able to understand how their work is contributing to the high-level organizational goals and objectives. Most of the times businesses confuse OKRs with the Performance Management, however, the OKRs are a framework for the goal management and the performance management majorly tend to evaluate employee performance.This doesn’t mean the performance management and the OKRs are rivals or can’t work together, in fact if a business wants to enjoy the maximum of both, they should align and integrate OKRs within their performance management process.
What is the Difference between the Performance Management and OKRs?
The OKRs are Objectives and Key Results. The OKRs are set by teams and managers for the teams and it always have a clear goal and objectives which can be measured clearly by the outcome. For example. We will improve customer service by increasing customer satisfaction. The improvement in customer service is an objective and how much improvement is done, that can be measured by the customer satisfaction survey, or by NPS score or even by reduction in customer churn rate or even by all those factors altogether. To achieve the OKRs several different employees will have to work together. In our example, in order to improve customer service, many teams must have to work together to produce the desired outcome. However, the performance management is entirely a different process with a different scope. It involves, high-level planning, continuous monitoring, reviewing or evaluation and then rewards & acknowledgements for the individual employees instead of teams. Although performance management also measures the teams’ performance but the main focus is at the individual performance.
The OKRs are not the employee evaluation, in fact it is the measure of the employees’ and teams’ contribution to the high-level goals and objectives. The performance management on the other hand is the evaluation of the performance of each employees for a given period of time. Hence the OKRs and the performance reviews should be kept separate and independent. Neither should dictate the other. The performance management system focuses on the outputs and attainments while the OKRs focus on the outcomes. Most of the outcomes for a business are not an individual effort, but a collective and collaborative effort by multiple employees and teams. That is why the OKRs focus on the outcomes instead of individual outputs. The OKRs inspire innovation and are designed to encourage teams to set more bold and stretched goals. Which encourage the entire teams to perform better and motivates them. The performance management doesn’t require collaboration as it is focused on individual goals, however, the OKRs encourage collaborations and demand collective efforts to maximize the outcome that is aligned with the high-level organizational goals and objectives.
How Businesses can Improve Performance Management through OKR System?
Now that we have established a clear understanding of the performance management system and OKR system, we will discuss how both can be used in parallel to maximize the results. The OKRs are also used to aid performance management process but unlike the traditional performance management system the OKRs focus more on broader goals and results. The OKRs have two parts, the objectives and the key results. Usually there are 3 to 5 primary objectives with additional 3 to 5 supportive or relevant objectives. These goals and objectives tend to be measured with quantifiable outcomes which are usually monitored through KPIs (key performance indicators). The biggest advantage of the OKRs is that all the goals are communicated well with the teams they have their say in it, and all goals are aligned with the high-level organizational goals and objectives. The goals set under OKR framework are always achievable but challenging which is a key to maximize the outcome. The OKRs cycle is also more frequent, usually it is 2 to 4 months, unlike the performance management cycle which is usually 12 months. This also provide better visibility and much deeper understanding of the progress and the factors that are impacting the productivity.
Basically the OKRs are used to support faster growth and help businesses in more dynamic and fast changing markets. There are several multinational businesses and enterprises who have performed exceptionally with OKR system, such as:
- Intel Corporation
- Meta (Facebook)
And many more. All those companies are well-known for their hyper-growth and global expansion. The OKR system helped them and thousands of others to effectively maximize the productivity of their teams and individual employees.
Here are some key benefits of using OKR System to boost the performance:
OKR System Align all Resources with your Vision and High-level Organizational Goals
Every organization have a long term vision, in order to achieve that visions businesses set high-level organization goals and objectives. On the bases of these high-level organizational goals and objectives, the management develop plans and strategies which help them achieve those goals and objectives. Usually these goals and objectives scaled down to lower hierarchies such as different business functions, departments, teams and even individual employees. The prime goal is to achieve the high-level organizational goals and objectives that led the business to achieve its vision down the road. The OKRs are usually set in the same fashion. Start with high-level organizational OKRs, which later divided into departments, teams and even individuals. With a traditional performance management system a time comes when achieving the goals of the individuals, teams or even departments could become very difficult while performing daily tasks or work as per the respective job role or function. However, with OKR System business can assign different goals to the teams and departments and different goals for the individual employees which ultimately aligns with the high-level organizational goals and objectives. This can significantly boost the performance and produce better outcomes.
