OKR is becoming increasingly popular. More and more companies of all sectors and sizes have already abandoned MbO and are focussing on OKR instead of traditional annual targets. But why? What can OKR do that MbO cannot? What are the differences?
MbO (Management by Objectives) was developed in 1954 by the Austrian ‘management guru’ and economist Peter Drucker and forms the basis of all modern target agreement systems. The company objectives are broken down into personal goals for each employee and these are rewarded in monetary terms if they are achieved. This type of participation in the company's success is intended to motivate employees to deliver top performance and thus increase the company's productivity.
Over time, however, MbO increasingly mutated into an elaborate control instrument. The targets are strictly set from the top (note: does the upper level really know best where the greatest challenges and opportunities lie at the lower level?), the annual appraisals with the employees resemble a meeting marathon, and the employees are strictly monitored and evaluated on whether or not they have achieved them. A good intention has thus become a resource-consuming and demotivating monster - good idea, bad implementation.
And in the past three years in particular, in which one crisis has followed another (and there will probably be no real return to ‘normal mode’ in the next few years either), another serious disadvantage of classic MbO has become apparent: Issuing annual targets is pointless if the business environment is constantly changing and requires constant adjustments!
OKR (Objectives & Key Results) takes up the basic idea of MbO again, but also takes into account the requirements of our VUCA world: starting with a strong team focus and complete transparency, through short cycles and optimised coordination processes, to intrinsic motivation without remuneration.
Comparison OKR vs. MbO
Bottom-up instead of top-down: Employees are actively involved in the development and coordination of objectives and develop the majority of their objectives independently.
Dynamic instead of static: permanent experimentation and learning in short cycles of 3-4 months enables short-term adjustments in the event of changes in the environment.
The achievement of team and company goals takes precedence over personal, individual goals. All targets are transparent for all employees across all levels and areas.
All targets are clearly measurable and leave no room for interpretation. Moonshots’ are used to develop new solutions and substantially develop the company.
The focus is oncurrent challenges. Possible solutions are developed to achieve the goals. In addition to the WHAT, the HOW is decisive.
Motivation and commitment are achieved through jointly set goals that contribute to the company's vision. There is no link between targets and remuneration.
What is the situation in your company? Do you work with MbO or do you use alternative management tools? And how satisfied are you with them?