Forget KPIs – they’re so last decade. Objectives and key results (OKRs), on the other hand – favoured by the likes of Deloitte, Asana, Netflix and Salesforce – are rapidly gaining popularity as a performance metric enabling employees to track goals and outcomes against overall corporate objectives.

What are OKRs?

OKRs form part of agile performance management; they are a simple black-and-white approach using specific metrics to track the achievement of a goal. Distinctly different from the traditional key performance indicator (KPI), which evaluates the success of an organisation or a particular activity, the OKR framework is two-fold: it sets an objective, which is the “what I want to have accomplished”, and the key results, which are “how I’m going to demonstrate I’m getting it done.”

How to write OKRs

Here’s an example. A global organisation might want to grow sales globally by 10%. For the Head of Sales in the company’s A/NZ region, this might translate to the following OKRs:

Objective (what needs to be achieved): Increase sales in the ANZ region

Key results (how the sales team will demonstrate this objective is being achieved):

  • Increase new leads pipeline by 4%
  • Increase reseller activity by 5%
  • Increase cross-sell wins by 2%

The Objective tends to be a broad, overarching mission statement; whereas the Key Results are quantitative and demonstrate in numbers how you are going to reach that objective. Ideally there are around three Key Results. A key way to ensure your Key Results are correct is to see if you can put the words “as measured by…” in front of them; key results should always be measurable outcomes.

Below is a microcosm of what an agile OKR goal-setting framework might look like. In larger organisations, there would be many more contributing factors involved in revenue generation, but the below diagram helps to explain how each person’s goals align with those of the wider organisation.

What are the benefits of OKRs?

1. Better alignment of employee goals with the organisation’s bottom line

By aligning employees’ goals with corporate ones, all staff have an enhanced vision of how their individual input contributes to the organisation’s bottom line. This transparency is known to have a positive impact on employee engagement, reinforcing to employees that they are part of a mission bigger than just themselves.

2. Increased flexibility

Unlike KPIs, which often take a ‘set and forget’ approach and are commonly set on a yearly basis, OKRs are typically set on a quarterly basis, and while the ‘Objective’ of an OKR stays the same, the ‘Key Results’ – the metrics used to demonstrate objectives being achieved – can change if better metrics to demonstrate success are identified.

In other words, OKRs are not about dictating how objectives are achieved; this part is flexible. The OKR framework sets the ‘what’ (Objective) and empowers the team (for key results are often agreed by teams) to decide how they will get there – driving greater ownership of goals.

According to research[1], 79% of employees said the flexibility to change their goals helped them to set more relevant goals, and 59% of employees agreed flexible goal setting has contributed to their professional growth.

What’s more, in today’s rapidly evolving business landscape, priorities and objectives can change in an instant. COVID-19 clearly demonstrated this. The ability to quickly re-align goals with changing business requirements is critical in a volatile, uncertain, complex and ambiguous (VUCA) environment.

3. OKRs encourage better teamwork and transparency

OKRs are output, rather than input, focused. And while goals are set at an individual level, they ultimately ladder up to a higher collective output. As such, the OKRs of the Marketing Executive are connected to those of the Marketing Manager and the Marketing Executive successfully hitting their own Key Results should in theory enable the Marketing Manager to better hit their own.

OKRs are also intended to be transparent. This means that all employees’ OKRs – including, in some cases, those of the CEO – are visible, helping staff to align their goals with those of their peers, managers, and members of other teams, which enhances perceptions of fairness. According to research, 70% of employees agreed that seeing other people’s goals helped them align their goals with those in their group.1

Enhanced visibility means improved tracking ability – so that on a regular basis, OKRs can be tracked via the metrics established when they were written. Are employees on track to meet their objectives? If not, why not? Asking these questions regularly allows for course correction and staff can remain on track to meet their own objectives, and better advance those of the wider organisation.

Keen to know more about the role of OKRs and the creation of agile performance management processes? Download our eBook here.

ELMO Software offers people, process and pay solutions in an all-in-one cloud-based platform. This includes recruitment, learning, performance management, payroll, expenses, and more. ELMO has helped thousands of organisations across Australia, New Zealand and the United Kingdom better manage, engage and inspire their people. For further information, contact us.

[1] “Implementing agile performance management”, IBM, 2015

 

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