HR leaders help organizations move faster from strategy to results with OKRs
Organizations are adopting OKRs at record pace. These initiatives are usually spearheaded by one of two people in the organization.
The CEO is a large driver of implementing OKRs because they view it as a strategic execution playbook that they can use to short-cut the time from strategy to results.
The other key stakeholder is the senior leader in Human Resources.
HR has an enormous role to play in the implementation of OKRs for various reasons:
Why are HR organizations adopting OKRs?
There are several reasons HR leaders are turning to OKRs, but above all, it boils down to purpose.
Simply put, OKRs connect WHAT people do to WHY they do it.
Ok…but why should I care?
Let me tell you why.
According to Deloitte, employees who have a sense of purpose at work perform three times better than employees who do not.
An important distinction to make here is an employee’s purpose at work vs. outside work.
While many initiatives we undertake within HR focus on “outside work”, it turns out that what people really strive for is more purpose within their job.
In a research article by McKinsey on purpose, they had this to say: “While such efforts are laudable, and even beneficial, they are not a good solution to the problem our survey identified. Your starting point should be opportunities that help employees find more personal meaning in their day-to-day work. By doing your part to help employees live their purpose at work, you will enable them to feel more fulfilled. And when the work is aligned with the company’s own purpose, that sense of fulfillment will ultimately benefit the company, too.”
Everything! As a refresher for those that don’t remember what OKRs stand for:
Objective: Inspirational statement that provides clarity on the direction and purpose a team or individual has for a period of time.
Key Results: How we measure the success of the objective.
In other words, OKRs help companies define why they are accomplishing a certain task and whether or not we were actually able to hit our goal. This is in stark contrast to how we normally plan and measure what we do.
Let’s take a simple example of what we might ask a Payroll Administrator to do within a quarter:
You would be hard-pressed to find an employee who would not perform better if given the direction in Scenario 2.
Instead of outlining what they are supposed to do, the employee understands the bigger picture of why they are doing the work.
What are the benefits of driving purpose with OKRs?
If we take the above example, we can clearly see the advantages of giving employees more purpose in their work.
Focusing more on the WHY of a job, gives employees the ability to openly explore the best way to solve a problem. In the example above, maybe the HR Manager realizes their payroll software can automatically check all employees direct deposit status and send out an email on a scheduled date if there are issues. This would save the company several hours every single pay period and remove the headache of manual errors.
There are countless studies that create a direct link between employee engagement and purpose, including Deloitte who said that 73% of employees who feel they work for a purpose-driven company said they are engaged. OKRs drive engagement by forcing people to look at the WHY behind their work, and not the what.
Those familiar with OKRs know that leveraging OKR software allows organizations to connect the goals of the company from executive to front-line employee. In the scenario above, this means that the Payroll Administrator could clearly see how their goal of “creating a painless salary and bonus experience for our team” helped the CHRO accomplish their own goals for the quarter, which might be “Remove all friction from the payroll process to allow employees to focus on what they do best, their work”.
This is what OKRs are all about! OKRs provide a universal playbook for measuring the performance of our employees based on their impact on the organization, not the amount of work they were able to accomplish in a day. In the payroll example, this translated to our employee working smarter, instead of harder. In addition, OKRs by their nature are much more transparent than a typical results framework because every item is required for it to be measurable (yes/no, % obtained, etc.) instead of opaque.
The nature of OKRs make them an obvious choice for HR leaders who are looking for a better way to measure employee performance.
Before we dig deep into this topic though, which can be quite confrontational, let’s first understand why you might want to replace your current system for measuring employee performance.
Does Your Employee Performance Track Performance?
Sadly, this is not a rhetorical question.
Ask any 10 HR leaders and, after they are done laughing, at least half of them will respond with something along the lines of “no, but it’s the best we can do for now”.
Ask the same question to non-HR employees and they will respond in a similar fashion. The fact is that very few performance review tools actually measure what the employee, manager, HR, or organization would call performance. This causes frustration from all parties involved.
The employee wants to be rewarded based on their impact on the organization, not how their manager feels about their impact on the organization.
The manager wants a better system for holding their teams accountable for delivering results and they want the feedback loop shortened. HR, obviously, wants what is best for the employee and the manager, but also needs to ensure we are measuring performance universally across all employees and that system of measurement is fair (and easy to access). The organization wants what it always wants…improved performance.
Can I use OKRs as a performance review tool?
