The terms ‘OKRs’ and ‘performance objectives’ are often thrown around in the same conversations and even used interchangeably. But, while they’re both related to performance management, these two terms have distinct, different meanings.
At a high-level, OKRs are business-centric, while performance objectives are employee-centric, but there are many more subtle nuances between the two. Read on to learn the similarities between OKRs and performance management, the differences, and how to use them together to help your organization and employees set effective and measurable goals.
What Are the Differences Between OKRs and Performance Objectives?
While OKRs and performance objectives are both types of goals, they have a few key differences. Here’s a closer look at what each term means, where their meanings overlap, and how they differ.
The acronym OKR stands for “objective and key results,” which is a popular goal-setting framework used by businesses to define and measure success across an organization. First introduced decades ago by management scientist and former Intel CEO Andy Grove, OKRs have since been popularized by large corporations like Google, Walmart, LinkedIn, and more.
As the name suggests, OKRs have two distinct components:
- A single objective, or goal you’re setting out to achieve, like, for example, “Increase sales revenue to $3.5 million in Q1,” for a sales team.
- Two to five key results, or actions you plan to take to achieve your goal. Continuing with the previous sales team example, this could be things like, “Hire two new inbound sales representatives,” “Increase upsell/cross-sell revenue by 15%,” and “Generate 530 new customer sign-ups.”
Key results help evaluate how successful your organization, department, or team is at meeting or exceeding its overall objective. Throughout the course of a given goal’s time frame (whether that’s quarterly, biannually, or annually), your company can track the progress that’s been made toward the key results to see whether you’re ahead of, falling behind on, or on the right pace to meet your goals.
To learn more about OKRs, like how to set them effectively and use goals to inspire employees, download our eBook, The Complete Guide to OKRs.
Performance objectives, on the other hand, are employee-centric. These goals are set at the employee level and used to measure an individual’s performance against their role and job-level expectations. An employee and their manager typically set performance objectives at the start of the year or quarter to help align the pair on performance expectations for the coming review period. HR teams usually assist in the administrative side of performance objectives, helping ensure employees and managers have a designated place to store and reference these goals after they’ve been created.
Employee goals are then typically referenced during quarterly, biannual, or annual performance reviews to determine an individual’s overall performance. Like OKRs, performance objectives should be attainable, but also ambitious so they motivate employees to do their best work and give them something to strive for.
Most organizations use a top-down approach for goal-setting, where a department or team‘s OKRs help determine an individual’s performance objectives. This is known as a cascading goal framework, meaning the department and team goals should “cascade down” to the individual level, or guide the formation of goals at the employee level so everyone’s work is aligned and directed toward reaching the larger organizational goals.
This alignment can help employees better understand how their contributions impact business success and enable them to find more meaning in their work. So, while OKRs impact personal performance objectives, these two goal frameworks differ based on the level of the organization they hold accountable.
OKRs and Performance Objectives Side by Side
Here’s a quick glance at everything we’ve covered about OKRs and performance objectives so far.
Tips for Creating Effective OKRs and Performance Objectives
Effective goal-setting takes deliberate thought and effort. In order to reap the benefits of goals at the company, department, team, and individual levels, your HR team needs to properly instruct your employees on how to set effective goals. Here are a few ways to help your organization and its people get the most out of the process.
1. Set realistic but ambitious goals.
Goals help give your employees’ work meaning, and they can even be good for retention when used correctly. Unfortunately, setting goals that are too easily achieved or impossible to reach can have the opposite effect.
In order for your organization to get the most out of its goals, you’ll want to set attainable goals at every level that help motivate your employees to stretch to their potential. Ambitious, actionable goals help inspire and energize your employees to be more creative and strategic, while reaching these aspirational targets can give them a greater sense of accomplishment and confidence in their abilities. If you need help crafting goals, download our Quarterly OKRs Template or read our article about SMART goals.
2. Mix qualitative and quantitative goals.
Effective goal-setting requires a mix of both qualitative and quantitative goals. For example, an OKR for a social media marketing team might look like:
- Objective: Increase social media followers by 30% in H1
- Key Result #1: Post 3-4 times a week on Facebook and LinkedIn to drive engagement
- Key Result #2: Host 5 product giveaways in Q1 and Q2
- Key Result #3: Experiment with new types of content (GIFs, quizzes, etc.) to boost likes and shares
As you can see in this example, the team’s objective and first two key results are quantitative and have a narrow definition of success. The team will either fulfill the specific numbers outlined in each task, or they won’t. But key result #3 is qualitative and pushes the team to think creatively to post more varied and engaging content that the business’s social media followers will find interesting. While this key result doesn’t tie the team to any strict parameters, it can help team members grow professionally, learn from experimentation, and ultimately evolve to be more strategic. Together, these different types of goals can motivate your employees to meet and exceed their projected targets.
3. Have a system for storing and referencing goals.
If your company uses OKRs and performance objectives, you’ll need a reliable and convenient way to store, update, and revisit these goals as needed. While smaller organizations might be able to get away with using a Word document or Google Doc, larger organizations will likely need to adopt OKR software to stay organized and on track. A goal management solution can help integrate your organizational OKRs, team-level goals, and individual performance objectives into employees’ daily routines, so they stay top of mind and continuously guide your staff members’ work.
Using OKR software can also help managers easily reference their employees’ goals and update progress during weekly check-ins and annual, biannual, and quarterly performance evaluations. Additionally, managers can easily check OKR progress at the team or department level to understand in what areas their team is exceeding expectations and where they might need to allocate additional resources. This kind of visibility gives managers the insight they need to better coach their employees and ensure the team stays on track to meet its goals.
For more goal-setting best practices and tips, download our eBook HR’s Complete Guide to Goal Setting. Whether your business uses OKRs, performance objectives, or a different goal-setting framework, having goals and an effective way to measure and monitor them can help your organization build more productive and engaged teams.
As your business grows, you might find yourself needing a more streamlined way to keep OKRs and performance objectives straight. Luckily, a goal management solution like Lattice OKRs & Goals makes it easy for your workforce to set, reference, track, and revisit goals throughout the year, so your employees know exactly what’s expected of them and whether they’re on track to succeed.
Plus, cascading goals make it easy to tie individual performance objectives to larger team, department, and company OKRs. This enables employees to know how their contributions are helping advance your company’s mission and performance.
Ready to make goal management easier for your organization? Learn more about how Lattice OKRs & Goals can help by scheduling a demo today.