MBOs (Management by Objectives) and OKRs (Objectives and Key Results) sound similar but aren't the same in many ways. Even if both are ways of goalsetting, there are differences and a clear winner. Let's point out two areas first:
1. MBOs are tied to compensation. OKRs aren't.
Imagine how "creative" you can get when compensation is in play. Some people even do illegal activities to get their bonuses. OKRs, on the other hand, are divorced from compensation. They focus on the intrinsic motivation of people, which is long-lasting. OKRs are here to measure, reflect and learn about our and the team's abilities. They are here to align everyone in the same direction for a common purpose.
2. Frequency of Measurement
The frequency and rhythm of measuring progress are crucial to success. While OKRs are measured in quarterly cycles, MBOs are commonly to be annual.
Do you remember a workplace where you had your once-a-year check-in with your manager? How the heck should a manager give multiple employees honest feedback or recognition in this cadence? Most of the time, they remember one thing from last week but certainly nothing about all the progress you've made over one year.
Having weekly check-ins to update progress with an honest conversation, feedback, and recognition keep people motivated, valued and aligned. It's a safe space where someone listens to you to discover how the environment could improve so you can deliver happier and better.
Here in comparison, MBOs vs OKRs:
You can find a very similar graphic in the book "Measure What Matters" by John Doerr. A must-read when you want to practice OKRs.
When you start to get rid of the contras of MBOs, they begin to transform into OKRs. Let's say you get rid of the compensation. Then the MBOs become a little more like OKRs. But why do the hard work and try to create something that Andy Grove already did in 1968?
Why do the hard work and try to create something that Andy Grove already did in 1968?
Let's look at the other points from the comparison to see why MBOs aren't as good as OKRs.
What vs Why How & What
While MBOs focus only on goals, OKRs focus on Purpose, Direction and how you get there. OKRs combined with CFRs (Conversation, Feedback, Recognition) lead to consistent performance management. This is the best you can do to ensure everyone stays aligned with the purpose, and 10x better than having yearly soulless goals like with MBOs.
Private & Siloed vs Public and Transparent
Isn't it better to see and understand where everyone is pushing in a team for a common purpose? MBOs are siloed and private, while OKRs are public and transparent. Google has been most known for working with OKRs since 1999. Imagine a company that this company implemented OKRs when they were about 40 people and now still uses OKRs along 150,000 people to align everyone in one direction.
Top-Down vs Bottom-Up & Sideways (~50%)
Imagine a conversation with your manager, asking you questions such as:
"What would you do in the upcoming quarter to contribute to our mission? What ideas do you have to improve our product for our customers? What if you had all the time you needed to focus on one thing—what would it be?"
Now imagine the same situation hearing this: "Here is what you have to achieve, no matter what."
Which one do you prefer?
OKRs focus on 50% bottom-up & sideways goals to make progress as a company, while MBOs are Top-Down constructed. That makes no sense, mainly because the people doing the work are the experts and should be listened to. It's good to challenge the answers and the numbers but not to dictate all of them top-down.
Risk-averse vs Aggressive & Aspirational
Imagine you would get compensation for hitting a specific goal. Would you play safe to reach that goal or try to stretch as much as possible and maybe miss it? Goalsetting with OKRs should always feel uncomfortable to reach but achievable. There are so-called "moonshots". These goals are overly ambitious and challenge your team. It pushes everyone's limits and sets a new definition of what's possible. That's not possible with MBOs, because of the methodology itself.
Watch this video to find out what it takes to learn OKRs: A robust goal-setting methodology for life and business.
Future Members learn OKRs by practising them for a few cycles. This is the unmodified 6th lesson from the 52-week program to give you an insight into the style of the lessons.
Feel free to share this Article with your colleagues who struggle to make the progress they want in life and business.
Many teams are stuck because of MBOs or not having a goal-setting strategy. Change takes time, but it's better to start early than to stay stuck in a situation that isn't purpose-driven and frustrates all. If you want to learn OKRs, consider joining the 52-week program at FutureHabits: It's aimed at individuals who wish to move forward in life and business.