This is the only article you need to read to manage employee performance effectively — from goal setting to performance monitoring to employee development.
Managing employee performance is a key priority for every organization. With the rise of the knowledge economy, it has become quite evident that an organization’s human capital is one of its biggest assets. Invariably, leaders globally are identifying and experimenting with new ways to manage and improve employee performance.
For a long time, performance management has been equated with reviews and feedback. However, most organizations are now adopting a more comprehensive approach for managing employee performance.
If you believe that performance management goes beyond reviews, you are in for a knowledgeable read.
Based on years of industry research and experience of working with fast growing organizations, we have been able to identify that there are three major components which collectively contribute to managing employee performance.
In this article, we will take you through a deep understanding of each of the three components and how you can facilitate effective performance management.
In the first element of managing employee performance, you need to be clear on what your team members are performing towards. This requires setting key goals on individual, team and organizational level. Setting goals effectively can enable you as well as your employees to gauge where the performance is expected to go, making performance management seamless.
However, performance goals must be set strategically and there must be an alignment between individual, team and organizational goals to ensure collective success. There are two facets to managing employee performance when it comes to performance goals, first is the types of goals and second how goal setting should take place.
We have a free guide on how to set and align goals effectively. Click here to download the PDF.
Based on the intent, scope and impact, you may find three types of performance goals for your fast growing organization:
Role specific goals for managing employee performance talk about major goals that align with the responsibilities mentioned in the job description. When you onboard any employee, you set a job description for the role you seek to get them for. The goals highlighted in this job description are primarily the role specific goals.
For instance, if you hire someone in the marketing team, the role would be to ensure better product reach and brand awareness. Essentially, this will become a goal, against which performance will be measured and improved, i.e. managed.
The second type of goals which can help manage and monitor performance revolve around project goals. These goals are more specific in nature and are generally time bound.
They are meant to be achieved in a particular time frame (the time of the project) and change once the project is over. Managing employee performance here depends on how well and to what level these goals have been achieved.
The final type of goals for managing employee performance talk about behavioral goals. If you take a close look, you will realize that the first two types essentially talk about what has to be achieved.
This third type talks more about the behaviors and patterns that must be achieved while achieving the above two types of goals. Behavioral goals mostly have a longer life than role based and project goals.
Once you understand the type of goals and have a broad agreement on different aspects of the same, you should focus your energy towards actually setting the goals. Goal setting should generally be a collaborative and collective process where managers, leaders and employees all should have a voice.
Collaborative goal setting ensures that there is greater buy-in, commitment and ownership towards the goals which makes managing employee performance more effective.
In this regard, you need to streamline your efforts across two major aspects:
OKRs or Objectives and Key Results is a goal setting approach that many fast growing organizations leverage to ensure that everyone in the team is on the same page and collectively works towards a collective vision. There are two facets at play here —
One, you need to set the objectives or the larger vision that you wish to achieve.
Two, you need to have a few key results that will help you measure and gauge whether or not you have been able to achieve your objectives or not.
Generally, you should have at least 2-3 key results associated with every objective to ensure holistic goal setting and performance management. Let’s take a quick example here:
Objective: Improve customer experience
Key result 1: Increase customer stickiness by 50%
Key result 2: Improve Net Promoter Score from 6 to 8
The example clearly illustrates that while the macro performance goal for employees is to improve customer experience, the milestones which will help determine the achievement of the goals, and are in turn sub goals include increasing customer stickiness and improving net promoter score.
We have a free 10 day Email course on OKRs to guide you through everything you need to know about setting, tracking and implementing OKRs in your organization. Click here to enroll now.
Most fast growing organizations today are adopting the SMART goals framework to ensure the performance goals they set are effective.
Specific: Ensure that the goals you set are clear and to the point to avoid any ambiguity
Measurable: All your goals must be measurable and result oriented to gauge the level of achievement and performance
Attainable: Keep your goals aspirational but not out of reach to ensure motivation
Relevant: Your goals must align with the organizational vision and employee objectives as well
Time Bound: The goals must have timelines to mark a start and end date to streamline efforts
Irrespective of the goals you set and the way you set them, it is very important to:
Setting of performance goals takes us to the next phase or component of managing employee performance which focuses on performance review.
