All companies over 25 employees must have a formal process for both monthly.
First, I think it is critical to understand that OKRs, originally called MBOs, for Management By Objective, was actually invented by The Father of Management Peter Drucker in the 1960s. The concept has been rebranded by many others as SMART Goals, OKR (Intel and Google’s preferred handle) and many others. However, they are all based on the same psychological and Management Science principles that will never change in the next 100+ years. That is that people work most effectively when they have clear objectives, priorities and communications, and are guided by a longer-term vision. Most do not think ahead more than they have to so it is a Managers job to force that thinking and planning. However, almost everyone, even Managers, need some help connecting the dots to the big picture plans, and breaking these big objectives down into monthly priorities and focus.
MBOs/OKRs are generally designed for projects that have a definable beginning and end. While KPIs are designed to measure, by the numbers, ongoing processes that a company is expected to do forever.
Every company should implement a formal MBO process by the time it has about 7 to 10 full-time equivalent employees. This is not my opinion but sort of the unbreakable laws of physics in business and people management.There are very few exceptions when work is framed by external processes, like the law and accounting industries where the professional does not control the process, the system they work in already does.These principles are proven by over one hundred years of practicing Management Science now. They are not debatable!Companies that do not do this MBO/OKR process well, with few exceptions, will fail to achieve significant market share and continued growth. They will be beaten handily by those companies that get this fundamental blocking and tackling of management down well.
Each Objective Noun: "MBO" or "Objective" should be a significant goal and manpower generally. This will depend on the size of the company and who is doing the monthly or quarterly list of Objectives.But I would say it should never be under about a person-day of work as then there would be too many on the monthly list to manage well. Typically, any given person, or department, should have no more than 5-7 key objectives in a give time period. Smaller ones can be grouped by category. If it is monthly then there are smaller milestones, if it is a quarterly MBO process they can just be larger objectives.
Typically, the need for KPIs kick in a little later as a company matures some, often at 20 to 30 employees. This is when processes have matured some and you need to start “Running the business by the numbers”. A formal collection, distribution and review process is needed monthly at least. These metrics allow entire departments to be focused, accountable and have total clarity on the monthly priorities.When companies do these things well they will constantly improve their business every month and generally become market leaders over time, simply because most companies fail to get these business basics right.
The concept of Objective (noun: MBO or Key Objective) can be applied at any level or size (e.g. a person, department, Division, Company). It could be a person-day, or 5-person years’ worth of work, literally. The purpose of the process is to get away from micromanagement and allowing bigger goals to be “owned” by a single professional, or department head.Delegation with total clarity. They can then be 100% responsible for a specific deliverable/goal at a certain time that is well defined.Once you start using MBO/OKR well you will never go back to a "managing by the seat of the pants" process that most “managers” use daily. This is for amateurs. not professional Managers. It is micromanagement, almost supervision for low level employees who need to be constantly watched.
Typically, in a small business, let’s say with 20 to 100 people, a has monthly OKR/MBO meeting that must be held to communicate across departments and tap into the brain trust of the company’s management team too. It should generally be an hour but might take 90-minutes or more the first couple times while people are learning the process. There is some prework in agreement of the priorities for the coming month with superiors, but this can be a quick 10-minute conversation that answers the question “What are your main priorities for next month boss?”. However, and this is critical and not optional! The process requires the owner of the objective to set the time frame, not the boss or superior. Why you say – oh so many reasons:
1.The objective owner has the best information and controls the resources
2.They know about other ongoing work and conflicts
3.They are then forced to plan and figure out the needed resources and validate the deliverable is realistic (the ‘R’ in SMART). This actually stretches the Manager/Owner's thinking abilities (neuroplasticity) to plan better, as more than 80% of people have very limited forethought and it needs to be exercised to work well. Each month they will get better.
4.They then really own that goal, as their own, and cannot make excuses, hence they are vested in its achievement. Goals or objectives handed down on from on high are often not even taken seriously and create hidden giggles and lack of respect for upper management.Generally, this evolves into an expectation that few, if any, goals will be met, and management as usual, will have egg on their face for their unreasonable and dictatorial style. Nothing degrades morale faster than a CEO or Executives that act like they know everything and dictate goals and timeframes. This will degrade a company’s performance over time and actually push out the best people who will lose faith in management and find better opportunities. A self-fulfilling prophecy of failure really.
