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.