Once the goals are set, it is important for you to constantly monitor the progress of your employee’s performance on the goals and determine their contribution to organizational success.
Here, it is very important to gauge employee pulse in real time. There are several reasons for this —
First, real time insights can help you track employee engagement and form a great base for performance review
Second, it will enable you to address any risks or challenges before they hinder performance levels massively
Based on the employee data collected through pulse survey and feedback received through regular team and 1:1 check-ins, you should focus on facilitating effective performance reviews. Performance reviews are a critical component of performance management.
There are several types of performance review systems that rapidly growing organizations today leverage. Based on your organizational priorities, you can either pick one of them or leverage a combination of a few to ensure maximum effectiveness. Some of the common types of performance reviews include —
Rating for managing employee performance generally focuses on adopting an objective approach towards performance reviews. It talks about grading employee performance on a scale, while taking different aspects into consideration.
The most commonly used one is the 5 point rating scale which starts from below average to excellent performance over 5 points. Depending on organizational comfort, either 1 or 5 are considered as excellent performance, while the other end of the spectrum denotes need for improvement.
Other rating scales include the 10 point scale, the Likert scale etc.
The importance of rating is that they form the basis for a fixed metric around which employee performance can be measured. It ensures that an objective and uniform approach is followed for all employees, which can be used as a basis for comparison of dedication, commitment and hard work.
On the simplest level, ratings can be on the achievement of a particular goal or objective, which makes the rating task specific. For instance, if an employee is able to achieve the task, with time in hand to go beyond the target, they surely deserve the highest rating.
However, there are a few other types of rating scales as well that will encourage you to look beyond target achievement into performance parameters that are critical for business success. The top two are mentioned below:
This particular rating scale has been used by many fast growing organizations to gauge the overall contribution of employees, and not just productivity. It seeks to rate employee performance on different characteristics which are instrumental for growth and success.
Under GRS, you may rate your employees on factors like punctuality, ownership, dependability, quality of work, collaborative potential, creativity, etc. These characteristics are essentially the guiding factors which enable employees to push their boundaries and achieve their goals.
The next rating scale focuses primarily on employee behaviors. This tool generally has two components to it.
The first is a performance dimension that organizations seek to review or measure. Attached to it are a few anchors which are graded on a 5 point scale, the cumulative result of which indicates the level of performance.
For instance, you might take the behavioral dimension as ‘accountability’. Here, the anchors would be, ‘takes responsibility for actions’, ‘does not indulge in blame games’, etc. The rating on these anchors can help create a final rating for accountability for an employee.
The next type of performance review that many organizations rely on is self-evaluation. This generally entails giving your team members an opportunity to reflect on their own performance and share key insights. It will help you get a chance to hear their side of the story about their performance, actions, impact, etc.
Self-evaluation will enable you to understand how the employees perceive their contribution to the organization and whether or not it aligns with your view. Furthermore, engaging in self-evaluation will give your employees to identify areas of improvement on their own which later you can collectively streamline and work towards.
Self-evaluation is critical for managing employee performance as it encourages employees to gauge a true picture of their performance.
Rankings primarily involve creating a stack of employees based on their performance in comparison to others. One of the top reasons organizations leverage rankings as a performance review tool is to get a comparative picture of everyone in the organization for decisions like appraisals, promotion, etc.
A 360 degree review is very important for managing employee performance, especially for fast growing organizations. Today, employees no longer only work with their managers. In the hyperconnected and collaborative workplace, employees work with almost everyone in the organization. Therefore, a review only from the manager will paint an incomplete picture.
Thus, you need to ensure that employees in your organization undergo a 360 degree review where feedback is collected from everyone they have worked with. This will help you manage their performance on different attributes and factors, and not simply on achievement of target.
You may want to collect feedback from peers to understand their teamwork and collaboration potential. Feedback from subordinates can help you gauge mentorship and leadership abilities, etc.
Finally, the last performance review type for the discussion here is Management by Objectives. This majorly revolves around the goals and objectives set in the beginning of the year, which become the base for review.