5.There is a psychological power that comes from standing up in front of a team and saying “My team (or I) will accomplish this for you in this timeframe”. And the others on the management team have an opportunity to drop in ideas, help, provide learning from past experience and more to create a collaborative and supportive environment. Managment team members become more invested in each other success than in politics and looking good themselves.
6.The owner is empowered and better respected by their own team because they are not a lackey to a superior but really in control of their business area, budget and deadlines. Of course, sometimes there are must do items, but that just means that becomes the #1 priority for all, it does not mean the boss gets to dictate the deadline. Anyone that thinks becuase they are the boss they can change reality is a bad Manager. They can however ask “What will it take to accomplish X by Y date?” and still respect the vital principles of OKR/MBO.
See my video on MBO/OKR here: https://www.youtube.com/watch?v=IyEthL3e5wU and I also have a full course posted at Udemy.com for a nominal fee. Access to our full training library is normally reserved for clients but we will design and deliver a custom on-demand program for a low monthly fee, using our on-demand video library and remote online webinar and some coaching that is customized. This is guaranteed to turbocharge your company’s performance in 60-90 days.
KPIs – Or Key Performance Indicators
Ongoing or repeating goals are generally better measured by KPIs, or Key Performance Indicators, which are numerical metrics for mature, or well-developed process, events or even daily, weekly or monthly performance metrics. A dashboard is a set of KPIs for a company, Department or even a job/person. Again, like MBOs, the concept can be used at any level really. And over any time frame.
However, if your business is all about events you likely should have a standard “Event Report” which would contain the Objectives and KPIs for each event, as this can vary. Then you would have standard results metrics (KPIs) that would compare for every event like profitability, productivity, quality and others. These would be aggregated in a company level dashboard report to upper Management monthly, so they can watch averages and trends over time for all events. Done well KPIs work at all levels and become a “language” to speak in shorthand and the math of the business. This attribute also allows a “drill down” to specifics on any report without drowning in data. The result is fully mathematical accountability and measurement of all key results, which also empowers employees and managers to “own” their results. It has over a dozen advantages and using these well is often the difference between a market leader, that constantly grows and improves, and an also-ran company. We have a three-hour course on dashboards for executives, two hours for managers and one hour for individual contributors.Levels I, II and III.
I am happy to provide our forms that frame the MBO/OKR process and instructions to anyone that emails me at bnorton@AirtTightMgt.com with the subject line “MBO Forms Please”. However, I have found inevitably people need to be both trained and coached through the process to get it right. It is a shift in thinking away from past reflexes.Generally, the first three monthly meetings should be attended by an expert to get the team doing the process right. It is abstract, and I do not entirely understand why, but I know for a fact that hardly anyone gets it right without some real-world examples and coaching first. Unfortunately, few business schools teach the importance of these two crucial tools of management success, and how they work together. I guarantee if you do both MBO and KPIs well you will become a leader in your marketplace in time simply because most companies do not do them well. You will eat your competitor's lunch due to higher productivity, more focus and inevitably create some sustainable competitive advantage just via excellence in execution.
Developing the proper KPIs and OKR is art, not science, and requires lots of practice. I have been doing it since about 1990 and so can do it very rapidly with high value for a company. I can design, train and implement it in most any company in two to four weeks. See: Dashboards And Metrics
Bottom line: If you have not mastered these in the past then bring in a professional to define them. Distance and objectivity is needed to do it well.It is short money given the large an ongoing impact it can have on a company’s revenue, sales, profit and culture for many years to come. Doing these things well is what separates professional Managers from people with the title “Manager”.
Bob Norton, CEO Coach & Consultant, Author and Speaker
Free videos at AirTight Management, www.AirTightGrowth.com
As an expert in management and business strategy, I have extensive knowledge and hands-on experience in the principles discussed in the article. I've successfully implemented Management By Objectives (MBO) and Key Performance Indicators (KPIs) in various organizations, helping them achieve significant improvements in efficiency, productivity, and overall success. My expertise is grounded in the foundational concepts of management science, and I understand the critical role that clear objectives, priorities, and communication play in driving organizational success.
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