Fundamentals of OKR Goal Setting - EmployeeConnect HRIS
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okr

Fundamentals of OKR Goal Setting

OKR, which stands for objectives key results, describes a management style that connects employee work tasks to overall strategic company goals. The objectives key results approach can include both company objectives and personal goals for career development. Objectives are the goals that your company – or your employees personally – want to accomplish, and key results provide a roadmap of how to get there.

An illustrative example of the differences between objectives and key results is NASA’s celebrated space program that used goal setting in a highly visible way – determining to put a man on the moon by the end of the 1960s, which was the objective. A key result of NASA’s goal setting was building a lunar module that weighed less than 40,000 pounds by December of 1965.  Most company goals aren’t quite this ambitious, but no organisation can accomplish its business objectives unless it first sets challenging goals. Goal setting is a highly publicised way of getting employees, managers, and executives to work towards common goals through objectives key results techniques.

Why Goals Matter

Statistics compiled by Kaplan and Norton shed light on why goal setting matters:

  • About 90 percent of companies fail to develop a comprehensive goal setting strategy.
  • When companies do develop a strategy, only about 5 percent of their employees truly understand it.
  • Only 25 percent of managers link work tasks to achieving company goals.
  • 85 percent of executive teams only spend about one hour each month discussing OKR strategy.
  • Most organisations – about 60 percent – fail to link their budgets to support a goal setting strategy.

Using this methodology for achieving company objectives gets everyone on the same page for achieving company objectives while leaving room for each employee to work on personal goals as part of the larger context of advancing the company’s agenda. Goal setting – when managed strategically – provides guidance, facilitates better planning, inspires employees and helps management evaluate and control performance to achieve company objectives.

Goal Setting Considerations

Developing a strategic approach to OKR simplifies achieving objectives key results. Some of the key considerations that are common to most businesses include:

  • Alignment
    Aligning your goals with the skills of employees is a critical step. One recent study found that there’s a strong correlation between financial success and developing a strategic goal setting process, and aligning goals with talent and skills offers the best chance of achieving objectives key results in the most efficient way possible.
  • Communication
    Linking communications to achieve the company’s objectives key results goals is also essential. All departments, company stakeholders and employees play a role in goal setting, and the success of the approach depends on maintaining clear and frequent communications. Communications might involve publishing content to your customers to increase product awareness or motivating employees to achieve concrete sales goals.
  • Discipline
    Discipline, or willpower, is a powerful tool for achieving company objectives. The best methods of fostering discipline include organizing the work and workspace, removing the temptations that waste time, learning to tolerate long hours and emotional discomfort and not getting discouraged when over mistakes.
  • Measurement
    The OKR approach lends itself to measuring your progress because you can set incremental objectives key results standards for yourself, each team member and specific company initiatives. It’s important to assess what each person’s abilities are so that you don’t set impossible goals, and unexpected difficulties should be considered when measuring progress. Use clear measurement benchmarks so that managers and team members understand what they’re expected to achieve. Clear measurement criteria also simplify the process of measuring achievements against goals.
  • Engagement
    Igniting workplace engagement can encourage even the most disconnected employees to achieve greater success. This is an area where setting personal goals and encouraging career development can foster better employee engagement.
  • Performance
    Performance management in OKR is the process of aligning company objectives and key results with performance. Managers can specify tasks and results, set targets, outline time frames and prioritise goals. Breaking down OKR into sections allows goals to be assigned to supervisors, employees, HR departments and executives because each stakeholder plays an important role in performance management.
  • Culture
    Culture is often neglected in OKR, but it’s important to consider your company’s culture when setting objectives and key results. Do any of your company’s goals solidify or support the company’s culture? If not, then your plans haven’t been adequately developed.

Evolution of Goals

Finding the right OKR cadence for your company doesn’t need to be set in stone. Quarterly, semi-annual and annual goals are common, but your company could benefit from regular check-ins on a daily or weekly basis, frequent performance reviews and periodic updates. One expert on the OKR framework recommends that companies begin by setting company and team goals and adding individual and personal goals at a later time as the process becomes clearer.