Here, performance is measured against the achievement of the set goals. Setting OKRs can really help in performance reviews with MBOs. It can help you gauge performance based on achievement of key results and collectively the objective.
Now that you have a clear understanding about the performance review components or ways you can follow, it is important to also be cognizant of the pitfalls you should avoid.
To begin with, performance reviews are vulnerable to human biases. There are several factors at play here.
First, if your line managers are not trained to evaluate performance and you are following a rating review format, there is likely to be similar ratings for all, high, low or average. This lack of differentiation will make managing employee performance difficult as you will have an incomplete understanding of true performance.
Second, reviews are vulnerable to the horns and halo effect. In the former, a particular negative aspect of the employee tends to cloud all other performance indicators and the employee gets an overall lower ranking than they deserve. In the latter, the opposite happens. A particular positive aspect of performance guides the entire review leading to a better rating than deserved.
Third, the notion of personal bias and favoritism comes in. As humans, we are all vulnerable to having favorites. However, when this manifests itself in performance evaluation, a few favorites of the manager might receive better reviews as personal feelings dominate this objective process.
This is where using an employee performance review software becomes crucial. Check out this quick 5 minute guide to understand what kind of performance review software your company needs.
The second major pitfall that fast growing organizations are vulnerable to is limited data for reviews. Due to limited bandwidth, you may be unable to gather all important information about employee performance from the employee themselves as well as all others who have worked with them.
This limited data might not contain components instrumental to gauging overall performance effectiveness. Invariably, when you don’t have a complete picture of the performance, managing the same will be difficult.
This is why most organizations use AI based tools to gather and analyze employee performance data. Here’s how you can choose one for yourself too.
Finally, the last performance review pitfall that you should avoid is the recency effect. In the absence of a continuous approach, organizations fall prey to evaluating only the latest performance and do not get a comprehensive picture of the entire year.
The major focus is on the latest events, which may not reflect the true performance caliber of the employee, hence compromising the effectiveness of your managing employee performance journey. Using employee performance snapshots throughout the year can be a great way to eliminate recency bias.
The third and the final component of managing employee performance revolves around performance improvement. Once you have reviewed the performance of your employees, your focus and energy should move towards improving the same to facilitate individual, team and organizational development.
Performance improvement is not just about identifying weaknesses and areas of development, but involves actually creating an action plan at all levels to bridge performance gaps. That’s what performance management is all about. We have identified a few practices that businesses can leverage to facilitate performance improvement for their employees.
You should focus on creating a culture of recognition and appreciation. Here rewarding high and good performance will be instrumental. Even if you have limited budgets, a paid day off, a voucher or social recognition are ways to reward your employees. There are two ways rewarding performance begets performance improvement.
First, it will motivate top performers to keep up the good work when they believe their commitment is being valued and appreciated.
Second, it will incentivize others to also go the extra mile to be a recipient of the rewards and recognition.
Creating performance improvement plans is extremely important for managing employee performance. This generally involves identifying key development areas and aligning them with learning opportunities to ensure performance improvement. However, a crucial element here is conducting meaningful 1:1 conversations.
Check out this list of top 50 1:1 meeting questions to prepare for your next conversation.
Managers should ensure that they have a real time insight into every aspect of employee performance to preempt any risks or challenges. Based on this data, they must focus on having streamlined and impactful conversations with their employees to address any gaps that exist.
This will in a way be a parallel approach to coaching employees, without making any big investments. If you feel your managers need support for the same, you might want to explore platforms that can help you provide AI driven guided conversation template recommendations to help with the right statements and resources.
It would be useful to create performance improvement plans for each employee and document it effectively. In addition to basic details about the employee, capturing performance goals, reviews and feedback, resources, etc. can be instrumental in gauging trends and performance improvement data over time.
Based on the performance improvement plan, you need to ensure that your employees are able to access the required resources and get adequate support for improving performance. This is very important for managing employee performance.
It entails identifying the training required or investing in other resources that employees consider important for the learning curves. In addition to technical training, investing in mentoring and coaching programs, providing opportunities to innovate and grow are also important.
While providing resources and support for employee development is important, it is equally critical to ensure your managers are competent to manage employee performance. This involves equipping them with key leadership competencies and resources that can help them lead better.