OKR System Produce Better Outcome and Results
The OKRs can be written in many ways, however the most common method is to define objectives and key results that are the milestones and these milestones outline progress instead of activity. The employees or teams should met those milestones in order to achieve the high-level organizational goals and objectives. The OKRs are great at communicating the goals and required efforts with clear timelines which can help achieving the high-level organizational goals and objectives.
The founder of the OKR framework and former CEO of Intel Corporation, Mr. Andrew Stephen Groveonce said about the OKRs:
“Stressing output is the key to increasing productivity.”
Google is another great example of stressing on the output and stretching the goals to achieve hyper-growth using OKR System. Mr. Larry Page, the co-founder of the Google once said:
“OKRs have helped lead us to 10X growth, many times over.”
When it comes to productivity, the output is what a team or individual does and the outcome is the effect of that output on the overall progress of the business towards their high-level organizational goals and vision. The OKR system can enable super-fast growth and transformation in any business. It support agile performance management and enable businesses to resolve problems and address issues midway. Which significantly reduce the time that is usually required by a traditional performance management system. Hence businesses can rapidly grow and expand while also maximizing their efficiency and performance.
OKR System Increase Employee Engagements
Studies have shown that only 1/3rd of the employees are truly engaged in their organizations, and improvements in employee engagement could lead to up to 10% to 30% better performance. That is why the employee engagement is very important, it also reduce employee turnover and help businesses retain valuable talent. The OKR system allow employees to actively participate in the planning process of setting up goals and objectives for both the individual employees and the teams. When employees know they are accountable and they also participate in goal setting process, they become more attached and connected to those goals and objectives. When communication is improved and the employees knows their voice will be heard, they feel more connected to the organization, this gives them a sense of purpose and make them more responsible. When the employee know what they are working for and how their efforts will add value, they become more efficient. The OKR System provides a very effective framework which enables managers to easily link the employee performance or their output with the outcomes or high-level organizational goals and objectives. Studies and surveys have revealed that 90% of the employees felt more connected to the organization after implementing OKR System.
OKR System Enables Quick Adjustments and Course Correction
Most of the times managers and employees both feel that they could have done something if they had time. This feeling is common after the traditional performance management cycle. If the performance is evaluated once in a year then only after that you will be able to understand what have gone wrong and where. Mostly smaller things, or easily avoidable problems cause huge damage to the overall performance of the organizations. The OKR system is much more agile and it can make managers more proactive, rather reactive. This is what make it superior from traditional performance management systems. The OKR cycle is usually shorter, the goals and objectives are shot-term but completely aligned with the high-level organizational goals and objectives. Shot-term goals means more frequent performance reviews, the factor that all goals are quantifiable also brings transparency to the system and prevent several other traditional performance management problems. More frequent performance reviews enables managers to quickly take actions and provide guidance to the employees and teams to prevent them from deviating from the original goals. This ensures the high-level goals and objectives remains achievable and all the problems and unexpected situations are addressed with adequate actions and plans.
OKR Systems are Transparent in Nature
Transparency, biased reviews, favoritism and lack of context are some of the most common reasons of failure of a conventional performance management system. The OKR System is far much transparent, as the goals and objectives are set by the employees and teams so they are more accountable and they feel more responsible in achieving their goals. Furthermore the OKRs of everyone are visible to everyone. This means that every team member knows everyone’s tasks and objectives. This helps specifically when it comes to collaborative tasks, the conventional performance management system lacks this ability. When an objective is not achieved the managers and the employees are in a better position to understand the effects and impact of under-performing team members. Another great advantage of the OKR system is that the employees and teams who will be performing the tasks are setting the goals and objectives. The employees who are performing the tasks are more aware of the problems and obstacles they might be facing, that is why the OKR system always yield better outcome. Unlike traditional performance management system there are only a fewer goals and objectives in the OKRs which keep employees and teams focused on the high-priority tasks which led to high performance and better results.
