So, here’s one of the most common questions I’m asked when we are helping a client to design the right OKR framework for their organisation:
Should we link OKRs to performance management and, if so, how is it best done?
Now there are OKR “purists” out there who would turn cold at the mere suggestion of this, arguing that by doing so, you are compromising the many benefits OKRs can offer and, in a large part, I’d agree. But I’d argue, here’s where a degree of pragmatism I think is worthwhile.
Let’s start by examining the reason why the organisation is choosing to use OKRs; if it’s because they want to use them to encourage innovation, then I would emphatically say “no” to any suggestion of a direct link between Key Result achievement and a team or individuals reward. As soon as you do this, people play it safe because they fear anything which could threaten their pay/compensation. We subconsciously link this to our ability to provide for ourselves and those we care about, and any threat to that is a powerful one, therefore, caution is the overriding emotion and mediocrity is the prevailing outcome.
We should also bear in mind the trends that have been happening over recent years within what we might call “progressive” performance management. A very clear one has been the move to regarding the team as the work unit, rather than the individual. This has brought the focus to what the team can/should achieve together with greater value on genuine collaboration, rather than individual output. Bad news for wannabe heroes I’m afraid, but great news for organisations who are prepared to take a fresh look at how they define and support teams so they have greater agility and impact. This is where OKRs have a major contribution to make.
So, let’s assume that the organisation in question does want OKRs to link to performance management in some way, but that they don’t want to have a direct link to reward. I can fully understand this desire as no one wants to pay for poor performance, and if a large part of a team/individuals work is guided by OKRs then I’d argue that they should be considered when forming a judgement on performance.
My recommendation to many clients has been this:
When assessing performance, take data from 3 sources to build a well-rounded and full picture of a team and/or individuals performance. The sources I suggest are
KPIs/Health Metrics – If an individual or a team are accountable for the performance of a business-as-usual measure, then what’s achieved should have some influence on their appraisal. What I’d be more interested in is not “steady as she goes” though, I’d be looking for evidence of high performance coming from how any issues have been resolved and if there haven’t been any, then what has been done to reduce the risk of issues further and/or driving incremental gains.
OKRs – Look at how the individual has “engaged” with OKRs. Have they been an active participant in check-ins, perhaps even stepped forward to run some of them? Have their updates been timely and on-point? How have they supported the wider team(s) in establishing and running OKRs? What have they achieved? Where have they fallen short and how have they reacted, adapted and iterated from that?
Values & Behaviours – While OKRs are good at guiding us on what needs to be achieved, they don’t help us to understand how we should go about that. This is why a fair and balanced appraisal of performance should always account for how someone has achieved what they have done. It’s bad for business if you have high-flyers who leave a trail of destruction behind them. Trust me, I’ve been in that trail many years ago and it wasn’t pretty.
So in summary, I believe there can be a “loose coupling” between OKRs and performance assessment if it’s designed so it’s transparent, fair and takes a broad well-rounded view of both impact and behaviour.
While we are on the subject of performance management and OKRs, I’ll wrap up by sharing one final piece of advice; OKRs are not “the new performance management.” They are not an off-the-shelf solution to modernise your old, individual appraisal-based system. Yes, they do tick some valuable boxes like more frequent conversations and stronger alignment to business strategy but I’ve seen organisations declare they are embracing OKRs as their new approach to performance management, only to back-pedal 6 months later. Why? Read my next blog to find out…