Typical OKR system period
The common OKR cycle is as follows:
1) At the beginning of the year, the company defined a set of advanced strategic OKR, preferably with the help of the team.
It is important to understand that without team input, top management should not develop strategic okrs in isolation. Should his article be built like mckerland’s software title?
Because people at all levels of the organization make daily compromises that affect the company’s strategic success, processes need to be designed to absorb ideas from all aspects of the organization, not just top management.
2) The executive team then validates the company’s OKR and collects feedback from the team.
3) The team used the above two-way approach to develop tactical OKR.
4) Teams map interdependencies and ensure consistency with other teams and initiatives.
5) The team checks in once a week to track results and actions.
6) For companies using quarterly OKR, OKR is usually reviewed in the middle of the quarter during the interim OKR review.
7) At the end of the cycle, you can quickly review / learn lessons and start over.
The easiest way to do a review is
Start stop continueFormat. In this model, each team member is required to identify specific things that the team should do: start / stop / continue.
The okrs that were not implemented in the previous cycle are reassessed so that they can be included in the next quarter and discarded if they are no longer needed.
Some companies see goals as “visions” that companies and teams pursue over time, so goals may transition from one quarter to the next. For example, goals such as “satisfy our customers” are goals that companies can use over multiple quarters, creating new key results in each tactical cycle.
Even over time, some of the key results themselves may be the same, with the goal changed. In almost every company I’ve seen, almost all quarters have metrics like revenue and net promotion value. However, the value drivers that each team will use to improve these metrics will change over time.
Why should you separate OKR from compensation
OKR is a management tool, not an employee assessment tool. Therefore, the basic component of the OKR framework is to separate OKR from compensation and promotion.
As Andy Grove of Intel wrote:
OKR is not a legal document that serves as the basis for performance evaluation, but should only be an input to determine how an individual performs.
Rick Klau of Google wrote:
OKR is not synonymous with employee evaluation. OKR is about the company’s goals and how each employee contributes to them. Performance evaluation (which is a complete assessment of employees’ performance in a given period) should be independent of their OKR.
This is very different from the traditional models that show signs of aging. A study conducted by Willis towers Watson shows that the typical compensation of performance tools can neither effectively improve individual performance nor reward them:
- Only 20% of employers in North America say performance pay effectively promotes higher levels of personal performance in their organizations.
- The company gives low marks for short-term incentives. Only half said short-term incentives can effectively improve individual performance, while a smaller number of respondents (47%) said they can effectively differentiate compensation based on personal performance.
Two bonus stories
There was once an organization with two employees on the same team: Paul and Mary.
- Paul was smart, focused and productive. But he’s driven by money rewards and has been trying to figure out how to make more money.
- Mary is smart and focused, but she’s driven by her achievements. She believes that if she succeeds, money will follow.
The organization uses a simplified bonus formula to link goals to rewards:
Bonus = ƒ (percentage of target achieved * salary level)
This means that the size of the bonus is a function of the employee’s salary grade and the percentage of the employee achieving the goal. Then, the following happened:
- Paul achieved 110% of a relaxed goal, and after several rounds of negotiations with the manager, he succeeded.
- Mary reached 80% of an ambitious goal, far beyond what the company thought possible. A real stretch target.
Who should get a higher bonus? Mary, of course.
But who finally got the bigger prize? Paul
This story is a classic example of improper motivation. In fact, our reward system is a reward for misconduct.
We are all Paul and Mary
There are some Paul and Mary in everyone. Your incentive system should work for real people in real life. Even if your team is full of Mary, why do you have a system that motivates things you don’t want to happen?
If you’re creating a culture that is guided by the development of extended goals, you should consider abandoning formula based (or tightly coupled) models for bonuses and promotions.
What’s the choice?
Another option is to adopt a system in which the achievement of goals is entered into the performance evaluation process, which defines bonus and promotion. In this model, bonus and target are loosely coupled.
Performance evaluation considers not only the percentage of goals achieved, but also the goals themselves: difficulty and impact on the business. Think of it as a gymnastics difficulty score: you can get more points by performing more difficult routines.
“But it’s too subjective.”
One of the common complaints about this model is that it is “subjective” while the formula based model is “objective.”.
The problem is that using formulas at the end of a process doesn’t make it objective. People think it’s objective because all they see is a little bit of Mathematics:
Several companies around the world, at least sometimes, use spot or discretionary bonuses to compensate or supplement bonus policies. Both of them follow 100% arbitrariness of subjective rules;
It is “subjective” to calculate the bonus according to who has the best negotiation skills to reduce the goal;
Project / resource allocation is arbitrary. Sometimes, the organization needs someone to fix a troubled project, which can damage his / her bonus in the short term – usually made up by a spot bonus.
Like moonshots, I strongly recommend that you don’t use this pattern in the first place. Do not change your compensation model until you have a stable and mature OKR function in your organization.
What about the sales quota?
Sales teams are different because the results are easier to measure. You can attach bonuses to sales quotas, but you should avoid using any model of rewarding employees who negotiate to reduce quotas.
Common OKR errors
Starting with the most basic errors, these are the most common ones we encounter in OKR implementation:
- Set key results that cannot be measured:Remember John Dole’s formula. Each key result must be measurable.
- Too muchOKR Or main results:KR is not everything you do. It represents your top priority. Less is more.
- Include tasks as key outcomes:The key results are not what you need to do. This is the result of your success.
- Set OKR from top to bottom:OKR is not cascaded. Trust your team and help them understand how they contribute.
- Create OKR in Silo:When setting OKR, teams must talk to each other or they will not be able to reach an agreement.
- ” put things right once and for all“：Don’t take your OKR as a new year’s resolution. OKR must be part of your organizational culture and must be tracked regularly.
- OKR is included in the compensation formulaOKR is not an employee assessment tool. OKR is a management tool.
- Trying to copy Google blindly:There is not only one way to use OKR. Even within Google, different teams use OKR in a variety of ways. Understand the principles involved and adapt your implementation to the needs of your organization.
You may also want to see:
- Agile and OKR practice (how to make OKR and agile plan coexist)
- Google OKR Guidebook
- OKR practice sharing of youzan mall
OKR beginner’s Guide Series
- OKR beginner’s guide part 1
- OKR beginner’s guide part 2
- OKR beginner’s guide part 3
- OKR beginner’s guide part 4
Author: Felipe Castro
Translator: Bob Jiang
Link to original text
- performance management
- target system
This article starts from Bob Jiang’s blog. Please contact Bob Jiang for reprint