Performance management criteria for OKRs

Posted on September 20, 2021.
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Implementing Objectives and Key Results (OKRs) changes the goals your teams are targeting. I’ve written multiple times about how to write good OKRs and what happens after you set new goals. Just last week I discussed the relationship between OKRs and strategy, however, what I haven’t touched on yet is what needs to change when it comes to performance management criteria and incentives. 

Performance management criteria is out of date

On, what Marty Cagan calls, a feature team the goal is to build a feature or a product. The end result is binary. The team ships the product or it doesn’t. This is easy to measure thus easy to manage and reward. The team is rewarded when the feature goes live, regardless of how it was achieved. Did they collaborate well? Who did most of the work? Did they get closer to the customer or build a deeper understanding of their needs? We don’t measure these performance criteria because, frankly, most organizations don’t care about them. The feature got out the door and the team’s velocity went up. 

Individual contributors and team managers are assessed per their traditional criteria, rewarded for individual contribution and heroism and promoted for production. Teams are publicly celebrated for shipping the product. 

OKR success relies heavily on team incentives

OKRs by their very nature require empowered product teams (again, a Cagan-ism). Since teams aren’t given a specific feature set to deliver they must practice product discovery, customer discovery, collaboration, humility, empathy and most importantly, tolerance for wrong decisions or bad ideas. If we’re going to make this type of team more common we need to rethink how we evaluate the performance of these teams. 

A quick caveat: I am not an expert in human resource management nor performance management systems. However, what I am confident in is the need for these evaluations to change in an effort to support OKRs, organizational agility and customer-centric teams.

6 Performance Management Criteria for OKRs

I believe companies should move away from traditional measures and consider ways to measure and then reward some or all of the following qualities of a team:

  • Prioritizing — How does a team choose what to work on and what not to work on? How do they determine when they’re done and to move on to the next item in their backlog? If these are done solely on intuition or the highest paid person’s opinion (the HIPPO!) you have a feature team — one that will fail to meet their OKR goals. Instead, these teams should be prioritizing based on insight from the market, internal data analysis and reporting and competitive intelligence (among other things)
  • Learning — How much learning is taking place every sprint? What happens to that learning? How does it influence what the team does? Is the team adjusting their learning activity based on its efficacy? Since empowered product teams with OKR goals must build product discovery and learning into their work, we need to make sure that this work is happening and being rewarded.
  • Collaborating — Individual heroism is yesterday’s news. Individuals don’t deliver world-class, high-performance, scalable, secure, well-designed, well-written products and services. Teams do. Successful teams collaborate and communicate well. They provide the psychological safety for ideas to surface from everyone and communicate transparently why certain decisions were made and others rejected. Highly-collaborative teams build their own vocabulary to drive efficiency and can increasingly anticipate each other’s needs as they work together.
  • Sharing knowledge — Teams don’t work on their OKRs in a silo. They work with other teams. Sometimes the information they learn during their discovery process is relevant and helpful to colleagues across the organization. How well does the team share their knowledge? How willing are they to be radically transparent about, not only the evidence they’re collecting, but their ways of working as well? 
  • Evidence-based decision making — Why is a project spun up? Why is a feature killed? Why is the team working on this specific initiative? Do they know? They should. And they should be able to point to data that justifies their efforts — the big ones and the small ones.
  • Closeness to the customer — Teams that care about hitting their OKR goals care about the customer. They know the customer because they speak with her regularly. They empathize with her needs and confirm, continuously, that those needs are being met. David Marquet stresses the need to push day-to-day decision-making down to the people in your organization who are closest to the customer. On any given day there shouldn’t be anyone closer to the customer than the team working to serve that customer. 

This is by no means a complete (or even accurate) list of potential performance management criteria for objectives and key results. What I hope this does is serve as inspiration for conversations within your organizations and with your HR leaders about how to ensure that not only are we writing great OKR goals for our teams, we’re creating the performance management systems that incentivize a culture where OKRs thrive. 

How do you see performance management criteria and incentives changing in an agile world? Drop your thoughts in the comments.