OKRs and Performance Management: Working Hand in Hand

Trying to tie individual performance reviews to the company’s Objectives and Key Results (OKRs)? Looking for a level-up of your performance reviews within the OKR Framework?

Either way and wherever you are on your journey to align OKRs with managing individual performance, you need to clearly understand the intersections and boundaries of both methodologies.

What is the Goal of Performance Management and How Does it Align with OKRs?

The goal of performance management is to help people perform better and align their work to the company’s goals. OKRs are also about alignment, but going from up to down — from the company’s goals to the departments’ and individual ones.

So, would it be logical to connect individual performance management directly to OKRs?

Let’s have a closer look.

OKR vs Performance Management

Seeming quite similar from the outside, Performance Management & OKRs also maintain some key differences:

• Individual performance evaluations use more conservative goals, while OKRs focus on driving significant change to the organizations
• While OKRs are all about teamwork and collaboration, performance goals are focused on individual contribution
• OKRs put the outcomes in the center, while individual performance reviews are mostly about the outputs fully controlled by the individual
• While classic OKRs are set quarterly, performance goals are generally yearly
• OKRs encourage transparency, while individual performance can be more discrete

So, as a summary, there shouldn’t be a direct connection between company OKRs and employee performance. However, if the approaches are not interconnected at all, it can trigger contradictory behaviors. People can get confused and fail to understand what are their priorities.

How to Connect Performance Management to OKRs

First, I must warn you. Tying financial incentives directly to OKRs will put you on a dangerous path.

If you connect financial incentives to the OKRs — it will limit people’s willingness to stretch and risk while setting their OKRs. They’d unconsciously tend to stay on the safe side with sandbagging and conservative objectives to avoid risking their compensation.

I would distinguish three ways to connect OKRs to performance management:

1. Apply the structure of OKRs to individual goals. Having a quality individual goal and a set of key results underneath would work much better than a list of separate KPIs. It can be a great basis for PDP (personal development plan), add objectivity to the employee performance evaluation, and benefit the whole performance management process.
2. Enhance performance reviews with CFRs. OKR framework encourages not to wait until the end of the cycle, but to constantly communicate about the progress in the form of CFR (Conversation, Feedback, Recognition). CFRs are a part of OKR methodology and an innovative way to give employees regular feedback.
3. Connect the less aggressive company OKR to the performance review. This is not a mainstream approach, and certainly not for everyone. However, some companies report success with having a more KPI-like OKR, which is partially connected to an individual bonus.

While I strongly encourage you to incorporate CFRs and apply OKR structure to individual goals, the financial-related approach should be carefully evaluated for each unique organization.

How to choose the OKR Performance Management System

While the idea of the mutual contribution of OKRs and individual performance is great, the implementation can be quite hard if you do not have the right system in place. Generally, performance reviews and OKRs are living in separate software solutions. But when OKRs & Performance Management come together in one system, all the best things happen.

This is why we recently added Private OKRs to our Oboard OKR Software. They serve as an objective evaluation of individual performance and can be measured side-to-side with classic OKRs. With Oboard as an OKR performance management tool, you actually get 2 in 1.

The same company hierarchy, the same users, and the same platform for both. Just a dedicated workspace for performance reviews with advanced privacy settings, so that only the team lead and your company admin will see them.

This is a sample of what it may look like for a team lead. All the subordinates’ progress is calculated, and the average team’s progress is shown on a graphic.

And this is what the report will look like from the employee’s perspective. In the example screenshot, Klaus sees only his goal, without the rest of the teammates:

By establishing an OKR performance management system, you can quickly assess and steer employee performance. This strategy not only brings more clarity to the review process but also ensures that individual efforts are in sync with the organization’s larger goals.

Final Thoughts

Performance reviews can strongly benefit from the measurement structure of OKRs. However, performance management is a sensitive topic since the result of the review is often tied to the person’s raise and bonuses. So it’s important to keep a balance between both.

There’s no blueprint with a one-fits-all approach here. But what is true for everyone, is staying consistent in rules and principles in how you treat both systems to make them co-exist together in peace.

At Oboard OKR software, we offer a platform that can help you manage both OKRs and performance management in one system. If you’re interested in learning more, we can hold a demo for you or provide full-scale OKR consulting services from our certified experts.

Also, if you’ve got more ideas on how to connect OKRs to performance reviews, or have any questions — drop a comment and I’ll be happy to help!