Creating OKRs: Best Practices
The purpose of OKR System is to provide better understanding of high-level organizational goals and to ensure the employees and teams will perform well to achieve those goals. Creating such goals and objectives that not only align with the high-level organizational goals but also individual and team development is a very tricky task. In fact inspiring someone is very difficult in itselfit and requires a lot of skills. Most of the time when businesses and organizations adopt OKR Systems the first problem they face is the lack of understanding of the OKRs. The employee could easily get overwhelmed when they have to create goals and objectives that are not only achievable and challenging at the same time but also perfectly aligned with the high-level organizational goals. Here are a few tips to create highly effective OKRs which can truly add value to the high-level organizational goals and objectives:
- Simplicity: Keeping it simple is always good, employees and teams should focus on the objectives they can achieve in the given timeframe and with the current resources they have.
- Prioritize Objectives: Employees usually caught up thinking they will have to contribute to every department’s objectives. This could drastically reduce the efficiency and performance. The employees and teams should only focus on what is most needed from them.
- Make them Specific: It is important that you brainstorm different possibilities to achieve the objectives, develop a specific plan of action to achieve those objectives. Also write how the performance will be measured.
- Create Cascaded Objectives: Cascading objectives from organizational point of view to department, then teams and then individual objectives will eliminate all ambiguities and help employees and teams to see how their objectives will contribute to the higher objectives.
- Break Goals into Smaller Goals: Create highly specific smaller goals within your key results. This will clarify what exactly the employees and teams will have to do to achieve their objectives and it also keep them more focused and aligned with their and higher goals.
- Make it Measurable: The worst scenario is when the employees or managers are not sure if the goal is achieved or not. That is why each key result needs a unit to measure the performance. It doesn’t matter what unit you use but the result should be quantifiable.
- Set Stretched Goals: Stretched and ambitious goals are a good motivation. But make sure the goals are achievable and challenging at the same time. Too easy goals and unrealistic goals will demotivate the employees and teams.
- Recognize Achievements: It is important to keep encouraging employees and teams during the time period of the key results. Even if the key results are not achieved yet, if a milestone or a smaller goal is achieved, the teams and employees should be admired and encouraged.
Never Link OKRs to Compensations
When it comes to OKRs it is a well-known fact that the 100% results are never achieved. It is majorly due to the nature of the goals that are set within the OKR System. As the goals are always stretched and made challenging so only 70% to 80% of the objectives can be achieved. That is why it is never beneficial to link the OKRs with compensations and bonuses. Linking OKRs with the compensations led the employees to only do the needful work to make their metrics and KPIs eligible for the bonuses. This could also led to malpractices in the teams and employees just to meet the minimum required KPIs for the bonuses and it could completely kill the innovation from the system. That is why the OKR System is never linked to bonuses, pay increments and compensations like that.
See More: Top 5 Performance Management Trends in 2022 – 2023
Conclusion
The OKRs and agile or continuous performance management (CPMS) are the modernized form of performance management. However, it is important to understand that the OKRs and the performance management are two separate frameworks. The performance management and OKRs can be integrated to leverage the additional benefits of the OKR system that a typical performance management system lacks. That is why the OKRs can be utilized as the gap between the typical performance management system and the modern needs of performance management. The OKRs are also not suitable as a mechanisms to design personal development programs. The OKRs are best at bringing the transparency in the performance management process which help businesses motivate their teams and workforce to perform exceptionally well. The OKRs also gives a sense of ownership, responsibility and help connecting employees with the high-level organizational goals and objectives which is a key to success.
Whether you are using a performance management system and implemented OKRs in it or whether you haven’t used them, a dedicated OKR system software could be a great help to boost your organization’s performance. At RSI Concepts we are helping our customers to bridge the gap between the strategy and execution. Our performance management system comes with in-built dedicated OKR System and it can also be acquired as a standalone software. If you want to learn more about the subject or if you want us to help you improving your existing performance management methods and processes. Please feel free to contact us through our Contact Us page or leave a comment in the comment box below and we will get in touch with you soon.
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