Recent studies have shown that an organization follows various approaches to set and prioritize goals that improve employee performance and in turn result in business success. There are few methods to define the goals and “S.M.A.R.T” is one such goal-setting method.
In an article, George T. mentions that “There’s a S.M.A.R.T. way to write management’s goals and objectives”. Recently we have seen Organizations move their focus from S.M.A.R.T goals to OKRs to ensure that the set goals are achieved. Superpowers of OKRs help us to convert our vision to actionable key results and help us to see the progress constantly. On the other hand, SMART is a simple way to create objectives but lacks visibility in achieving the organizational goal.
In this blog, we will take you through,
- What is OKR and How Does It Work?
- What are SMART Goals and How Does It Work?
- Similarities Between Goals and OKRs
- Difference Between OKRs and SMART Goals
- Pros and Cons of OKRs and SMART Goals
- When to Use OKRs vs. SMART Goals
- Tips for Setting OKRs and SMART Goals
What is OKR and How Does It Work?
OKR (Objectives and Key Results) is an interesting goal-setting framework to measure goals by which both individuals and teams are aligned to make success. OKRs came in light with Intel and the success stories started raising after the implementation at Google and today OKRs are being used by other organizations in spite of the size and industry.
OKR consists of a couple of important concepts:
Objectives help us to see “our destination, where are we traveling towards?”. To be precise Objectives answers the question “Where do you need to go?”
Objectives give us clear direction toward what mission to be accomplished, inspiring with a concrete path, and time-driven but not metric-driven.
Objective: Grow and increase our business by Q2
2. Key Results
Key results are the action plans which help us to achieve the objective. They are metric-driven and actionable. Key results answer the question: How will you know you’re getting closer to your Objective?
Key results help to measure your progress towards the objective and indicate if you are in the right direction. They are usually specific and time-bound.
An OKR refers to an Objective with one or more key results.
Key Result 1: Grow revenue to $5M
Key Result 2: Launch 2 new product modules by Q3
Key Result 3: Increase the customer retention rate from 90 to 95%
What are SMART Goals and How Does It Work?
Similar to OKR, SMART is a goal-setting tool, that describes how the objectives with a timeline attached to them, we can understand SMART more as given below.
Five Significant SMART criteria:
What needs to be achieved Achieve more customers in MENA This is more specific as to what is to be achieved but is more needs to be added to make it complete
2. MEASURABLE :
What Level of Effort, Time, and cost is required to reach the goal Achieve 1200 customers in MENA
This is specific and also has a measurement attached to it to facilitate the goal
3. ATTAINABLE :
Whether we can achieve the goal with the available resources and constraints Achieve 1000 customers in MENA
By revisiting the targets it becomes attainable for people who are working towards it.
Is it relevant to the business and contributes to attaining organizational goals? Achieve 1000 customers in MENA to grow our market share
This becomes more relevant and directly links to the goal the organization wants to achieve.
What are the timelines, deadlines, restrictions, and the end date when it can be reviewed? Achieve 1000 customers in MENA to grow our market share by 2021
Now this completes the SMART goals
SMART goals stand as a basic guide for the team and the organization to build concrete goals and use the same to progress towards business success.
Similarities Between OKR and smart goals
- Both evolved from the theory of Management by Objectives (MBO) and they share the belief in working towards the organizational goal.
- Both the tools aim at setting precise goals which act as a key to achieving business and organizational success. They both remove the ambiguity in the tool.
- SMART Goals and OKRs both remove the ambiguity in the tool
- On the outset, both might look similar but they are different in their own ways. One unique difference of OKR is that it works in unison with the goal.
- Both the framework drives towards achieving the organizational goal in their own methods. They both have a commonality of making the action plan specific and measurable and time-bound.
- Both the framework are informal and has no certifications are governing required, they are an open-source tool that can be adapted according to the organization’s requirement. Both the frameworks have seen leaps and bounds of travel in an organization and they have got refined by continuous testing.
- Both OKRs and SMART aim to get aligned with the organizational strategy. OKR drives the “Why” and SMART goals specifies the KRs where both have few common features.
- Both frameworks have a common objective to achieve the set objective in the specified timeline.
- Both OKR and SMART Goals are Specific, measurable, achievable, and Time-bound.
OKRs are identical in many characteristics. The objective defines a clear destination and key results drive the objective. Similar to the SMART goals key results contain metrics and a timeline to it.
In OKRs Key result grouping further, specify what achieving the objective means. Both the frameworks need to be refined over time to track what works and what doesn’t work. They are extensively used in many business verticals, NGOs, and individuals.
10 Difference Between OKR and SMART Goals
Though both goal-setting tools look similar as a structure in setting the goal, alignment, and timelines, they are fundamentally different. Though the similarities will be there on a surface level apart from that there are not many similarities.
The big difference between them is that the SMART goals work in isolation but OKRs works in unison. OKRs connect to the organizational objective and very clearly set key metrics to measure it along with the progress of the OKRs.
The importance of progress and alignment is the key ingredient of an OKR. There is no room for assumptions or retrospectives, it is an ongoing agile framework. Wherever you see a goal we can see it getting tracked by an objective.
- OKRs drive the business and it is an organizational-wide process not individualistic like SMART.
- OKRs cadence can be set based on the objective that we are working on. If one is working on an annual strategy he can opt for an annual cadence with key results measuring the ongoing progress. Whereas SMART goals have a fixed timeline not as agile as OKR.
