OKR and continuous performance management are both critical to how a company measures and improves upon results. But how do you combine the two?

The opinions expressed here are strictly my own (but I’m pretty sure I’m right).

Employees and managers hate annual performance reviews.[mfn]Kathi Enderes and Nejal Nangia, How to Make Performance Management Less Hated. Bersin Deloitte LLP, December 20, 2019[/mfn] And, even after decades of creating S.M.A.R.T goals, and enduring annual goal-setting exercises followed by annual performance evaluations, there’s been no measurable improvement in employee performance.

Why is that?

Why Performance Management Processes Were Created

Performance management processes were never meant to improve employee performance (or a business’s performance). These processes were created for myriad other reasons.

They were meant to give management a defensible way to allocate end of year merit increases. They were meant to help rank employees, and to develop learning plans and succession plans.

What was missing, many people concluded, was a system to encourage more consistent, periodic conversations between managers and their employees. This led to the creation of what became known as continuous performance management systems. “Continuous performance management entails more frequent dialogue between employees and managers, as well as joint accountability for employee success.”[mfn]Nehal Nangia, Julie Hiipakka and Jeff Mike, Understanding Employee Experience: Continuous Performance Management. Bersin Deloitte LLP, July 30, 2018[/mfn]

Why OKR Management Was Created

Consistency and frequency are good, but only if you consistently do the right thing. And simply doing performance appraisals more frequently isn’t necessarily any better.

What was really needed was a method or process to tie the continuous feedback to the goals, objectives or key results that drive businesses forward. Enter Goals, Objectives and Key Results (sometimes called OKR) Management.

The Current State: Continuous Performance + OKR Management

I’m a big fan of Gartner’s “Hype Cycle for Human Capital Management Technology.” If you’re a Gartner client, you can see the 2021 edition here: https://www.gartner.com/interactive/hc/4003419?ref=solrAll&refval=295036399.

According to Gartner, in 2021, we are betwixt and between with continuous performance management and goals, objectives and key results management still being thought of as two separate processes.

Gartner describes continuous performance management (in Hype Cycle Terms) as entering the “Trough of Disillusionment.”[mfn]Jeff Freyermuth, Hype Cycle for Human Capital Management Technology 2021. Gartner, July 9, 2021[/mfn] It is somewhat (early) mainstream. But only 20% to 50% of companies have adopted it. Intuitively, this disillusionment makes sense. Continuous performance management isn’t necessarily better than annual performance management. It’s just done more often.

Goals, Objectives and Key Results Management is earlier stage. Gartner describes this as in the “Innovation Trigger” phase. That sounds good until you look at where this is heading: to the next stage in Gartner’s Hype Cycle, the “Peak of Inflated Expectations.” That can’t be good.

Gartner – Hype Cycle for Human Capital Management Technology 2021[mfn]Jeff Freyermuth, Hype Cycle for Human Capital Management Technology 2021. Gartner, July 9, 2021[/mfn]

 

I disagree that continuous performance management and goals objectives and key results management are two separate things. But I still think Gartner is spot on in their observation of where these things stand in the cycle of user adoption.

And I have a strong opinion about what has to be done to make continuous performance improvement and goals, objectives and key results management work for any large business.

6 Things You Need to Make All This Work

#1: Common Goals & Objectives

Understand that Businesses achieve their strongest outcomes if everyone in the organization is working towards a shared set of goals and objectives. Bersin’s research has shown that “high-performing organizations more frequently set team-level goals and project-level goals than do their low-performing peers.”[mfn]Kathi Enderes and Nehal Nangia, Evolving Performance Management Practices that Support Teams. Bersin Deloitte LLP, December 12, 2019[/mfn] So, Objectives and Key Results Management should be the center of any performance management and performance appraisal system. Together, they are one system and set of processes.

#2: A Flexible Process

The process to manage goals and objectives must be flexible. Goals change, employees move around, and Senior Management sets and reset priorities. Goals are often shared across teams, divisions or sometimes even business units. The processes used to keep all of this on track must be flexible.

#3: Frequent Communication

Conversations between managers and employees related to goals have to happen frequently and consistently. And HR needs a way to maintain (or gain) visibility into this. With proper visibility into the process, HR can pioneer “a new future as an indispensable agent of change and driver of business value.”[mfn]Mike Kemp, Pete DeBellis and Timothy David; The New Role of HR Leaders in an Era of Disruption: A Primer. Bersin Deloitte LLP, January 13, 2020[/mfn]

#4: Annual Performance Reviews

Annual Performance Reviews are still needed by many, many companies. They need to be done better, not done away with. They need to be focused on real goals; goals that impact business results.

#5: Performance Based Compensation

Don’t forget that goal accomplishments must be incorporated into compensation decisions for more effective pay-for-performance approaches. Pay is still the number one factor driving employee engagement and employee retention.

#6: Comprehensive Software

Buy extremely flexible software that can easily connect to your system of record and can do all the things described above. The importance of using the right software cannot be overstated.

Why Software Is So Critical

According to Kathi Enderes and Nehal Nangia of Bersin Deloitte LLP, the disconnect between goal management and performance outcomes is rooted in the process-centric approach to goals that many organizations take.[mfn]Kathi Enderes and Nehal Nangia, Top Findings for Using Goals to Drive Productivity and Performance. Bersin Deloitte LLP, June 20, 2019[/mfn] This process centric approach is often driven by limitations on the configurability of data sets, workflows and user screens in the software that are used to manage goals. “The right technology can help make goals easier to set and manage (and place into the flow of work), enabling goal results to seamlessly come directly from work systems.”[mfn]Kathi Enderes and Nehal Nangia, Top Findings for Using Goals to Drive Productivity and Performance. Bersin Deloitte LLP, June 20, 2019[/mfn]

Aapo Markkamem and Helen Poitevin of Gartner agree. As goals management moves further into the mainstream, software applications are needed to improve the model’s usability, effectiveness and scalability. Without flexible and capable software, Goals, Objectives and Key Results can be a laborious process to manage. “The level of effort that an undertooled …. program requires …. undermines the value”[mfn]Aapo Markkamem and Helen Poitevin, OKR Applications; Gartner Hype Cycle for Human Capital Management Technology 2021. Gartner, July 9, 2021[/mfn] (“undertooled” seems to be Gartner Speak for not having the right software).

Conclusion

Continuous performance management and OKR management are each at different stages of evolution. But leveraging the two – and doing it well – requires a few key pieces in place, from achievable goals to consistent conversations. And last but not least – the right software.

HRSoft combines continuous performance management and OKR management into an easy to use and flexible system. For more information click here: https://hrsoft.com/products/performview/