You want to give everyone in your organization everything they need to succeed. You ensure they have the tools they need to do their job, support from their managers to grow, and clear guidelines for their role and responsibilities. But to consistently improve performance across the company, people need clear goals. OKRs and SMART goals are two of the most popular methods of doing this.
Choosing the right methodology is crucial. That choice helps promote alignment throughout the company, it keeps employees motivated, and it has a direct impact on the business outcomes you value.
In this guide, you’ll get a breakdown of both methods, a comparison of their advantages and disadvantages, and recommendations for setting stronger goals.
Key Takeaways:
- Both OKRs and SMART goals provide structure for employee goal setting but serve different organizational needs.
- SMART goals work best for individual, task-focused objectives that require clarity and measurement.
- OKRs are ideal for aligning teams with broader company vision and driving innovation through stretch goals.
- Businesses often benefit from a hybrid approach, applying SMART goals at the tactical level and OKRs at the strategic level.
- Choosing the right model depends on organizational culture, leadership style, and desired outcomes.
Understanding SMART goals
SMART goals are a foundation for employees, teams, or managers to set better goals. The methodology has its origins in a 1981 paper by consultant and corporate planning director George T. Doran: “There’s a SMART Way to Write Management’s Goals and Objectives.” SMART goals have evolved since this era, but this paper is the first mention of them.
Here’s how it works.
What are SMART goals?
SMART stands for specific, measurable, achievable, relevant, and time-bound. This framework allows you to consistently set realistic goals with a clear path towards achieving them. Here’s how each element of a SMART goal contributes to this:
- Specific: Specificity leads to stronger goals. A salesperson, for example, shouldn’t be given a vague goal like selling more. “Increase your total number of initial meetings” is a stronger, more specific goal.
- Measurable: SMART goals use metrics to measure progress. “Increase total number of initial meetings” might then become “Increase total number of initial meetings by 20%.”
- Achievable: SMART goals are realistic. They’re not meant to be your most ambitious targets, but something you can reliably achieve.
- Relevant: SMART goals tie directly into an employee’s broader objectives or the company’s overall strategy.
- Time-bound: SMART goals have a deadline. That deadline can align with broader company cycles (e.g., end of quarter) or a date that’s more meaningful to an individual employee.
SMART goals are widely used for setting individual performance goals or broader company objectives.
How to create SMART goals for employees
Here’s how a manager might set a SMART goal for a direct report. Imagine a salesperson whose growth plan involves closing higher-value deals as the company tries to attract more lucrative customers. Here’s what that goal looks like when it’s put through the SMART methodology:
“Increase the average value of deals closed by 50% by the end of the year.”
It’s specific because it targets an aspect of the selling process, rather than telling the salesperson to bring in more revenue. It’s measurable because the increase in average deal value is quantified as 50%. It’s achievable because the salesperson isn’t expected to double, triple, or quadruple deal value in a couple of weeks. It’s relevant because it’s tied directly to the company’s broader objective of attracting more lucrative customers. It’s time-bound because it has a deadline.
Benefits of SMART goals
SMART goals come with these benefits:
- Clarity: By forcing managers and employees to work through a concrete plan, SMART goals prevent misunderstandings and misalignment. They’re also easy to reference as progress is made.
- Accountability: A SMART goal serves as a baseline for determining the activities someone needs to take to reach their goals.
- Ideal for short-term planning: SMART goals are perfectly suited to short-term performance goals contributing to an employee’s broader objectives.
- Great for focus and prioritization: Since SMART goals are built around a single success metric, they allow employees to focus their activities towards improving that metric.
Limitations of SMART goals
While SMART goals are much stronger than goals created with no specific methodology in mind, they do have some limitations:
- Less ambitious: Since SMART goals have to be achievable, they’re not well-suited to your most ambitious objectives.
- Not ideal for broader alignment: While SMART goals create alignment around what needs to happen to meet them, they’re not an ideal method for driving alignment across multiple goals.
- Overly rigid: SMART goals offer a clear, step-by-step process for building stronger goals. However, they can often be too rigid, especially in companies experiencing rapid growth or projects with tight deadlines.
Understanding OKRs
OKRs (Objectives and Key Results) is a goal-setting methodology first introduced by former Intel CEO Andy Grove. The methodology was detailed in Grove’s book, High Output Management, but became widespread in the corporate world when John Doerr, a salesperson at Intel, introduced the idea to Google, which played a big role in popularizing it.
What are OKRs?
OKRs turn broad objectives into goals with clear success metrics. They’re created with only two main components:
- Objectives: The ultimate target you’re trying to reach.
- Key results: The metrics you use to track progress.
A single OKR might have multiple key results (i.e., multiple success metrics) but only one objective. This structure makes these goals simpler than SMART goals, which is why they’re often used for company-wide alignment.
How to create OKRs for employees
Let’s reuse that example of a salesperson trying to generate more high-value deals to support the company’s strategy. Here’s what an OKR supporting that goal might look like.
Objective: Drive higher-value deals to support the company’s move upmarket.
Key results:
- Increase average deal value by 75%.
- Increase personal win rate by 33%.
- Initiate five times more outreach activities.
Key results should involve activities that contribute directly to the broader objective or measurable sub-goals that contribute to that objective. When setting targets for key results, remember that OKRs are meant to be aspirational and just beyond reach.
Benefits of OKRs
Using OKRs to set goals comes with these benefits:
- Stronger alignment: The OKR format is easier to apply organization-wide, since it’s more flexible than other methodologies. That makes it easier for managers and individual contributors to create goals that align with broader company objectives.
