How do OKRs differ from Performance Management and Reviews?

Rewarding individual brilliance is not something new to us. Over the past 50 years, performance management practices continue to take inspiration from the vitality model, coined by Jack Welch, former Chairman of General Electric.?Jack spoke about the 20-70-10 system, where 20% of the workforce is most productive, 70% work adequately and 10% are non-producers. Unfortunately, bell curves (though not force-fit), continue to prevail in many organizations, compressing people to ratings for compensation reviews. Hundreds of hours are spent by managers, HR leaders, and business leaders to get this right - only to heartburn for many.??

Not all is lost. For the past 2 decades, performance conversations, no bell curves, and frequent feedback have enabled many organizations to be forerunners. Adobe made the headlines in 2012 with Donna Morris, Former Chief People Officer, calling performance reviews a ‘dreaded dental appointment.’ How Adobe abolished Annual Performance Management became a game-changer in the industry, with bold moves and innovation around introducing?check-ins.??

Earlier in April 2022, Google's CEO Sundar Pichai announced changes to Performance Reviews with the introduction of GRAD. You can read about it at Fortune's article?Google CEO Sundar Pichai changes performance reviews to just once a year.

Whatever the stance on performance reviews, one thing is apparent.?Organizations are now sensing the need to make people accountable for outcomes, rather than mundane tasks linked to roles and job descriptions.??

And that is where OKRs come in.

What aspects of performance practices differ from OKRs?

Can OKRs be linked to performance management frameworks, or would they negatively impact each other? We have narrowed down the differences into 5 categories.

1. Linkages?

OKRs are linked to the company’s strategic priorities. The process of performance review commences with goal setting, linked to the role played by an individual.?For instance, a Content Marketer would set goals associated with the role she/he plays, joined to a project or campaign.?Certain KPIs would be crucial in progressing toward Key?Results, while other KPIs would be necessary to sustain the business and keep it running. Here's an example of OKRs and KPIs being linked:

2. Linkage to Compensation

Ask a global OKR practitioner about their stance on tight linking to compensation and you would most often get a?No! Rightly so, as OKRs are not the business-as-usual metrics, but the ones which are to move the company forward.?While you ask your teams to stretch and aspire, linking OKRs to compensation would be more like saying -

“Hey! Reach for the skies! Oh, by the way, this will affect your Blue Sky holiday."

3. Crafting or Setting?

OKRs are set as teams, rather than individuals. While crafting team OKRs, members of cross-functional teams come together to critically think about a key business metric in a company OKR, which they can, together, move forward. In performance management practices, goals are set between a manager and team member, usually during 1:1 meetings.?This is why achieving KPIs is traditionally linked to compensation reviews, however, the trick is to link compensation-driven motivation to overall company growth. In turn, this means aligning individual and team activities to business strategy, pulling employees out of silos, and inspiring them to work towards growth rather than maintenance.

4. Choice of Metrics

OKRs is a great balance of lead and lag indicators. Performance reviews mostly measure business-as-usual metrics, KPIs, or lag indicators. For instance, reducing churn and reducing bugs on an app could be KPIs, but OKRs require cross-functional teams to deeply reflect on ‘What causes the churn or bugs?’ and walk back to trace metrics that can be controlled a lot sooner than later.??

5. Alignment??

OKRs are aligned vertically and bi-directionally. These are not set in silos. In performance management, goals are usually set 1:1 between a manager and team member, aligned to a project. This gap between performance management and goal management can negatively impact employees, making them feel disconnected from the company and their role in the company strategy.

Keep reading our full article here to learn about the differences between Individual OKRs and performance reviews, and whether OKRs and performance practices can co-exist.

Fitbots has worked with over 5,000+ teams, by helping them get OKRs right and tracking powerful insights on our OKRs software. During Executive or Company OKRs writing, our 5 Step methodology has simplified OKRs writing in a few hours, helping leaders to focus on action rather than verbose discussions. Click here to?book a call?with our OKRs expert on how we can help you get OKRs right, and manage them with powerful insights.?