Of course you CAN, but SHOULD you? This is the most popular topic around the virtual water cooler for HR leaders who want to implement OKRs.
There are two schools of thought, which we will call the “purist” view and the “realist” view.
OKR purists will argue that we should not measure employee performance using an OKR tool because the only type of goals which should be included in the OKR tool are something called Big, Hairy, Audacious, Goals (abbreviated BHAG). These BHAGs are not intended to be attainable. Out of 10, we should hope to land somewhere around 7. It is less about whether you actually accomplished what you said you would do and more about the effort, attempt, and ability to come close.
For many reasons, this creates problems as a performance review tool.
Most notably, when employees link their performance with these BHAGs to promotion and pay, they tend to write goals which are much smaller, simpler, and easier to obtain. This is the biggest gripe for the purist.
They believe OKRs should ONLY be used for BHAG and it is not fair to measure the performance of an employee against them.
OKR realists argue that there is no such thing as the “right way to implement OKRs”. They view OKRs as a guiding principle in helping the organization work more purposeful and results orientated.
Many feel that the “purist” view of OKRs devalues the process because it limits the application to a very narrow use-case (and audience size). The “realist” argues that we are better off capturing everything we want an employee to accomplish in a single location, instead of limiting the application to just 1-2 projects at a time.
When “realists” implement OKRs, they tend to capture not just BHAGs, but all of the goals for the employee that quarter. This gives a more comprehensive view of the performance of the employee. If you are using OKRs this way, you are losing one huge benefit of OKRs though, and that is creating goals which stretch your employees.
What does Unlock:OKR promote
The easy way out of this argument is to say “it depends” and maybe that is the answer that works for most people, but not for us. At Unlock:OKR, we address this problem head on because it was a problem we had to take head on.
When we started using OKRs in our company, our CEO (Sriraj Mallick) was pushing our Head of HR (Ajai Mehrotra) to remove our employee performance review tool, but thankfully, Ajai would not back down. He insisted that we have a way to determine which goals in our tool would be used for performance reviews and which would be considered BHAG.
Out of this necessity, one our most popular features was born; the ability to differentiate between the types of goals.
In short, we believe that OKRs can and should be used to track employee performance, but ONLY if the tool allows employees, managers, and HR leaders to clearly determine the difference between goals which are intended to be missed, versus those which we are holding people accountable.
If you’re wondering why you might need both of these, you are not alone. Many HR Leaders struggle to determine the differences between the two because they are so similar. There are some key differences which are important to understand.
Once you know them, you can leverage both of them together to maximize the impact of both.
One of the easiest ways to understand the differences is with an analogy about going on a road trip. Felipe Castro originally created this graphic and analogy, which has sense be widely used in the industry to help distinguish the two.
Another easy way to determine the differences between the two is by seeing examples of each paired next to each other.
Looking at OKRs and KPIs side-by-side, you can see they are certainly connected, but useful in their own ways.
Implementing OKRs is not a sprint, nor is it a marathon. It is most closely related to interval training, combining a series of intense training, followed by stretches of catching you breath, and then back to high-intensity.
Since the “intense” phases can be…well…intense…people who already have a day job outside of implementing OKRs prefer to leverage services help from their OKR software providers, but we will get to that later.
Implementation and Roadmap
We like to look at OKR implementation in four distinct stages: forming, storming, norming, and performing, which we have adapted from Tuckman’s stages of group development. Each stage his its own path and challenges.
This stage is all about creating buy-in from your organization that OKRs are going to be a valuable addition to your organization. Traditionally, this starts at the Executive level and then works its way down to frontline workers.
Now that everyone is excited about OKRs, we start training people how to use and write our first batch of OKRs. This is ALWAYS the most challenging phase of implementation because learning how to write OKRs can be challenging for many people.
Good OKR Examples for HR Leadership
OKR Examples for HR Leadership
Objective 1: Take new initiatives for training and development to foster employees’ professional growth
Objective 2: Improve our employee benefits program to augment their experience
Objective 3: Create a people-first company culture to translate employee success into organizational success
They are used to measuring people on WHAT they do, so starting to think about WHY they do the work can be a difficult transition. In addition, it requires the Executive team to align and prioritize their own goals for the quarter (or year), which is not always a smooth process.
Once we’ve written our OKRs, we have to embed them into our daily life to make them stick. Many OKR implementations fail here because they think the job was done after the storming phase. This makes the norming phase the most important in the process. Ensure you have a defined process for this and you have resources aligned (OKR Champions, Team Leadership, etc.) to help drive adherence to the plan.
