How Objective Setting Can Fit Into Your Performance Management Strategy
Every company has metrics and KPIs in place to regularly observe and measure performance, but when it comes to assessing people, quantitative analysis is only half the story. The other half of analyzing employee performance and team dynamics involves listening to employees to get a complete picture of the health of a people-centered organization.
Managers often look at data in a vacuum instead of taking a step back to see what employee behaviors influenced them. It can be dangerous to run a business by removing the story of what’s really going on and why, from the numbers you see.
The OKRs platform is meant to be used in tandem with a Weekly Check-in that provides visibility into the world of each employee. Managers can uncover employee challenges so that they can offer support, and even find out what’s going on in an employee’s personal life that might be affecting work performance. Together these two practices offer managers an elegant solution for receiving employee feedback and responding in a way that re-aligns employees with their quarterly Objectives.
This post includes excerpts from our latest eBook: 15Five’s Comprehensive OKR Guide: How To Launch, Track, and Achieve Your Objectives & Key Results. Below we’ll discuss specific steps you can take to leverage OKRs in your performance management strategy.
“[Performance management] practices are mutually reinforcing: implementing one practice well can have a positive effect on the performance of others and leads to more effective performance management overall.”
– McKinsey & Company
Communication is key
To paraphrase the Scottish poet Andrew Lang, don’t use data as a drunken man uses a lamp post – for support rather than illumination. Without supplementing the numbers with context, leaders are just guessing about the future of their company.
Company leaders who communicate with employees to discover their challenges and ideas are better equipped to take specific action to remedy ailments like low output. Managers need to hear the in-depth story behind performance issues or see what is working so that you can replicate it elsewhere in the company.
The quantitative by itself doesn’t provide the full picture, but when managers have conversations early enough, so much can be addressed before breakdown. When people can share openly because they don’t feel that their jobs are at risk, managers learn where they are struggling beyond their capacity and become aware of the things that need improvement before it’s too late.
Standalone Objective setting is insufficient for producing strong results. To be most effective, OKRs must be part of a complete performance management system that includes a Weekly Check-in and 1-on-1 Meetings.
By asking the right questions every week, managers obtain deeper insight into the motivations, distractions and other issues that influence or hinder results:
• Managers can see where employees are challenged and offer just enough support to allow them to grow into their roles and achieve their goals.
• Employees have the opportunity to share triumphs and be acknowledged by management. Acknowledgements help motivate employees to perform and boosts morale.
• Managers can quickly and easily discover misalignments and make weekly course corrections.
Using feedback to establish trust
Check-ins are not just about information gathering, but also aid in the establishment of trust. Asking team-members “How do you feel?” or “Where are you challenged?”, elicits valuable information like, “I am stressed because we re-oriented departmental procedures and it feels like there are still gaping holes in our new process,” or “I am getting run down and can’t do my best work.” Managers can then respond to employee needs before the issues get out of hand.
When company leaders connect performance on key Objectives with communication, they tap into the human element of performance. People move naturally towards doing their best work and becoming their best selves.
Mihaly Csikszentmihalyi wrote in his bestselling book Flow: The Psychology of Optimal Experience, “The more a job resembles a game – with variety, appropriate and flexible challenges, clear goals and immediate feedback — the more enjoyable it will be regardless of the worker’s level of development.” Set goals, measure them, and then have the conversations to replicate triumphs and remediate challenges.
Gallup shows that only 34 percent of employees strongly agree that their manager knows of the projects or tasks they’re currently working on. When managers keep track of goals and key performance projects and milestones, the feedback they provide improves.
In the Check-in, managers move beyond results and through the use of questions, blend qualitative feedback into the OKR process. During 1-on-1s managers obtain deeper insight into their team members’ work and the factors that influence or hinder progress.
A note about compensation: When we talk about Objective setting in relation to Reviews, the most common question we hear is whether goal completions should be linked to promotions and pay increases. If goals are high stretch goals, don’t link them to pay. Research shows extremely high goals combined with economic incentives lead to unethical behavior, since tying rewards to goal achievement can create a “results at all costs” mentality.
Which OKR system should you use? Aspirational or Commitment based
Google is known for setting overly ambitious Objective setting, and many companies followed suit. Other organizations use a different strategy by having teams and employees set more attainable Objectives and use OKRs as a method for goal tracking. Success will then be benchmarked by 90-100 percent completion, rather than 60-70 percent.
We recommend that companies decouple stretch Objectives from pay decisions, and when assessing performance for compensation decisions, to use data from as many Objective performance measures as possible, including both behaviors and results. For example, with sales teams, measure calls made and revenue growth. For managers, measure team results and employee retention and promotion rates.
Overall, Objective setting should be used for establishing direction and setting a context for work that motivates employees. By linking their efforts to company priorities, you will imbue high leverage tasks with greater purpose and meaning.
David Hassell is co-founder and CEO of 15Five, industry leading continuous performance management software that helps leaders and managers drive high performance by bringing out the best in their people. David formerly served as President of the San Francisco chapter of the Entrepreneurs’ Organization and was later named “The Most Connected Man You Don’t Know in Silicon Valley” by Forbes Magazine. David has been featured in The Wall Street Journal, Inc., Entrepreneur, and Wired. Follow him on Twitter @dhassell.