Managing your talent and organisational objectives is critical for success. It ensures employees can identify and work towards common goals, it encourages responsibility, ownership and autonomy within a role, and assists in executing overall organisational strategy.
There are multiple ways to manage this. Two goal-setting frameworks are MBO and OKR and whilst both are inherently designed to track, manage, and appraise output.
There are slight differences in these two methodologies
MBO, or “Managed By Objectives”, is a goal-oriented management approach where managers align an employee’s objectives and KPIs to the organisational goals and mission.
Another way to appraise staff performance is OKR, or “Objectives & Key Results”. OKR is an evolution from the MBO framework and offers a few extensions in order to structure your objectives and execute strategy in a more clearly defined way. It outlines the key ways in which success will be defined, along with what needs to be done to achieve the goal. It breaks it down into an objective portion, and key actions and results portion.
When setting an objective under OKR you will set an objective by asking where you want to go and what you want to be or achieve. It could be that your organisation becomes the leading company for what you offer to your specific market. It could be to become the leader in customer service, to be the brand most recognised for your chosen cause, or the brand top-of-mind when a customer thinks of your specific product offering.
After that, you define your key results so that you know you’re working towards your objectives. These could be increasing revenue or market share by a certain percentage, closing a certain number of accounts or sales, improving your customer service or response time scores, or brand recognition is improving. You are then able to implement initiatives to ensure you are achieving these key objectives.
Whilst both frameworks set and communicate goals and measure performance to achieve organisational objectives and strategy, MBO will focus on what you want to achieve, and OKR will set out what you want to achieve and the key things you need to do to achieve them.
Here are a few other key differences between MBO and OKR:
Frequency of reviews
MBO offers easy-to-understand objectives so that employees can constantly check in at any time to see if they are achieving their goals, however formal reviews tend to only occur yearly. OKR often have more frequent reviews, and work toward monthly or quarterly evaluations.
How they are measured
MBO tend to be more flexible and open-ended, can be qualitative or quantitative, and can vary based on the organisation. OKR require much more precise and quantitative measurements for the set objectives; they need to be able to be clearly measured.
Confidentiality and transparency
Whereas MBO are set between a manager and the employee and are often individual and role-based, OKR often has greater alignment with the team and company objectives, meaning that OKR is public and openly shared.
Whilst both frameworks are designed to ensure a company is getting the desired output of an employee, due to the yearly frequency, MBOs assist in annual reviews and can be a way to determine compensation. The focus is always on the individual. OKRs don’t directly correlate to compensation, and their main focus is to improve productivity and efficiency.
Expectations on results
A 100% achievement rate is a strong indicator of success in an MBO approach. This isn’t necessarily the case the OKR, because you want your objectives to be ambitious and offer something to strive towards.
Company vs Team
MBOs can be more focused on individual employee’s, how they perform their role and what they are providing their team. OKRs are more aligned with organisational goals and can be across teams and departments, so are inherently more collaborative.
Popularity and Adoption
As MBO was the original performance management approach the majority of companies and teams are utilising this. However, OKR is increasing in popularity and there is a lot of interest due to the level of organizational goals and objectives being integrated into the review metrics.
Regardless of the framework you choose to review performance, you should constantly review output to ensure maximum productivity and efficiency.