Dispelling OKR Myths: OKRs Should be Divorced from Compensation

It is said that OKRs (Objectives and Key Results) is a simple methodology with a simple language. There are no hard and fast rules, and there is no GAAP (Generally Accepted Accounting Principles). So, much of what has been written of OKRs, taught by consultants, and espoused by OKR Software providers, is open to interpretation. As a result, we have misinterpretations, misunderstandings, and outright “Myths” about the process.

This series of blogs will debunk many of the most prevalent misconceptions.

OKR Myth #5: You must divorce compensation from OKRs

This “Myth” is mostly true but requires clarification. In his New York Times bestseller, “Measure What Matters,” Author John Doerr recommends divorcing compensation from OKRs. However, many consultants believe Committed goals, such as a sales goal, can be factored into compensation.

The determining factor should be the type of OKR (Objective and Key Results). Many companies, Google as a prime example, deploy two types of OKRs, Aspirational, stretch goals, and Committed goals, those incremental-type goals that should be achieved at 100%, every cycle.

Tying compensation to Aspirational goals has two primary issues;

  1. True stretch goals will result in less than 100% achievement, most of the time which can demoralize the team, and,
  2. As a result, teams and individuals may start to “sandbag” on their Objectives and Key Results to optimize compensation

Conversely, tying compensation to Committed goals is logical. It may be considered acceptable for an Aspirational goal to grade at .7, but a sales goal must be achieved at a much higher level for the good of the enterprise.

Do you manage a company or teams (either as a CEO, a senior executive, a middle manager or even a front-line manager)? Do you set and track objectives? Does aligning employee performance to business goals matter, and are you responsible for driving results? If so, please check out a live demo of Atiim OKR & Goals Management Software and we’d love to hear what you think about it. Thank you!

Image Credit: Stockvault

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