You can rely on employee management tools to understand what key competencies are most sought after by the employees for performance improvement and encourage your managers to build the same. Leveraging heatmaps provided by third party platforms on the top competencies can be a good starting point.
Simultaneously, you need to ensure that your managers know how to handle 1:1 conversations and eliminate any biases mentioned above to ensure fair reviews and performance management.
Managing employee performance can be an overwhelming process especially for fast growing organizations that might have limited capital and human resources. Here, you can collaborate with a platform like SuperBeings to manage the performance of your growing team effectively. Following are some quick points you can benefit from:
The right compensation management practices and policies can make or break your employee experience. Of course, there is merit in linking compensation and performance to drive organizational success, it can lead to several questions and implementation problems as well.
Read on to get all your compensation management related questions answered.
Let’s start with the very basic question of why fair compensation is important and the merits it brings along. It is no surprise that if you are paid more and are compensated according to your efforts, you are likely to give in your 100% and stay with an organization longer. However, there are other factors that support fair compensation:
Thus, fair compensation as a part of compensation linked performance management has the potential to facilitate better employee outcomes such as engagement, experience and performance.
To make compensation fair and inclusive in all aspects, it needs to have a clear foundation. Most organizations have relied on performance reviews as a way of reflecting on performance as a means of compensation decisions. However, there are several competing views both for and against tying compensation to performance reviews.
Clearly, there are both sides to the story.
The most favorable outcome will be to keep performance as one of the parameters for compensation, but not the sole foundation.
Additionally, as one of the best practices, performance reviews can be conducted on a regular basis, where some are only developmental in nature and others can be tied to compensation management.
As discussed, focusing only on performance reviews for compensation management needs a relook. Working with growing organizations, we have curated a list of the top five performance and compensation management practices you can leverage:
Ensure that your compensation structure aligns with the market trends so your employees don’t feel underpaid and leave.
Provide complete transparency and clarity to your employees on what constitutes high levels of performance and what it will take to earn a raise or appraisal.
Have specific, well defined and measurable criteria for the compensation strategy to ensure that there is complete transparency.
Salary in hand or the pay check your employees receive is accompanied by a range of benefits that are a part of the compensation structure and cost to the company, but are often overlooked by employees. Make sure they are widely communicated.
Ensure that there is a base pay range for every role and profile with variable additions based on candidate competencies.
The idea of fair compensation and linking compensation and performance management, leads to a very interesting concept of distributive justice. On a broad level, distributive justice essentially focuses on ensuring that the compensation received by employees is fair and equitable and is based on objective and rational grounds which are uniform for all. Here are a few ways to ensure distributive justice:
Measure potential and market value of the employee in addition to experience and expertise to ensure distributive justice for high potential employees
Another interesting component of compensation and performance management that you must acquaint yourself with is pay transparency. Essentially pay transparency refers to how openly or freely employees within an organization can discuss their compensation with others.
This is not only limited to the check they take home but other perks and benefits they are entitled to. Invariably, many platforms today also enable individuals to anonymously share their salaries online and get insights from others doing the same. However, there are diverse views on when it comes to pay transparency for an organization.
Those who advocate for pay transparency believe that it can enable large scale impact for the organization across performance management.
However, there is a flip side to pay transparency too with some common pitfalls that need to be addressed proactively.
In the last section of this article, we will focus on how managers play an integral role in compensation and performance management and the best practices to guide managers to have effective compensation conversations with their team members.
Almost 58% organizations do not train managers on pay communications
This startling statistic clearly highlights how despite the apparent importance of compensation management, the focus on ensuring a seamless process is rather limited. However, organizations today can play a leading role in enabling their managers to have better pay communication and conversations by following these tips:
It is quite evident that compensation and performance management are intrinsically interlinked and if leveraged well, compensation has great potential to not only drive performance, but also facilitate engagement, retention and much more.
However, to ensure the same, you need to have a very structured, transparent and fair compensation strategy and policy. Furthermore, you must, don’t forget to invest in training your managers to bridge any gaps and constantly gauge and address employee pulse — to ensure fair compensation for all.
Talent development is critical for growing organizations which see the workforce as their biggest asset. Focus on developing their talent stack not only leads to a pleasant employee experience, it also augments the overall performance and productivity for an organization.
