How Should HR Teams Incorporate OKRs Into Performance Management?

Spoiler: I don’t know. But I do know what orgs should incentivize.

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Hey folks, 

One thing that led Josh Seiden and I to dive deep into OKRs was that no matter how bought-in our client teams were on cross-functional, collaborative, agile ways of working, the transformation never fully took hold. We kept ending up stuck in the same two places: the CFO’s office and the CHRO’s office.

In this newsletter I want to go through why we kept ending up blocked at the CHRO office and what we can potentially do to get past those challenges. (We’ll save the CFO conversation for another newsletter.) Let’s dive in. 

- Jeff

Article: How Should HR Teams Incorporate OKRs Into Performance Management?

OKRs make performance management hard. Why? Because in transitioning to OKRs, we are effectively moving our teams away from measuring their individual contribution and performance according to their delivery of a thing—which is how we’ve always measured and rewarded people. How many lines of code did you write? How many bugs did you fix? How quickly did you get the product to market? Did you get the design and copy done on time? These are productivity metrics, and they’re easy to measure.

The problem is that these metrics incentivize production above all else. Learning, course correction and customer development go out the window fast when receiving a bonus relies on you completing a specific task or shipping a specific feature of the product. OKRs, however, measure success according to human behavior change (outcomes). This throws one wrench in the works of performance management. Add in the fact that OKRs are also a team-based goal-setting framework and you get to the difficult—and understandable—question, “How should we measure, reward and incentivize our individual contributors in this new world?”

Here’s my answer: I have no idea. This isn’t my area of expertise. However, I do know what I would like to see incentivized, rewarded and promoted in organizations that do use OKRs. 

Let’s talk about that. 

The qualities of a great OKR practitioner

If an individual, regardless of role, has truly embraced OKRs and especially the idea of managing to outcomes, here are the qualities that I would expect to see in their work. 

First and foremost, they start each initiative curious about the problem they’re trying to solve rather than just the solution they’re going to implement. They want to understand the “why” behind the work and not just the “what.”

Second, great OKR practitioners are deeply curious about their customers. They’re always trying to learn as much as they can about the people they serve. Not only do these practitioners proactively seek out their customers to learn about them, but they also take advantage of unplanned opportunities. Some years ago, Josh and I worked with a software developer who commuted into New York City every day, and he passed by many small businesses—bodegas, laundromats, nail salons, etc.—on the way. At the time we were working on an advertising system for small businesses. This developer started stopping in to these businesses on his commute every day and asking the owners questions about their advertising efforts. This kind of commitment to the customer is a key quality of a great OKR practitioner. 

Third, while we all work from our guts, experiences and expertise, a great OKR practitioner combines those things with evidence. Their decisions are made with data—both qualitative and quantitative—collected through their customer discovery efforts. Each decision they make has a clear rationale that is backed up by the data.

Finally, OKR practitioners are collaborative and humble. They don’t hoard knowledge; they share it. They’re transparent about what they know and what they don’t know. When the data they collect conflicts with their experience, they’re willing to change course and let the old ideas go. Their goal isn’t to win on their own but to ensure that the entire team works, learns and wins together. 

How do you quantify these qualities?

Again, I don’t really know. It’s a tough question, but if we’re going to get OKRs to work well, we have to incentivize the behaviors that make them successful. The qualities of curiosity, customer-centricity, evidence-based decision making, humility and collaboration are just that—qualities. They generate behaviors but often not quantifiable behaviors. When we and our friends in HR can figure out how to adjust performance management criteria to account for these elements, OKRs will have an even stronger chance of taking root.

What I've been up to

I went to Madrid last week for a business meeting. Did you know Europe has high-speed trains? And that they go 300 kmh?! Amazing what humans can do when we get out of our own way. 

Josh and I are still heads down editing the manuscript for the new book. In addition, we’ve been onboarding a few new enterprise training clients, which has kept us busy.

Finally, inspired by some recent presentations I’ve been in, I believe there’s a need for a practical course in storytelling—especially as it relates to building great talks and presentations. I’ve started sketching out a course like this and hope to be able to give you all a preview of it soon. Is this something that might interest you? Let me know. 

Watch, Listen, Read

Watch: The 3 Body Problem (Netflix) – Set in Mao Zedong’s China in the mid-1960s, this one starts out a bit slow and tough to watch, but it quickly transforms into a multi-faceted mystery that threatens the whole world. The concept is cool—a nice twist on the “aliens invade Earth” trope. In eight episodes they do a great job of setting us up for Season 2. ;-)

Listen: Facemelts – This is not an artist. It’s a setlist maker/music reviewer. I follow their Instagram account, and they share monthly and annual playlists. They feature groovy, often mellow music mostly from up-and-coming artists. It’s a great place to discover chill material to work and relax to.

Read: $100M Leads by Alex Hormozi – Apparently, internet bro Alex Hormozi has made hundreds of millions of dollars online, and this is one book that shares how he generates leads for his many and varied businesses. The book reads like you’re being shouted at by a 30-year-old tech bro, BUT there are some great, practical nuggets to help you think through your outreach and lead gen funnels. I’m taking a lot of notes. The one thing he regularly skips over, though, is the fact that these ideas work well when the thing you’re selling is good too. Underpants gnomes and all of that.

What’s new on the blog

Revenue Isn’t Everyone’s Goal  What’s the ultimate goal of most companies? To make money. But that doesn’t mean you should set every team’s goals to target revenue. Why? First, revenue is a lagging indicator, so you have to achieve other targets that lead to revenue first in order to hit those goals. Second, revenue is not in most teams’ sphere of influence. Third, setting revenue goals for everyone demoralizes teams.

How I Break Down Hypotheses to Make Them Easier to Test  For years I’ve been advocating for teams to reframe their product and feature ideas as hypotheses—for many reasons. But when teams start writing hypotheses for the first time, they usually write huge hypotheses that are nearly impossible to test. To be able to test them, we need to break them down into smaller components. In this blog, I explain my process for doing that.


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