The role of OKRs in performance management

by Roger Longden | Mar 21, 2019

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There’s no denying that performance management (objectives, evaluations, the annual appraisal) has been dysfunctional in most organisations for many years. 

Typical annual cycles don’t allow for the agility demanded by the volatility, uncertainty and opportunity of the modern economy.  Science also tells us that appraisals and evaluations,  when used for motivation and reward, have a negative impact on the very performance they seek to enhance.

All this has resulted in a trend towards a more “check-in” based approach – i.e. “little and often” conversations. The traditional “big conversation” at the end of the year is highly likely to be emotionally charged and is unlikely to impart a sense of fairness when evaluating performance, which in some cases could have occurred 10-12 months ago.

In the search for a new model, I’ve seen some organisations adopt OKRs in the hope they will be a 100% solution for check-in performance management.

Unfortunately, while they have a valuable contribution to make, they are not, and trying to make them so dilutes their impact to the point where people are left asking “how have they made things better for us?”

First, as the scope can shift from quarter to quarter, it’s unlikely that everyone in the business will contribute to an OKR all of the time.  Think of your OKRs as your scalpel to focus on growth, change and innovation; not all roles have the opportunity to contribute to those all of the time.  Trying to force everyone to own an OKR means you can lose that laser-like focus on what the priorities are.  Those who find themselves not contributing should have a clear contribution to make towards a key performance measure through which is there to make sure the business remains healthy.

Second, as mentioned when discussing the importance of your organisational culture on OKRs, you have to be prepared to accept a degree of “smart failure” within them if they are going to be genuinely innovative and challenging.  Directly linking OKR achievement to pay & reward is the quickest way to ensure people play safe and resist any possibility of failure; they just simply won’t take risks.

So what’s the answer?

I recommend a holistic approach to performance motivation and evaluation.  If you have defined what high-performance means in your business then building a frequent check-in conversation to focus on this is incredibly valuable.  What I have seen work well is a conversation which looks at:

  • How the team member is demonstrating the organisational values (from both their own and their manager’s perspective)
  • How they have impacted OKRs/key performance measures they have contributed to

In addition, I recommend these powerful,  evaluative  questions are answered by the manager and then discussed with the team member:

  • Would I always want them on my team?
  • If it were my money, would I give them the highest possible reward?

These questions should promote an open discussion and also identify any skills & behaviour development which should go on to their own plan.

To make these conversations routine, feel fair and low on the emotional charge, I recommend having them monthly and aim for 30 mins.  Over a year, you’ll build up 12 snapshots which you can then bring together to help make an annual decision if needed on pay & reward.

In summary, I strongly recommend NOT adopting the policy that everyone in the business should have/contribute towards OKRs all of the time.  OKRs are there to aid agility and that means being able to flex where the focus needs to be.  If you force them on all, you will massively dilute their benefit.