What HR needs to know about OKRs and employee goals

The hype around OKRs, a goal-setting framework that originates in the Silicon Valley tech scene, continues to grow. I’m personally a big fan of the framework, but there seem to be many misconceptions among executives and HR professionals about how OKRs fit into employee goals and performance reviews.

I learned a lot about the framework’s pitfalls and success factors at Perdoo, a pioneer in the OKR software and coaching market. Now that I’m with Small Improvements, where goal setting is part of our ongoing performance management tool, the topic still comes up a lot. And it bugs me.

Having seen both sides, I believe that organizations should draw a clear line between OKRs and employee performance management.

What are OKRs?

The concept of OKRs (objectives and key results) is a set of best practices for setting, sharing, and tracking goals in ambitious organizations. As the first company that used OKRs after Andy Grove invented it at Intel, Google revealed how they adopted it in Rick Klau’s 2013 video How Google sets goals. This became the foundation for what we mean when we say OKRs. But due to the open-source nature of the OKR framework, approaches vary.

The focused organization

Organizations use OKRs to communicate clear priorities, maintain alignment across teams, and stay focused on what makes the biggest impact. They typically set three to five objectives every year, each with about three key results. Teams do the same every quarter to support those top-level OKRs. Each OKR consists of an inspiring statement (objective) and multiple outcomes that measure its success (key results).

Radical, not incremental, change

It’s recommended to keep business as usual out of your OKRs because you want to focus on meaningful change in the foreseeable future. Standard procedures and maintenance work still get done, they are just not reflected in your OKRs. Many organizations use stretch goals to push for big achievements, so getting to 70% progress usually counts as a good result. To encourage ambitious targets and avoid sandbagging, all major OKR experts recommend decoupling OKR completion from compensation and bonuses.

Tip: If your organization doesn’t use the framework yet, check out our article on the potential downsides of OKRs.

The case against individual OKRs

In addition to company and team OKRs, some organizations have employee OKRs as well. There are, however, many reasons for not having them. The most common issues I’ve seen are added complexity and less autonomy for individuals as well as blurred lines between business outcomes, tasks, and personal development.

Spotify’s HR team, for instance, reported that OKRs only work well for them on a corporate level. As a fast-moving company, they could no longer afford to have individual OKRs slow them down without adding value. So they abandoned them and established a take on individual objectives that allows for agility and autonomy:

“Individuals’ objectives are set to make sense independent of the changes in direction our business takes. This way our individuals can focus on making the business work, instead of on making the OKR process work.”

Even Rick Klau, the man behind the famous Google video where he still promoted individual OKRs, later recommended:

Without the individual level, OKRs become less useful and relevant for employee evaluations. And that’s a good thing. After all, the employee’s contribution to short-term team objectives is only one of many criteria to assess performance.

How employee goals are different from OKRs

Goals and objectives have a long tradition in performance management. On an individual level, goals can make evaluations fairer, set expectations, create accountability, and emphasize personal development. So their purpose is very different from OKRs.

“OKRs are not synonymous with employee evaluations. OKRs are about the company’s goals,” explains Rick Klau. “Performance evaluations – which are entirely about evaluating how an employee performed in a given period – should be independent from their OKRs.” And Perdoo CEO Henrik-Jan van der Pol notes: “OKR is about the organization and not about an individual employee and his or her performance.”

Expectations and accountability

You want to hold employees accountable for certain results, regardless of the short-term focus areas you have set for the business. Say your OKRs are about attracting new customers, and retaining customers is not in anyone’s OKR. Wouldn’t you still expect certain people look after existing customers? Don’t limit yourself by your OKRs – they are only part of what’s going on in your organization.

Performance

Individuals’ performance goals are often about things they do or contribute rather than outcomes they generate. Good OKRs always measure outcomes, but most real outcomes – like revenue or customer satisfaction – are a joint effort. So if you want to assess someone’s performance based on goals they are solely responsible for, set them independently.

A note on OKRs in performance reviews: OKRs are about setting direction on a company and team level – not about evaluating individuals. So managers shouldn't talk about OKR completion in performance reviews. Instead, they could give their team members qualitative feedback on OKR-related behavior. For example, they might want to say things like "I liked how you often referred to our team OKRs when prioritizing your tasks" or "When deciding what to work on next, you could pay more attention to the team OKRs that are currently at risk."

Learning and development

Setting personal development goals is pretty much mandatory in organizations where learning and development is a priority. But an employee who wants to learn something new will most likely not have a measurable impact on any current OKR with that skill. Learning is a process. A clear line between OKRs and professional development goals helps you think beyond quarterly or annual timeframes.

Conclusion

How employees contribute to company and team-level OKRs should only be a small consideration in performance reviews. To make the most out of individual goals, employees should set performance and development goals independently. This will prove beneficial for your OKR program and your people’s growth. While objectives and key results belong in an OKR spreadsheet, on a Confluence page, or in a dedicated OKR tool, employee goals are better off in a performance management tool like Small Improvements.