MBOs vs OKRs: A Comprehensive Guide for Project Managers

Objectives and Key Results (OKRs) and Management by Objectives (MBOs) are well-established goal-setting frameworks. Both can be powerful tools for project managers to drive alignment, focus, and performance. However, for newcomers, understanding the nuances and applications of each can be challenging. This article seeks to shed light on both frameworks, provide examples, and discuss when you should use one or the other.

MBOs: Management by Objectives

MBOs were the precursor to all other goal-setting frameworks, designed by Peter Drucker in the 1950s and released first in his 1954 The Practice of Management. The idea doesn’t belong to him alone — earlier takes on a similar framework can be found as early as 1924 — but Drucker’s comprehensive approach popularized it and brought it to the public attention. Since then, MBOs have been used in many S&P500 companies and went through many iterations, giving birth to other goal-setting frameworks, including OKRs.

The Structure of MBOs

MBOs focus on setting specific, measurable goals collaboratively between managers and employees. Once set, employees are free to approach and achieve these objectives as they see fit. For example, MBOs can look like this:

Objective: Reduce server costs by 15% without compromising existing features.

Once this Objective is issued, it’s up to the development team how they will achieve it — refactor the backend code, optimize databases, or find a new server provider. As long as the Objective is achieved one way or the other, it is considered successful.

The Pros and Cons of MBOs

This approach brings many benefits to the company — you develop employee autonomy, encourage collaboration, and motivate people to improve their skills. However, it also has several obvious drawbacks.

First, you don’t get much feedback from the team — the default MBO approach does not include progress tracking or regular check-ins. Second, autonomy is a double-edged sword — even experienced teams can get easily sidetracked and fall victim to feature creep. Finally, there is very little transparency in the organization that runs on MBOs — everyone is doing their own things, which limits insights and potential innovation.

The benefits still outweigh the drawbacks, and that’s why MBOs remain in use even 70 years after their inception. However, there has also been a need for modern frameworks explicitly created to address the issues with MBOs.

Enter OKRs.

OKRs: Objectives and Key Results

OKRs were created by Andrew Grove throughout the 1970s and 1980s when he was the Director of Engineering and later a CEO at Intel, and released to the public in his book High Output Management in 1983. That said, OKRs didn’t become popular until John Doerr — a venture capitalist and Intel alumni — introduced them at Google. After seeing the framework in action, Google project managers spread OKRs across Silicon Valley and eventually even outside the IT industry.

If you are interested in the early OKR history, we highly recommend our Guide to John Doerr’s OKRs.

The Structure of OKRs

OKRs take the concept of MBOs and develop it further — instead of focusing just on Objectives, they also ask and answer how that Objective will be achieved. This answer comes in the form of Key Results — measurable metrics that can be used as solid proof of progress. For example:

• [O] Increase user engagement on our mobile app.
• [KR] Achieve a 20% increase in active users by Q2.
• [KR] Increase average session duration by 10% in the next six months
• [KR] Reduce app churn rate by 5% by year-end

To learn more about the basics of OKRs, check out our 16-minute video detailing all aspects of OKRs in business.

The Pros and Cons of OKRs

Unlike MBOs, OKRs prioritize alignment, transparency, and progress tracking, with bi-weekly OKR check-ins and quarterly OKR reviews explicitly designed to keep everyone focused on what matters. This, in turn, leads to further benefits — check out our OKR F.A.C.T.S. infographic and the OKR Benefits Showcase to learn more about them.

On the other hand, OKRs are more complex than you might think. This is why many companies that try to implement OKRs end up with an inefficient and ineffective process that they quickly abandon. We’ve got some resources to help you with this — the links are at the end of this article.

Finally, OKRs can be time-consuming — since progress tracking is one of the crucial aspects, managers must keep an eye on everything their team is doing. This was fine in the 1980s, but with the advent of Jira and other project management tools, it became an annoying redundancy. To fix that, we’ve developed our automated platform OKR Board for Jira — and you can learn more about it in our comparison of 4 methods to implement OKRs in Jira.

Should You Choose OKRs, MBOs, or Both?

MBOs are a powerful tool in the hands of an experienced manager and a trusted veteran team. They give a lot of autonomy to professionals who only need to be directed rather than directly managed. If you trust your team unequivocally and do not need to keep an eye on them at all, MBOs can work for you.

However, we at Oboard have seen even the most experienced teams become misaligned and lose focus on their Objectives due to the routine of everyday work. Moreover, not every team is that skilled at self-management — and autonomy can quickly become a rope by which the team will proceed to hang itself. Finally, MBOs alone do not provide enough data to understand the state of the project — and we live in a data-driven world, whether we like it or not.

This is why we highly recommend you use OKRs instead. They may be more resource-intensive and have a higher skill floor, but they also provide a massive improvement when it comes to team efficiency. For projects where outcomes are more critical than processes and regular progress tracking is a must, OKRs are invaluable.

Want to convert your team to OKRs? Oboard OKR Consultants are ready to help!

Conclusion

Both OKRs and MBOs have their strengths, but OKRs provide a better, more modern, data-driven approach to project management. The agility they give your teams is much appreciated in turbulent industries like IT, providing an excellent bridge between strategy and execution.

If you want to uncover the full potential of OKRs, we highly recommend our OKR Coaching — it will guide you through the entire framework and help you introduce OKRs to your team without disrupting the existing workflows. It will also teach you how to use OKR Board for Jira — a robust platform that integrates OKRs into the Atlassian ecosystem and automates most OKR management tasks. We already helped hundreds of companies — check out their Success Stories!

However, if you’d rather learn it all yourself — we’ve got you covered. To get a solid foundation, start with How to Write Effective OKRs, then read OKR Breakdown and Alignment Guide, and finish with Guide to OKRs in Agile. And don’t forget to grab OKR Board for Jira — it’s free for teams of 10 users or less!