While you may come across many ways to facilitate talent development, leveraging the competency framework can help you move the needle very quickly.
Let's see how.
Before moving directly to how you can implement the competency framework, let’s quickly understand the 5 stages of talent development.
The first stage involves planning for your talent needs based on your organizational priorities and creating the position profile based on the skills, attitudes and other competencies.
Based on the position profile, you need to start attracting talent for the position. You can do so by spreading the word in the right networks, through job portal platforms, etc. The objective is to ensure that you are reaching out to the right network. You can also explore the right candidate for the position internally to considerably save hiring and training costs.
Once you have identified the right person, the next stage of talent development is extending the offer to the person after a thorough background check as well as a competency and expectation match. It also requires creating personalized onboarding plans for the first 30-60-90 days of the candidate’s journey within the organization. Read our guide to employee onboarding to learn more about onboarding do’s and don’ts.
The main focus of talent development starts with providing the right development and learning opportunities to your workforce. This can involve upskilling for both technical and soft skills, leadership building or any development intervention based on the need of the role and position.
Finally, talent development involves undertaking initiatives to retain your talent. While learning opportunities are important, facilitating engagement, wellness, motivation, etc. all contribute to employee retention.
If you are wondering how the competency framework aligns with talent development, you need to start by decoding what the framework actually stands for.
Put simply, a competency framework is a set of behaviors, skills, abilities and attributes that an organization considers imperative for creating a high performance culture.
The competency framework can be implemented at all stages of the talent development or the employee lifecycle within an organization. The idea is to ensure that certain core competencies are kept at the heart of the decision making that in any way impact the workforce.
Competency framework based talent development is very important for employee retention. Talent development practices when undertaken effectively have the potential to encourage team members to stay with the organization for long and at the same time become ambassadors to help attract high quality peers.
Here are the top reasons why competency framework based talent development matters:
Now that we have covered the basics of talent development and competency framework, let’s understand how leveraging the latter to advance the former can create a far reaching impact for organizations.
The first step is to create a competency framework which involves identifying the key competencies which will be instrumental in guiding all decisions around talent development. Depending on the nature of your organization, there can be categories within the competency framework that you seek to focus on. Your competency framework should focus on behaviors, skills and attributes which are critical for performance and overall success. The following steps can help you create a competency framework for talent development:
The responsibility of creating the competency framework is collective. It starts with involving the executive leadership to ensure alignment with the vision, people managers to ensure they are ideal for the culture you are trying to build and functional managers to ensure inclusion of right competencies for each role and position. Furthermore, involving those on the ground can be fruitful as they have the best idea of what competencies are critical and others which are good to have.
Once the competency framework for talent development is ready, the next step is to align it with your recruitment process to ensure precise and effective hiring. There are a few steps along the way:
The onus of implementing the competency framework during selection lies primarily with the HR team and recruiters who assess the candidates with different tests and assessments. Team managers and leaders also play a role in assessing functional competencies and fit.
Irrespective of whether an employee is onboarded before or after you have implemented the competency framework for recruitment, you need to ensure competency based performance management and development opportunities.
From a talent development perspective, the focus of the competency framework should equally be on developing employees for their next or subsequent role based on the specific competencies for the same.
The onus of aligning performance and development with the competency framework lies with team managers as they are best able to determine the performance gaps. Furthermore, employees with their managers can identify competency gaps for better performance and focus on the right learning and development interventions to bridge the same.
Finally, the competency framework must also impact the subsequent rungs of talent development where an employee moves up the ladder from one position to the next. Based on the organizational matrix and competencies for each level, you need to identify key attributes that differentiate one level from another and ensure the same is communicated to your employees.
In a nutshell, it is quite evident that the competency framework can inform and advance every stage of talent development for fast growing organizations. If you implement such a framework across the employee lifecycle, you will significantly reduce your chances of a wrong hire and will be able to nurture a workforce that aligns on the vision, goals and overall organizational culture.
A clear competency based talent development approach can help you achieve high levels of performance which is observable and measurable.