- OKRs are very easy to understand and are very unique you can jump on it right away to start working without much training, unlike the SMART goals. There are many proven use cases for OKRs to trust their deliverables and their success.
- OKRs understand the business better and the top priority of OKR is to achieve the organizational goal than the microanalysis. Hence we can clearly state that the OKRs connect to the organizational objective whereas the SMART goal works more on silos. SMART goals, however, can guide to create an objective but can not bring focus in achieving the objective.
- OKR also provides a clear direction toward the organizational goal and distinguishes the goal from an objective by adding key results which help us to understand how to achieve it.
- Wherever we have confusion, there end the clarity and focus. OKRs drive focus and clarity but in SMART goals, Mostly we tend to confuse the “M” in SMART as many variations are available for the acronym SMART means. For example, the M can stand for measurable, meaningful, or motivational. Goals cannot work on assumptions. It has to be clear and concrete.
- In that context, OKR is not based on assumptions are interpretations rather it is clear and concise.
- OKRs can be driven organizational-wide and provide a clear destination and the ways to achieve it as the key results are metric-driven and also has a timeline to it to ensure that the objective has been achieved.
- SMART goal-setting is more suitable for small teams than organizational level. OKRs alignment works top-down and bottom-up to ensure it aligns down and people contribute upward as well, whereas SMART goals are very subjective.
- OKRs can be set as aspirational and can also be a stretch objective. The team can set an aspirational goal and also measure accordingly to keep the motivation level up to encourage teams to think out of the box and stretch to achieve more. Whereas SMART goals are more business as usual metrics.
- The Quarterly cadence in OKR gives it more agility compared to SMART which is retrospective in nature.
- When it comes to flexibility SMART goals are less flexible and not easy to adjust as per market requirements. OKRs are flexible and can adjust and correct based on the market and business conditions.
- SMART goals are vertical in nature and hierarchy driven but whereas OKRs have both vertical and horizontal alignment.
Pros and Cons of OKRs and SMART Goals
Every method has its benefits in certain conditions. Following are some attributes for selecting an effective tool:
- Adaptability/Flexibility: SMART goals offer less opportunity to change the core as they have a clearly defined target with annual cadence. OKRs on the other hand, with weekly & Quarterly cadence, allow changes in Key results
- Alignment: The majority of the SMART Goals and OKRs are strategy-driven and reinforced by executive buy-in
- Aspirational Expansiveness: A SMART goal encourages one to work towards achieving a specific purpose. Hence it limits individual success and expansion by working on attainable goals. In contrast, OKRs promote fearless exploration of new options.
- Morale: At times SMART goal approach that lacks broad focus tends the employee to lose their morale when they fail to achieve a goal.
- Planning: Because of the particularity of SMART goals, they take much time to create
- Precision: Objectives in OKRs have a wider scope and key results tend to change certain situations. By contrast, SMART goals proceed towards clear targets with predefined metrics and timelines.
When to Use OKRs vs SMART Goal
- Both OKR and SMART Goals have different uses and serve different purposes. These methodologies have to be chosen considering the following checklist:
- OKRs can be used in the following situations:
When you develop an in-depth & long-term goal-setting plan – contributed by top management, teams, and groups.
- When we have a clear annual strategy to be measured when the plan is long term and top management is driving the execution.
- To measure organizational performance.
- When aligning organizational performance to the people performance.
- When you have a clear ground plan towards a destination – a clear representation of what you want to achieve in the specific timeline.
- When we need flexibility and transparency. OKRs offer flexibility. OKR retrospectives help in tracking the progress constantly. Frequently reviewing goals also helps you to monitor changes that may require you to shift or drop key results.
- To measure all kinds of metrics, be it Positive metric or negative metrics
- When we need to break down the goals into quarters to avoid delays and mistakes.
- Use SMART goals in the following situations:
- When you want to have an easy framework for creating a clear, specific goal on a timeline.
- Perfect for performance management of individuals, mostly retrospective
- When you require top-down measures for effective performance and behavior
- To set and track discrete goals within a team or for an individual: Sometimes, teams or individuals have aims that are important to the team but don’t contribute directly to the larger-scale strategic plan. SMART goals are an excellent structure for writing such goals.
Tips for Setting OKRs and SMART Goals
- Here are a few tips for defining Product OKRs and SMART Goals
- Always choose and Craft the goals carefully.
- Creating Team and individual goals: Collaborate with Team members while setting goals and individuals can select their own goals that are in line with the team goals
- List down the goals: Writing down the goals improves commitment among the team, conduce the follow-ups. It also enhances the transparency and understanding of goals across the team members and the organization.
- Have a ground plan for Success: Goals once set has to be reviewed periodically by conducting Status meetings & training programs across all the levels
- Setting a creative Base: Companies always doubt their capability and fear to face a new or different customer with performance reviews. But OKRs on the other hand create a safe base by asking “What if we focus on new/Different customers?”, “What if we try a new market?”.
Creating OKRs is simple and can be easily measured by Datalligence OKR software. The OKR insights are real-time which helps organizations to outperform their competitors constantly. The of implementing Datalligence OKR tool is so simple as its been guided by our OKR consultants to provide you with constant guidance. OKRs sibling CFR (conversation, Feedback, and recognization) is inbuilt along with OKR to make maximum out of the process. Get started to know more details on our OKR tool.