Experts define high-performance culture as a set of shared beliefs and values set up by leaders. These shared beliefs and values are then embedded and communicated through different strategies that eventually form employee perceptions, behaviors, and understanding.
All companies want their employees to arrive each day motivated, prepared, and energetic to do what it takes to make the work done. However, it’s more of an idealism than a reality. A State of the Global Workplace report from Gallup shows that only 15 percent of employees are engaged at work. Meanwhile, new research from Zenefits revealed that 63.3% of companies consider employee retention more challenging than hiring.
The Pillars of a High-Performance Culture
Several reports and case studies emphasize the impact of motivation on employee performance. While there are means to address waning motivation, a “well-performing” company isn’t good enough. With the capacity to trade globally, and markets immersed with companies scrambling for market share, it is more critical than ever to have a distinctive, high-performance culture.
There are many frameworks to analyze high-performance culture in an organization. One example of a well-developed and data-driven framework for assessing a high-performance culture can be seen in the Organizational Health Index.
Developed by McKinsey in 2017, the Organizational Health Index (OHI) survey measures 37 individual management practices and nine outcomes against a global database of more than 1.5 million individual responses.
The Role of OKRs in Building a High-Performance Culture
Objectives and key results (OKR) is a goal-setting tool used for measuring organizational/departmental/individual objectives through challenging and ambitious key results. Extracted from the organization’s visions and missions and aligned with the department’s goals, OKR involves activities such as planning, activating, managing, and adjusting.
With OKRs, teams can cascade and align goals to the different levels of an organization, defining outcome-based key results that help verify the success of the objective. OKRs act as a guide for daily work and connect all employees to a larger purpose, which is what the organization intends to achieve.
If OKRs are perceived as more than just a goal-setting tool and instead as a communication one, it shows why the OKRs are brilliant at building a high-performance culture. The effort of achieving daily goals at the individual and team levels eventually leads to the achievement of the overall objectives at the organization level in the long run.
As a result, when implemented correctly, OKRs can help a company enable a high-performance culture and achieve far more than their team thought possible. OKRs help the organization adopts performance culture in the following ways:
OKRs provide organizations with a clear direction, coordination, control, and orientation. Direction, coordination, control, and external collaboration play a vital role in helping organizations jump from their current state to the state they want to achieve. To guide the organization in achieving what they desire, it’s important that the organization ensures that its vision and strategic clarity are understood by the stakeholders in every layer, and while doing so, the organization must also facilitate the involvement of its employees.
OKR helps organizations align priorities and make sure everyone at every level in the organization moves towards the same goals. Employees must be given the opportunity to provide their insights when the organization decides in the next 12 months. It is recommended to start with an OKR workshop where all key stakeholders responsible for company strategy ask for and gather input from employees on what they think the top priorities should be.
Those inputs can then be aligned with the existing company strategy and broken down into three to five OKRs. The process can be done using collaborative notes and documents or even a whiteboard to ensure that collaboration and ideas are well-captured. The goal of the process is to reach an agreement on what priorities should be achieved in the following year.
The process is then followed by aligning the company OKRs with team and individual OKRs. OKRs provide teams and individuals with a clear set of directions and achievements. OKRs are also a reason to remove things that are unrelated to the scope of the objective they wanted to achieve, keeping their focus and avoiding unnecessary activities or resources.
If every team gets the opportunity to create their own OKRs that they will be working on in a particular quarter, for example, it can assure a successful OKR program while helping the organization realize its strategy and maintain its focus.
OKRs increase employees’ motivation, innovation, capabilities, and accountability. OKRs can be used to develop a set of productive behaviors that establish an essential motivating culture. Through the process of building OKRs, employees set the outcomes they’ll achieve. These outcomes are in line with the organization’s setup that supports autonomy and motivation.
In addition, OKRs focus on outcomes over outputs. It is a way to resolve organizational problems and gives employees the flexibility to experiment, innovate, and think outside the box. It also allows a humanistic approach, rather than a systemic approach. OKRs promote positive behavior by providing continuous reflection and iteration about the organization’s goals, sharing progress updates, and keeping goals collaborative, all while observing freedom and trust.
OKRs are more than just a goal-setting framework. They enable stronger and healthier relationships within companies and support powerful dynamics in an organization that will significantly increase performance levels.
To start doing the OKRs right, companies can hire an OKR expert to start partnering with their organization or provide their managers with training. The KPI Institute’s Certified OKR Program can equip them with the right tools, knowledge, and guidance in deploying OKRs in their organizations.
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Editor’s Note: This article has been updated as of September 17, 2024.