While most people managers are able to create a business case for setting OKRs as well as for the adoption of an OKR software by leveraging industry benchmarks and best practices, there is a need to explicitly decode the return on investment of using an OKR tool as well.
Unless they are able to clearly illustrate how the return achieved using a goal management software is greater than the investment, it becomes difficult to sustain the adoption and get long-term leadership buy-in.
Continue reading to strengthen your business case on the same.
Let’s quickly understand how the OKR framework is integral for an organization, especially high growth companies. Most fast growing organizations have competing priorities they need to focus on with limited resources at hand.
Therefore, simply setting goals by adopting a top-down approach without supporting parameters can lead to confusion and incompetence. OKRs help drive away this ambiguity by linking measurable key results for each objective and facilitating a collaborative approach to achieving goals.
Here are the top three benefits of implementing OKRs in an effective manner:
OKRs enable employees and leadership to have a very clear focus on what needs to be accomplished and what work is out of scope. The idea is to have complete clarity on —
The last part is extremely important as it helps create a sharp focus and set priorities straight.
93% of employees don’t really understand what their organization is trying to accomplish in order to align with their own work.
This illustrates that there is a big absence of clarity and focus amongst employees when it comes to what needs to be accomplished, which stands in the way of creating a high performance culture. Therefore, OKRs can help reduce such uncertainty and ambiguity, making it easy for the workforce to concentrate on what matters.
Taking cue from the first point, the second benefit or purpose of implementing OKRs foris a need for clarity of expectations and overall team and organizational alignment. In case of fast growing organizations, there is an overlapping of roles and responsibilities and a lack of clarity on expectations from each employee. This leads to lower than average outcomes, productivity and revenue growth and data backs the same.
97% of employees and executives believe lack of alignment within a team impacts the outcome of a task or project. Whereas, companies that regularly exceeded revenue goals were 2.3X more likely to report high levels of alignment.
By ensuring organization-wide goal visibility, OKRs help teams to decode what is expected out of each team member and their respective contribution towards achievement of the shared goals. Thus, increasing alignment and collaboration.
Finally, setting and implementing OKRs is often a collaborative process. Employees get involved in and participate during the entire OKR process and feel engaged in the same. This greater involvement and participation leads to deeper levels of engagement and ownership of key results which drive impact.
OKRs also enable employees to also gauge their performance and measure their progress in an effective manner. This motivates them to get more involved in achieving the common weekly, quarterly and annual goals. This higher level of engagement directly impacts key organizational parameters such as retention, productivity, profitability, etc.
The business case for OKRs is very clear. However, for companies that are scaling up, with limited bandwidth and competing priorities, often setting OKRs itself gets left behind due to other business priorities.
If an organization focuses on a manual approach to the OKR system, there are several steps which require a lot of time and effort including setting and writing, implementing, tracking, grading, evaluating and modifying OKRs.
Fortunately, today there are OKR tools in the market, which can help automate all of these aspects to help simplify the OKR journey. The right goal management software can help you maximize the realization of the return on investment for your OKRs. Following are the top five ways in which an OKR software makes a measurable difference on the bottomline —
First, an OKR tool can help organizations document or record the OKRs in a way that is visible and accessible to all. There is supporting evidence to show that what gets documented has a higher chance of being achieved, as what is out of sight is often out of mind.
Individuals are 42% more likely to achieve goals when they are physically recorded.
Therefore, the OKR tool can enable organizations to clearly define the business and team OKRs in a written manner which can be reflected on, seen again and again to create instant recall for employees.
OKR tools are great for creating alignment and accountability. On the alignment front, the OKR software can help achieve high levels of strategic alignment on what is the responsibility of each team member across organizations towards the key business goal achievement.
Highly aligned companies grow revenue 58% faster and are 72% more profitable than their misaligned counterparts.
The dashboard of a good OKR software can help you constantly gauge the level of goal achievement, ensure that team members are aligned on different phases as well as keep a track of when their responsibility is due. It creates high levels of transparency.
Moreover, greater alignment leads to high levels of accountability. Generally, since there is a lack of alignment on responsibilities, there is an accompanying lack of ownership and accountability, and most employees shirk away from taking accountability.
84% of the workforce describes itself as “trying but failing” or “avoiding” accountability, even when employees know what to fix.
