For a long time, the only reference point in how to approach performance management has been what corporates have done for many years, which is often built around an annual appraisal. I’m here to tell you that what lies down that path is the enemy of agility. It will kill the responsiveness of your people and cause overall ‘drag and lag’ to the velocity of your business. This will limit your growth and your results. But, there’s another way. Let‘s take a look at making use of OKRs for great performance management.
Taking Inspiration from Silicon Valley
To find this, we need to look to the early adopters and innovators in tech from over the pond. It all started with a guy called John Doer, who was working at Intel. He was refining the management-by-objectives approach originally proposed by Drucker in the 50’s. Doer wanted to increase the focus on the specific results an objective was designed to achieve – i.e. the business outcome, so he created OKRs (Objectives & Key Results). Doer then moved to Google in the early noughties, which is when OKRs (and Google) took a big leap forward.
It was around 2010 that businesses like LinkedIn, Netflix and Spotify went on to adopt OKRs. And then in 2015 the global professional services firms of PWC, Accenture, Deloitte and KPMG all made announcements about doing away with their annual appraisal systems. These businesses have rafts of global clients who look to them for innovation, so it’s safe to assume that what they are doing for themselves, they will be starting to do for their clients too. This means that the OKR approach to performance – a more “iterative” approach – is at a tipping point. It’s at that 17-18% market saturation point on the diffusion on innovation curve and is about to accelerate, and not before time.
More Than Just an Acronym
Now, let’s get something clear. OKRs are not just another TLA (three letter acronym). They come with a whole ethos and set of principles, which are key to getting the best from them and driving them like a Pro.
The great thing is that these principles have evolved as businesses have adopted them and shared their experiences, which is why I think of OKRs as being genuinely open-source in nature.
It’s safe to say that the OKR movement has now grown much further afield than just the hip & hooky pioneers of Silicon Valley. And there are three very compelling explanations for this.
- At a biological level – an “iterative” approach (like OKRs) works better than an annual appraisal. This is down to our fight/flight response. The pressure and expectation that leads up to an annual conversation that might decide our pay rise, promotion etc. has been found to put most of us into a “threat” sate – i.e. we want to secure what we believe we are due, what we believe is fair. David Rock has much to say about this subject.
Why does this matter?
It matters because as long as that threat state persists, it cuts off the hormones that make us able to think objectively, creatively and collaboratively. As OKRs allow for much more frequent lighter-touch check-ins on performance, the opportunity for anxiety to build is reduced and the risk of a threat-state developing diminished.
- Millennials. Whether you subscribe to the label or not, there is no escaping that the current generation joining the workforce bring with them a different set of drivers and expectations. For employers, this means they need to take a long hard look at how they should manage them, as the old ways are not guaranteed to work anymore.
One expectation of the new generation is feedback, but they might not always ask for it. They want it often and as near to real-time as possible, as their personal growth is important to them. OKRs – again because of their frequent light-touch check-ins – naturally provide the opportunity for this.
- The pace of modern business. Gone are the days where a 12-month plan won’t experience the pressure to flex before it reaches completion. This may be due to the age-old challenges like resources. But now it can be due to the pace of technology and competitive pressures. While flip-flopping from one course of action to another is rarely a recipe for success, the ability to flex within the priorities and parameters of your strategy is the agility you need to have.
OKRs help introduce this agility through their typically quarterly cycles, which allow for regular review and reprioritisation. The frequent team and individual check-ins will keep a healthy dialogue on performance and a focus on priorities. When priorities are clear, decision making can be sped up as people should be confident to make the right choice without always having to constantly seek advice or guidance.
Five Elements Behind Immediate OKR Success
The case for adopting OKRs, then, has some history behind it. The success stories attached to the global brands adopting OKRs are fascinating, and may inspire you to try them out. To make sure your trial is as successful as Silicon Valley’s giants, it’s important to get these 5 elements right for a flying start:
Have a business plan that has a very clear set of priorities, which can help shape the business-level OKRs. All the team and individual OKRs should then be in support of these (what I call line-of-sight). If they aren’t, then why are you focusing on them?
Pitching an OKR at the right level takes practice. The Key Results should be measurable and outcome-focused on something that will drive the business forward. An OKR should be growth-focused. And the measure of that is if it challenges us to do:
- Something new
- Something differently
- Significantly more of what has been achieve before
OKRs will just wither and die if you don’t build the right routines around them. This means setting up regular light-touch team check-ins, alongside 1-on-1 check-ins.
By raising the discussion of individual OKRs to team level, this increases accountability and the opportunity for collaboration. Often, the right cadence for team check-ins is weekly.
The 1-on-1 check-ins allow for a deeper conversation around individual OKRs. but again, it should be focused and structured conversation. This is where feedback should feature too. A fortnightly cadence works well with these.
My recommendation is to keep OKR discussions separate from personal development conversations. They are very different in nature and require different modes of thinking to be effective. Quarterly is a good frequency for these. There will be development ideas arising from 1-on-1 discussions, which can be captured and discussed in the personal development conversation.
If you want OKRs to succeed, don’t try and manage them by spreadsheet. They will become unwieldy and cumbersome. And people will just opt out as what originally looked simple to understand turns into a monster to manage.
OKRs need to be present and as close to real-time as possible. So it’s vital that you choose a system that balances ease of update with the outputs you need to make timely decisions. Find a system that works for you.
Embracing OKRs will present new challenges to everyone in your business. If you’re not already doing it, you and your senior team need to become skilled at strategising, prioritising, planning and communicating. Managers also need to develop their muscles to become better at coaching, feeding back, challenging underperformance and recognising achievement.
Everyone needs to be great at taking feedback onboard too which is its own skill. The ability to remain objective and take feedback constructively is not something which everyone can naturally do. And it may require individuals to improve their self-management skills.
Getting started: Build Upon Foundations
If you want to avoid failure, don’t jump headlong into drawing up your first set of OKRs without getting these foundations in place first. You will only see the enthusiasm built up during the planning fetter away while you create the routines to manage and achieve them. A good idea is often to run a pilot for your first 3-month cycle.
Also, don’t expect to get them right in the first cycle. In my experience, it takes a minimum of 3-4 cycles before clients start to feel like they are getting slicker at setting, reviewing and signing them off. The beauty of OKRs is that you can learn, reflect and adapt for the next cycle, all without sacrificing the agility of your early days – something the annual appraisal never did well.
Learn everything you need to know about OKRs in our online OKR goal setting class.