The COVID-19 pandemic has left a strong mark in all aspects of our lives. It has impacted society – our habits, routines, and the way we interact. It has pressured the economy, its financial stability, and the way we do business.
Thus, what has changed in the way managers are doing performance management in these volatile times?
1. The way we do strategic planning
Before the pandemic, risk management, scenario planning, and business continuity plans were specific to large corporations. Nowadays, even small organizations will have a plan B ready for different scenarios of the COVID-19 evolution. There are industries, like retail, where all planning revolves around foresting based on historical data. Nowadays, using data from the past to plan the future seems a futile attempt to regain the feeling of control.
Moreover, most organizations, regardless of their industry, rely on annual if not 3 to 5 years planning. It is obvious that in the present circumstances and given the complexity of managing a business nowadays, these strategic planning practices seem useless.
2. The importance given to performance measurement
More than ever before, real-time data is a vital management tool. Access to data is critical in managing a crisis. One of the positive side effects of the pandemic was the pressure to digitize operations that create opportunities for data collection and better measurement of operations.
3. The way employees can be evaluated
Remote work and hybrid systems (combining work from home with office time) are no novelty, but in the COVID-19 circumstances, they gained significant recognition and became the norm rather than the exception for many organizations.
Managers and team leaders can no longer directly observe employees. There is a series of soft competencies, like communication, collaboration, proactivity, and creativity that are very difficult to evaluate in an online working environment, and yet they are essential skills for many jobs.
What is the way forward?
1. A different way of planning
Risk management must be an inherent part of organizational strategy, regardless of the company size. You don’t need a risk management office to have a proactive management approach and handle risks well. Small organizations can use their performance scorecard and populate it with leading KPIs or Key Risk Indicators.
For example, setting a red line level for # Days in accounts receivable can help you manage better cash flow, monitoring # Safety non-compliances can provide insights into the risk exposure to # Work accidents resulting in mortality. Identifying different scenarios in key areas of business and having contingency plans can give any organization a heads-up in case of a crisis.
Strategic planning must concentrate on shorter time horizons and reassess a series of factors that organizations may not have considered on a quarterly basis.
Government interventions, international economic context, competitors’ reactions, customers’ preferences, customers buying power, suppliers’ situations, internal capabilities and optimization potential, and employees morale and productivity are factors that have changed post-pandemic and need to be investigated. Moreover, agile strategic planning processes must be set in place to enable the organizations to react fast to changes.
In the face of chaos, the most effective tool to put everyone on the same page is to use clear objectives, KPIs, and initiatives, even short-term ones. The challenge is to adapt the measuring and reporting of performance to respond to tight deadlines. Data must be available fast, preferably in real time.
Thus, identify five to 10 KPIs that are easy to use, concise (tackle the problem directly), and can be collected with high frequency (weekly, monthly). These will be the ones that help you navigate a crisis. Now is the time to replace complex measurements and reports with simple yet relevant tools.
In the medium term, most likely for many organizations, the entire strategy must be reconsidered and linked to relevant performance scorecards in which simple measurements can be combined with more complex KPIs to provide a holistic overview of performance.
3. Focus on building the right mindset for each job than defining the specific job outputs
Many organizations invest a significant amount of time in identifying the right KPIs and targets to capture as precisely as possible the employee’s performance or productivity. Moreover, the more complex the job is, the more difficult it is to capture all contributions in relevant KPIs. In a volatile business environment, such an approach makes targets and KPIs obsolete the moment they are communicated.
The performance criteria used for employee evaluations should be flexible, easy to adapt and more focused on the extent to which the role is successfully achieved, as compared to looking at operational details. For example, it should be less important if the employee delivered one or three safety awareness sessions to factory workers if their awareness level is at the desired level.
One methodology that can be used at the employee level is the Objectives and Key Results Framework. OKRs are set and reviewed quarterly, but they can be changed even more often if the result set is no longer of interest. They emphasize on the importance of personalizing the objectives and key results and making the employee accountable for setting and monitoring them. Not all key results have to be KPIs; some of them can be reflected by completing an initiative or other types of results.
The end purpose of an OKRs system is not to compare employees or indicate what percentage of your staff are high performers. This methodology aims to facilitate communication, clarify expectations, align work activities to corporate strategy, and to provide a tool for managers and employees for discussing individual performance and improvement opportunities.
As the Objectives and Key Results (OKRs) framework becomes increasingly well-known for companies that want to better execute their strategies, but still benefit from the flexibility and innovation of their capabilities, its complexity increases as well due to the particularities of each organization’s environment.