A goal management software like SuperBeings allows you to integrate OKRs with regular meetings and check-ins to keep track of progress. Thus, driving a culture of accountability.
It is very common for companies to set OKRs and then evaluate them only at the end of the quarter/year. There is a lack of mid-term tracking which makes it difficult to gauge whether the progress is aligned with the key results or not.
40% of people that write down goals don’t check whether they’ve achieved them. Moreover, only 5.9% of companies communicate goals daily.
An OKR software can help you address this concern by facilitating day-to-day OKR progress tracking. A daily dashboard and history of 1:1 and team check-ins on OKRs, can help organizations track developments over time.
It can also help identify and resolve any performance issues that stand in the way of goal achievement preemptively. At the same time, even if organizations are tracking and monitoring OKR progress, doing so with a manual process is inefficient. An OKR tool can automate most of these processes to enable HR and people managers to spend more time on driving results.
Another major concern that organizations face when it comes to OKRs is being prepared and ready for the same. Many line managers and others struggle with writing effective OKRs. Many organizations believe setting OKRs once is enough. However, that is far from the truth.
Research says, companies that set performance goals quarterly can generate 31% more returns than those reassessing annually.
Using an OKR software can help eliminate all these challenges.
Finally, an OKR software can promote high levels of collaboration for goal achievement. For many organizations, the inability to collaborate leads to low levels of results, diminishing the ROI for OKRs.
86% of employees and executives cite lack of collaboration or ineffective communication for workplace failures.
Using a good OKR software makes collaboration seamless by aligning cross-functional projects and tracking cumulative progress. Invariably, an increase in degree of collaboration is a direct ROI of an OKR tool which can create far reaching impact.
In this final section of the article, we will talk about the key parameters that can help you gauge the ROI of an OKR software. While the above mentioned are primary impact areas, most of them have a qualitative aspect to them.
Gauging the ROI requires backing of data points from employee experience and business results, which the following parameters can help explain.
Organizations should start by gauging whether or not transparency and alignment on goals has increased. This can be measured using employee pulse surveys to understand their opinion on how well they have visibility of goals and clarity on what they need to work towards. Therefore, the first ROI parameter for an OKR software is to identify the increase in level of transparency to ensure everyone is working in the same direction and there are no gaps or overlap in efforts.
The main purpose of an OKR tool is to facilitate the effective and efficient achievement of the goals set by an organization. Thus, the next parameter to measure ROI should revolve around the degree and time period of goal achievement.
You can start by comparing the degree of goal achievement by leveraging OKR grading to see if there is a significant improvement in percentage terms as compared to pre-OKR tool period. Second, it is important to gauge whether or not the goals/key results have been achieved in a shorter period of time or not. Since the OKR platform facilitates better alignment, collaboration, tracking, etc., it can help organizations achieve or realize the goals faster.
Third, there are several administrative overheads that accompany the setting and implementation of goals/OKRs. These include tracking, grading, etc. for managers and providing inputs on the part of employees. The ROI of an OKR software can be gauged by mapping whether or not these overheads come down.
The next parameter for ROI calculation is to measure the change or increase in revenue after the adoption of an OKR software. Since an OKR tool seeks to enable organizations to achieve their goals faster, cost effectively and to a greater extent, there should be an increase in the revenue realized.
According to Larry Page, co-founder, Google claims that “OKRs have helped lead us to 10X growth, many times over.”
Finally, gauging the value of employee parameters like retention/turnover, productivity, engagement, etc, can cumulatively be leveraged to capture the ROI of an OKR tool. There are several ways to gauge these workforce parameters, along with factors like eNPS, etc. which have a direct business impact. Calculating them can help measure the ROI of the OKR tool for an organization.
It is evident that adoption of an intelligent OKR software is not only good to have, but integral for organizational success. Using the right tool has a direct business impact which can be measured in numbers using the ROI parameters mentioned in this article.
There are both qualitative and quantitative aspects to measuring the ROI and a balanced approach to both can empower organizations to align individual performance with business goals.
If you are considering implementing the right OKR software in your business, try out SuperBeings free 21 day trial. Book today. (No credit card or commitment required)