We’re off and running, but we’re not quite done yet. The beauty of OKRs is that they are always in motion. In the first year of implementation, you should review the OKR process and adoption rates at the end of every quarter and the start of the next. You want to ensure people are scoring their previous OKRs and updating their new ones for the quarter on-time, or else it diminishes the value of the process.
How long does it take?
The time it takes to implement OKRs varies widely based on the size and culture of your organization.
Size is an important factor because it simply takes longer to train a larger audience on how to implement OKRs.
For smaller companies (around 500 employees), the process to implement OKRs might take as little as 45 days.
Companies with around 1,000 employees don’t necessarily take twice as long, but we like to plan for about 90 days to ensure the entire company is up and running.
Larger companies (more than 2,000 employees) vary greatly because they usually don’t attempt to onboard the entire company at once. They start with any logical grouping of employees (geographic, department, seniority, etc.) and then slowly bring in groups quarter after quarter.
Culture tends to be the other factor that can either expedite or slow down the implementation of OKRs. Specifically, we are talking about the culture of purpose and how closely that relates to what your organization does today.
Companies that focus more on the Why and less on the What tend to be more aligned, focus, engaged, and results focused. This makes the transition to OKRs quite simple.
However, if people are not familiar with the concept of being measured on the results of their work, instead of the amount of work they do, it can lead to serious confusion and concern. This creates friction and less buy-in during the implementation process and causes significant slowdown, ESPECIALLY at the Executive level.
How much time do you have in your day to manage OKRs?”. Before we answer, you should answer this question for yourself: “
If you have a lot of time in your day, or maybe you’ve been hired just for this purpose, you don’t have to pay anything. You can manage OKRs on a spreadsheet and accomplish many of the core tenants of OKRs.
Sure, there are some drawbacks of going this route, many of which we have covered in this article on “Why Organizations are Shifting from Spreadsheets to OKR Software”, but it is possible. One caveat, if you intend to leverage OKRs as a performance review tool as well, we highly recommend you don’t use a spreadsheet for security and compliance reasons.
If you don’t have extra time in your day for managing OKRs, then I would not even consider using spreadsheets for OKRs. Not only does it take significantly longer to implement, many OKR software providers, like Unlock:OKR, have built features on top of the OKR framework which allow you to recognize additional benefits that you didn’t even know existed.
For example, in Unlock:OKR, there are several features which enable HR Leaders to leverage the OKR tool as a performance review tool, killing two birds with one stone.
Many HR Leaders prefer to integrate their OKR tool with at least one other application within their tech-stack. This prevents friction in the adoption process and automates several administrative functions which can bog down HR teams.
This is what it is all about at the end of the day. We need a strong “WHY” if we are going to implement the “WHAT”. At this point in the article, we have covered several reasons why companies like Netflix, Google, and Amazon have all leveraged OKRs to help propel their business.
As an HR Leader, implementing OKRs does much more than it does for most. It doesn’t just help your individual teams perform better, it helps HR check several boxes at once which are universal marks of success for HR which extends much beyond benefiting just the HR department.
People want to know what is expected of them at their job and most times, that is not reflected in the job description or interview process. This is because the nature of most jobs are dynamic and people wear several hats within an organization. OKRs help land more qualified candidates and keep them around longer by giving candidates and the person hiring the candidate a platform to align on “WHY”. This excites candidates because they can see how their role impacts the success of the business and it helps managers by setting clear expectations outcomes, instead of output.
If nothing else, HR leaders should jump at the opportunity to implement OKRs because it creates engagement across an entire organization, in a very simple and straightforward way. It is rare to find any one thing to engage all employees (not even money!), but every employee wants to connect their work back to a purpose. They want to know why they work. Even if money is their only desire, OKRs will give employees a clear path to earning more money by nailing their Objectives and Key Results in every quarter.
The connection between engagement, retention, and purpose are clear as day. HR Leaders who implement OKRs notice an immediate impact on retention across the entire organization. It even helps HR and Managers retain employees who are high performers that might be looking elsewhere because the ROI conversation writes itself. By reviewing the OKRs of any individual employee, the impact of losing that employee becomes quite clear.
Creating a culture that focuses on Why people work instead of what they are working on has countless benefits. It increases innovation by promoting more freedom to employees. It decreases bias from centering conversation around performance. It creates transparency and trust by exposing to everyone in the organization the goals of any individual, team, and department.