Most professionals interested in performance management must have heard by now about a new hip approach – Objectives and Key Results (OKRs). So, what is it all about? Why is everyone so mesmerized by this new system?
Some may argue that the OKR format became popular because companies with strong brands, such as Google or LinkedIn, credit their success to OKRs. Some might say that it is just another, more flexible, way of working with KPIs.
Others claim that OKRs are simply operational measures, while KPIs reflect the achievement of the strategy. However, supporters of the system state that OKRs represent a tool to create a link between the vision and the reality of an organization.
So, as we can see, there are many ways of interpreting them, but what is the truth behind OKRs and how did they become so popular? Do they really bring superior benefits to organizations compared to other performance management systems or are they used simply because KPIs are starting to be too “mainstream” and the field needed something new?
Timeline of OKR Popularity
Figure 1. OKR Timeline | Source: Author’s Compilation Based on Step by Step Guide to OKRs
OKR Components
Objectives and Key Results is a goal-setting methodology deriving from Management by Objectives, which tries to simplify the concept of performance management. The main goal of this approach is to be easy to use, flexible and answers 3 main questions:
Where do I want to go?
How will I know I’m getting there?
What will I do when I arrive?
Figure 2. OKR Questions | Source: Author’s Compilation Based on Step by Step Guide to OKRs
OKRs are there to better serve fast-changing, agile businesses and environments, given that this system requires regular updates and feedback, as well as employs a smaller time span for changing objectives or key results.
The main changes an OKR-focused system brings are the following:
The achievement of our actions or of what we want to do is supposed to be stretched (60-70% achievable) and set quarterly. In other words, the OKR methodology encourages employees and organizations to set inspirational, challenging, higher-risk objectives, not just operational ones.
The purpose is to strive to do more, which is why a lower achievement than 100% is considered good. The number of objectives is limited to a maximum 5 to ensure employees are focusing on the most important work for one quarter at a time.
Everyone should be involved in the OKR-setting process and employees should be responsible for creating their own OKRs. This automatically creates more empowerment and accountability for the value their job brings. The process of empowering employees to think outside the box, and allowing them to take risks, will result in higher employee engagement.
By not just focusing on day-to-day activities and taking part in a more creative process, your workforce will be able to generate increased levels of innovation as well.
The Value creation theory says Key Results should focus on the impact of activities, not measure the result of the tasks. Setting Key Results that trigger going the extra mile for each employee will create even more value for the entire organization, which will allow it to go even further than planned.
Objectives and Key Results should focus on alignment, not cascading. When setting their own OKRs, employees should take into consideration they own responsibilities, the strategic direction, the already-established OKRs or the management’s aspirations in the organizational context. It is recommended that an employee’s OKRs are actionable by that person, so it’s harder to assign OKRs or create a set of general OKRs for a position.
Given that OKRs are set quarterly and designed to stimulate constant communication, this tool offers more flexibility that the others. It allows fast changes through weekly or biweekly progress checks and makes sure that the focal point is reconsidered each quarter.
However, after all is said and done, we have to remember that the main change OKRs bring is cultural.
Instead of only giving employees objectives and KPIs, employees should understand the strategy, in order to be able to align their OKRs to the strategy or the management’s.
Instead of being given the measures of their performance, employees are involved in setting the focus of their quarterly work.
Instead of measuring the performance of the employees based only on what they have to do, employees are measured based on the value they bring and are offered the flexibility to work on innovative ideas, which might in return bring a lot of benefits to the organizations.
Instead of linking performance with rewards and making sure employees do what they need to do because of incentives, organizations try to engage employees, to make them part of the vision.
As we can see, when implementing Objectives and Key Results, the process feels a lot more back-and-forth than other management methods.
On the one hand, managers play a key role since they need to challenge their employees to consider the value they bring to the organization, as well as offer them support and stimulate regular communication on their OKRs’ status.
On the other, employees represent an equivalent key player, since they need to set their OKRs and be honest with themselves in the process, trying to set challenging OKRs and be willing to go the extra mile.
Visit our website to read more articles covering OKRs and other similar performance management concepts.
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Editor’s Note: This article is part of an ongoing series that will feature practical tips and tricks we’ve learned while implementing the OKR system within various organizations.This article has been updated as of September 17, 2024
In most cases, in small businesses within the service sector, the lack of managerial education of entrepreneurs negatively impacts the quality of the entire managerial process.
This is one of the reasons for employing modern methods of management in small companies from the third sector, in order to obtain qualitative management, even though in some specialty researches, these methods are recommended only for managers of large enterprises or businesses.
