How's your business doing?
It’s not always an easy question to answer. If your business is growing, it can get harder and harder to tell what’s going well and what’s slipping through the cracks. You probably have a dashboard of KPIs and OKRs that you track regularly, but a business is made up of more than just numbers. It’s made up of people. Your teams.
By pairing employee performance goals with your OKRs, you can start to get stronger signals about your business and highlight things when they are going wrong or right.
In this article, we’ll talk about how to quickly highlight good/bad signals within your business and how you should analyse or think about them.
First, let’s talk about goals.
The purpose of OKRs
What are OKRs? The acronym stands for Objectives and Key results, and it’s a common goal-tracking method used in many modern businesses to help teams focus and align around business goals.
One of OKRs' defining features is its aspirational nature. By encouraging individuals and teams to reach beyond their current capabilities, OKRs foster a culture of ambition and creativity. They are not about perfection or hitting 100% of the target but rather about driving progress in a specific part of the business and learning from the journey. Missing the target on an OKR does not necessarily mean a failure because the focus brought to the area will give you some insight on that part of the business, whether you reach the target.
OKRs also promote transparency and alignment, making it easier for teams to collaborate and stay focused on shared objectives that support the organisation's overall strategy. This helps teams and individuals understand how their role or team contributes to the company's greater vision, giving them autonomy and the understanding needed to experiment and find unexpected solutions from the bottom up.
Example OKR:
- Objective: Launch a successful new product in Q3.
- Key Result 1: Achieve 10,000 pre-orders before launch.
- Key Result 2: Reduce production costs by 15%.
(See more OKR examples here)
The purpose of Employee Performance Goals
Performance goals are crucial for measuring individual contributions and ensuring accountability within an organisation. Where OKRs guide the team's vision, performance goals focus on specific, measurable outcomes directly related to an employee's role, making them ideal for tracking performance.
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For example, a performance goal might involve achieving a sales quota, resolving a set percentage of customer inquiries within a specific timeframe, or completing a project on time and within budget. By providing clear expectations, performance goals help employees understand their responsibilities, offer a structured way to evaluate their success and give employers a measurable baseline to look at when preparing for a performance review.
These goals can also be valuable for new hires, especially during their probationary period or as part of a 30-, 60-, or 90-day plan. Performance goals provide a clear roadmap for employees just starting in a role, breaking down key responsibilities into manageable milestones. At the end of the 90-day plan and beyond, Performance goals become a measurable rubric that can help drive the conversation during performance reviews and salary re-negotiations.
Unlike OKRs, your employee performance goals are designed to be achievable. You don't want your employees to feel like their jobs are impossible; rather, motivate them to hit their expectations with realistic and fair goals that they should be achieving.
Performance goals examples:
- "Launch 3 campaigns that generate 5,000 leads."
- "Write content to generate 200 new subscribers to our newsletter"
(You can find more performance goal examples here)
OKRs vs. Performance goals: Why you need both
Now that we know what each of these types of goals do, what does it all mean? Each type of goal serves a very different purpose and can tell very different stories.
Your OKRs will tell you about your business health, while performance goals will tell you the quality of your people. The signals you get from one or the other will inform a few things that can help you assess your ability to perform as an organisation.
Take a look at the quadrant below:
Assess both your OKRs and employee performance goals to see where things are looking good and where things are looking bad. Combining these assessments will tell a more complete story about what’s going on.
Here are some scenarios:
Good strategy/good people
The perfect situation is when you're seeing positive signs from your OKRs and your team is hitting all of their performance metrics. Business is thriving, and the team is solid—business is healthy. However, this doesn’t mean taking your foot off the pedal. These are good and positive signs but it doesn’t mean it will last, and it doesn’t mean that there is no room for improvement either.
Make sure to:
- Take a look ahead to predict any upcoming changes that could affect your performance.
- Assess your strategy and make sure your goals aren’t too soft. Are you satisfied with your results?
Reality check aside, things look good, and regardless of how you see it, make sure you celebrate this win with the team 🎉
Bad strategy/good people
In this scenario, your business is not good, but your people are doing everything that they set out to do. You’ve got a team of motivated high-performers but it’s just not turning into dollars in the bank or an increase in usage.
This may seem odd as you’re reading this but it’s a situation that can happen more than you think when you have market forces that cause big changes. Think about the impact of COVID, remote work, AI… A great team can end up having to recover from a bad business situation.
Oftentimes it means your strategy needs reworking. But the good news is that you have the people in place to make it work, you just might have a bad business idea. Get back to the drawing board or you might be in serious trouble.
This situation highlights the importance of having OKRs, because if you had solely focused on individual performance goals then you’d think that everything is going well while your business is actually failing.
Good strategy/bad people
Good news: The business is thriving. There’s money in the bank, and things are feeling really good from an OKR and metrics perspective. The board is happy with the company's progress.
However, the team is not meeting their individual expectations and their performance metrics are in the red. But if the business is thriving anyway, does it matter? Yes, it absolutely does. This scenario should be a warning for the future quarters.
It can signal a few things:
- A false positive. You’ve set OKRs that are too easy to achieve and don’t really reflect what’s required to be successful on the long term.
- There is a very favourable market condition. Maybe there is a huge demand for your new idea, and there’s just not a lot of competition… yet.
The good strategy/bad people signal can be severely misleading because your business is doing well. Without a good team, you’re likely going to start slowing down or feeling the competition catching up. Like the rabbit and the hare, you might be the rabbit off to a great start, but without consistency and the right team behind you, you’re still going to lose the race.
More often than not, good strategy and underperforming teams will eventually lead to a failing business too. This situation highlights the importance of having a good framework to measure individual performance. Without it you would realise too late that you don’t have what it takes to keep up with your competitors.
Bad strategy/bad people
Your company is in a critical state. It’s time to start (if you haven’t already) having some serious conversations. This scenario means:
- Your business is failing because it’s just not a good business. People don’t want what you’re selling.
- The people you hired are no good, and they’re sinking it with them.
Regardless, this is the type of signal that forces you to start thinking about how to restructure the company, who to fire, how to pivot your product and, at worst, how to wind down the company if necessary.
There is no one formula for this
I wish I could tell you there’s a clean, tried and true formula you can apply to address your performance goals. There simply is not. People and businesses are complex. There are many moving parts and a million different reasons why some signals can look bad or good.
While the guide above can be treated as a rubric for finding quick signals, don’t trust anything like this blindly. The rubric is here to help you highlight when things may be going wrong before it’s too late but will never be able to paint a full picture. Take the data you have, and take the time to analyse it yourself to truly understand what’s happening.
Always do your due diligence, have real conversations to work through problems, and treat them like people, not numbers ❤️
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