Other methods of updating objectives and key results include:

Drucker’s MBO Approach
Drucker’s Management by Objectives theory, which was developed by Peter Drucker, seeks a balance between achieving company objectives and each employee’s personal goals.  This approach involves integrating personal goals with company objects by setting goals for employees at the quantitative and qualitative levels. The goals must be challenging, and best practices include providing daily feedback. Rewards and recognition are essential motivating factors, and the approach depends on positive reinforcement instead of punishments.

Doran’s SMART and SMARTER Goals
Goal setting is an important aspect of personal and business success, and George T. Doran developed SMARTER goal setting in 1981. Setting SMART goals involves choosing goals that are specific, meaningful, achievable, relevant and timely or time-bound. Doran’s SMARTER goals go further by requiring decision-makers to evaluate and readjust their approach.

KPIs
If you decide to use OKR goals, it’s important to set a range of metrics in your key performance indicators or KPIs. This approach provides greater utility because you can set specific goals while defining what happens if you fall short or exceed your goals significantly. These ranges of actions can be applied equally to KPIs and OKRs.

Balanced Scorecard
New goals must be measured by today’s more precise analytic measurements. For example, it’s impossible to measure newspaper success today by the standards of previous decades when news media commanded a larger percentage of advertising dollars. The Balanced Scorecard refers to setting realistic measurements based on today’s expectations and indicators of success. Managers can use four perspectives for measuring performance that include customer performance and satisfaction, internal processes, improvement activities and innovation.

Objective Key Results

Google developed a grading system for objective key results when it adopted this management approach early in its operations. Google helped to define setting goals in ways that have resonated throughout the digital ecosphere. Instead of setting a goal to increase sales, try setting a goal of increasing sales by 30 percent and profit by 15 percent. Google recommends measuring OKR performances quarterly and annually at the company level, team level, managerial level and personal level. Employees should have at least four to six OKRs per quarter as their contributions to achieving company objectives. Google grades each OKR between 0 and 1. If employees consistently achieve a ‘1,’ then the goals are considered too easy to achieve. An ideal score ranges between 0.6 and 0.7.

Goal setting and Behavioural Science

Psychological studies show that those who set goals achieve greater success than those who don’t. Employees earn faster promotions and pay raises, and college professors earn tenure in record-setting times. Even students can learn up to 250 percent faster when they break down their studying habits into manageable, incremental goals. [6]

Best Practices for Using the OKR Framework

You can reach your objectives – personal and business – with the objectives key results approach. Leading companies such as LinkedIn and Google endorse the method, and you can enhance your success by using OKR best practices. Although there are many best practices that you can follow as your experience in this management process grows, the following practices are of major importance:

  • Make sure that your goals are aligned with your employees’ skills and the company’s technological capabilities.
  • OKR needs to be supported at the executive, managerial and personal level to succeed.
  • Your strategy must be adaptable in the face of a continuously evolving company environment and marketplace.
  • Your efforts should be progress-based and offer rewards instead of punishments for failure.
  • The best practices include developing aspirational OKRs for transformational change and support of the company’s culture.

Agile Performance Management Using OKR

Agile performance management has become increasingly popular in today’s rapidly evolving markets where new technologies are constantly and continuously developing. Using the objectives key results approach complements today’s agile approach to performance management by setting concrete goals, monitoring performance and adjusting goals based on changing conditions. Regular check-ins, daily feedback and support for achieving personal goals helps to ensure success when using the objectives key results approach. If one key result doesn’t work, it’s easy to break it down into more easily achieved parts or reassign duties to employees who can better achieve the desired key result.

Goal setting with the OKR method is an excellent way to build a more favourable future for your company and better careers for your employees. It’s impossible to predict the future with 100-percent accuracy, but you can facilitate a probable, possible or preferable future by setting SMARTER goals, using the OKR method and developing talent by encouraging workers to set personal goals and achieve key company objectives.

 

Ari Kopoulos
ari@employeeconnect.com

CEO at EmployeeConnect