Management by Objectives (MBO) is not a new concept. The practice, which consists of participative goal setting, was developed by Peter Drucker in 1954. While it’s proven to be timelessly effective, in recent years leading organizations have found ways to further improve the process to better manage performance and achieve company goals.
The new method, called OKR (Objectives and Key Results), still uses Objectives to boost performance, but it also encompasses SMART goal setting principles –specific, measurable, aligned, relevant, and time-bound – so progress is easy to track. As a result, performance becomes measurable, making it simpler than ever for managers to coach their teams and provide targeted feedback to help them improve.
OKRs were developed at Intel and are used by forward-thinking companies like Google to consistently drive high performance, both on an individual level and across the organization. Let’s take a look at some ways you can use Objectives to improve employee performance:
#1 – Align Employee Objectives with Company Priorities
OKRs align team and individual goals with company priorities, which has two major benefits: they help organizations achieve what’s most important, and they make each individual contributor feel like their work is valued.
By linking individual OKRs to company goals, employees begin to see how their efforts contribute to the “big picture.” When they begin to see how their work plays a meaningful role in supporting company priorities, employees will be intrinsically motivated, which drives engagement and thus, supports high performance.
#2 - Set Strategic Key Results
The reason OKRs are a step up from MBO is because they incorporate Key Results. While the Objective informs the “what” in what you’re trying to achieve, the Key Results inform the “how” in how you’ll achieve it.
Key Results are measurable steps, often containing numbers, which break down the Objective into more achievable parts. They can be qualitative (measured by complete/incomplete), or quantitative (measured by number of units, monetary value, or percent of completion). Since KRs spell out exactly how an Objective will be completed, they enhance clarity and focus, which drives better performance.
#3 - Have Employees Set Independent Goals
While Objectives should cascade down from company priorities, some should also be set by employees themselves. Have managers collaborate with employees at the time Objectives are set to encourage independent goal setting. While employees will come up with their Objectives and corresponding Key Results, managers can guide them so goals still support company priorities in some way.
When employees have an active role in the goal-setting process, they develop a sense of autonomy, which can act as yet another intrinsic motivator.
#4 - Balance Aspirational & Inspirational Goals
Companies like Google encourage ambitious goal setting. Teams and employees alike set stretch goals, knowing that only 60-70% completion may be possible. In fact, the idea is that with big, hairy audacious goals (BHAGs), any progress is still considered a success.
Yet, achieving only 60-70% completion for all of their goals can quickly become demotivating to employees. Thus, while implementing some stretch goals can boost performance by pushing employees out of their comfort zone, it’s important to also balance aspirational goals with some aspirational Objectives. That way, they won’t feel as if they’re always under-performing.
#5 - Track Progress Consistently
Lastly, but most importantly, managers must track progress made on Objectives. Otherwise, there’s no way to tell whether employees are performing up to expectations.
Managers should have weekly one-on-one meetings with teams to go over goal progress and performance. If you set Objectives quarterly, teams should be completing roughly 10% each week (with a 2-3 week “grace period”). If performance is falling short, managers can step in and coach using specific, actionable feedback. If employees are on track, managers can provide praise to commend weekly wins. Either way, employees will be getting the critical feedback they need to understand how they can perform better.
Ultimately, managing by Objectives doesn’t just help you achieve better results as a company; it also provides valuable insights about employee performance which managers can use to help their teams improve. Thus, Objectives are actually the foundation upon which you can structure a comprehensive, effective ongoing performance management system.