- Stretch goals: OKRs encourage people to break out of their comfort zone and aim for lofty goals. This can help drive innovation and creative opportunities for collaboration.
- Increased transparency: OKRs are typically shared across teams or even entire departments, surfacing what everyone’s working on and uncovering ways teams can cooperate towards reaching those OKRs.
Limitations of OKRs
While OKRs can help individual employees and departments align on objectives, they do have the following limitations:
- Potentially overwhelming: OKRs are meant to be ambitious, but it’s all too easy to misfire on an objective and set the bar just a bit too high, overwhelming employees as they try to make progress towards an impossible goal.
- Ongoing monitoring: Because key results and success metrics are inherent to OKRs, managers have to closely monitor their team’s activities to measure progress on their objectives. This can easily create an unnecessary administrative burden.
- Cultural buy-in: OKRs don’t work without buy-in. Objectives will languish in your project management tools with no progress being made towards them. That means additional work is required from your managers to keep teams on track and engaged.
OKRs vs. SMART goals: A direct comparison
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OKRs vs. SMART goals at a glance |
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OKRs |
SMART Goals |
|
|
Best for |
Aligning individual contributors, managers, and leadership on clear objectives and measurable results. |
Building measurable, robust goals with a deadline for individuals or projects. |
|
Advantages |
✅Flexible ✅Great for alignment ✅Measurable ✅Ambitious |
✅Thorough plan for creating any goal ✅Specific ✅Great for accountability ✅Helps prioritization |
|
Disadvantages |
❌Need monitoring ❌Overwhelming ❌ Requires significant buy-in to work |
❌Rigid ❌Achievable, not ambitious ❌Doesn’t support broader alignment |
|
Use in |
⚫Strategic initiatives ⚫Cross-functional collaboration ⚫High-growth seasons |
⚫Performance reviews ⚫Project milestones ⚫Tactical deliverables |
Choosing the right framework for your business
With all this in mind, should you choose OKRs or SMART goals for your organization? Before you answer that question, consider the following:
Company size and culture
A certain goal-setting methodology might be better for some objectives on paper, but not be a natural fit for your organization. If your team is on the small side, for example, you won’t benefit from the alignment boost of OKRs. And if your teams are used to moving quickly and breaking things, SMART goals may be too rigid (and slow) for them.
Leadership and management styles
Not all leaders have the same leadership styles, and some prefer one goal-setting method over another. Some like to be more involved in the day-to-day work of their direct reports, while others prefer an initial alignment session before letting their teams work autonomously.
Strategic vs. tactical work
The same goal-setting methodology might not work for everyone. For teams involved in more strategic work, OKRs are a more natural fit than SMART goals, since they promote alignment and measure multiple metrics across a range of activities. Contributors involved in more tactical work might instead prefer the robust rigidity of SMART goals.
Existing performance management systems
If you’re already using a performance management system, you might have an easier time with one goal-setting methodology over another. Consider what you’re already doing before adding anything new. Your system of choice might be uniquely suited to OKRS, while building SMART goals would involve a significant amount of manual work.
Hybrid approaches
Like in many things, the best goal-setting methodology isn’t one or the other. It’s a combination of both. Your organization doesn’t have to choose between OKRs and SMART goals. You can just determine where and when each one should be applied.
For example, you could use OKRs for your leadership team and individual managers, ensuring that objectives are fully aligned throughout your org chart. Then, at the individual contributor level, you might use SMART goals to build more robust plans for each team member.
Setting better goals with 15Five (no matter how you do it)
15Five is a performance management platform that integrates natively with your HRIS tool and other apps, giving you a single place for everything performance-related.
The HR Outcomes Dashboard allows managers and HR professionals to tie goals to business outcomes and use in-depth data analysis to visualize organizational trends and set better goals. Combined with 15Five’s advanced performance management platform, allows managers to implement robust goals easily and transparently.
Want to see what else 15Five can do for your organization? Book a demo today.
Practical tips for implementation
Whichever goal-setting methodology you choose, implementing it will have significant repercussions throughout your teams. That’s why you want to make sure you get it right. Here’s how.
Start with a pilot project
Instead of deploying OKRs or SMART goals across your entire organization at once, start with a single team (or even a single project). Assess the risks, document the process, and evaluate the results. From there, you can adjust your approach before a more widespread rollout.
Train managers and leaders
Both OKRs and SMART goals depend on managers guiding employees through setting their goals. Instead of letting them figure things out on the fly, plan for at least one training session on the goal-setting methodology of your choice, followed by ongoing support.
Get buy-in from leadership
Leaders need to support any serious change in an organization. To get buy-in from them, look for data that supports the methodology you want to implement or use your pilot project as an example of potential gains.
Revisit and refine your approach quarterly
Goals need regular revision to ensure they still represent your priorities, and your goal-setting methodology is no different. Review how you set goals every quarter, and make changes as needed.
Use feedback loops for continuous improvement
If employees aren’t already sharing feedback about the way your company sets goals, encourage them to do so. You can use engagement surveys and performance reviews to build feedback loops, allowing you to work on your goal-setting methodology over time.
OKRs vs. SMART goals: Making the right choice
OKRs are generally for ambitious, strategic goals that benefit from measuring multiple success metrics. SMART goals, meanwhile, are more tactical and rely on a robust goal-setting framework to give individual contributors a solid plan for progress. Neither of these methodologies is the “correct” one in all situations, and more organizations benefit from using both in the right place, at the right time.
Need a tool that helps you drive employee performance and set better goals? Check out 15Five and book a demo.
