Differences Between Traditional Performance Management System and OKR

Traditional Performance Management System Approach

In Traditional Performance Systems, goals are set for annual periods. Budget and long-term strategies shape these goals at the beginning of the year. The set goals are seen as fixed and unchangeable commitments. The basis is the employee's adherence to the goals set throughout the year. This philosophy can work in slow-changing sectors. However, today's world is characterized by speed, uncertainty, and complexity. This is a weak point of the system. Goals are rarely revised during the year. Revisions do not occur unless major organizational changes necessitate them. Mid-year reviews conducted in the sixth month do not question the validity of the goals. They generally look at achievement rates. Consequently, the organization may spend resources for a year on goals that are not up-to-date. The year-end evaluation is entirely based on the percentage of goal achievement. This pushes the employee solely toward reaching the result. The employee's efforts in learning, innovation, and collaboration during the process take a back seat.

Revisions do not occur unless major organizational changes necessitate them.

Consequently, the organization may spend resources for a year on goals that are not up-to-date.

The year-end evaluation is entirely based on the percentage of goal achievement. This pushes the employee solely toward reaching the result. The employee's efforts in learning, innovation, and collaboration during the process take a back seat.

OKR (Objectives and Key Results) System

OKR adopts an agile management philosophy. This system works with short, agile cycles. Quarterly periods are mostly preferred. OKR allows for rapid adaptation to changing market conditions. Moves by new competitors or internal company learnings are immediately integrated into the goals. OKRs are evaluated at the end of each quarter. Updated and more ambitious goals are set for the next quarter. The organization constantly focuses on areas that create the highest value. Weekly or bi-weekly check-in meetings ensure that goals remain current. These meetings do not only discuss progress. They also address encountered obstacles, necessary resources, support needs, and development processes. The employee's journey and development toward the goal is centered, not the goal itself. It is necessary to go to these periodic meetings prepared. Employees should pay attention to the following points before attending the meetings:

The OKR System, on the other hand, ensures that goals are followed in an agile and dynamic way throughout the year. It allows targets to be revised and pursued as realistic and challenging goals, taking into account changing conditions, needs, internal and external dynamics.

In addition, thanks to the check-in meetings, which are usually held on quarterly basis, not only the realization rate of the goals, but also the support and development process that the employee needs in achieving the goal are discussed.

In OKR, reaching 70%-80% of the goals can be considered a success. Contrary to the 100% expectation of the traditional system, the OKR system demands ambitious and challenging goals. Consistent 100% success indicates that the goals were not ambitious enough. This philosophy supports continuous growth and innovation.

Goal Creation Direction and Interaction

Traditional Performance Management Systems: Unidirectional Interaction

Goals are communicated top-down through a rigid cascading method. Top management first determines the strategic goals. These goals become the goals of the manager at the next level down. The manager then assigns these goals in pieces to the team members below them. This chain descends to the lowest level. In this method, the contribution of lower-level employees to goal setting is limited. The employee is a passive implementer who performs the task assigned to them. This situation reduces employee engagement. The alignment of goals with the real operational challenges at the lower levels can be questioned. Interaction occurs only in the direction of giving instructions.

The employee does not get the chance to align their goals with the Company goals and be part of the whole. Each employee focuses on the goals assigned to them, and full alignment does not occur, which makes it difficult to act within the framework of common goals and strategy for success.

OKR: Bi-directional Alignment

The OKR system uses a bi-directional interaction method, unlike traditional performance systems. Alignment is one of the fundamental building blocks of OKR. The Company's strategic OKRs draw a top-down direction. Bottom-up suggestions are received when Departmental and Individual OKRs are being determined. Employees personally set the most effective goals based on their own abilities.

In alignment with strategic priorities and Company OKRs, Top Management prepares and publishes their Objectives and Key Results (OKR). Employees create their draft OKRs in alignment with top management's goals. This work is also an individual preliminary preparation for the team OKR setting meeting. Employees who complete their individual OKR work and report to the same manager/project team meet to work on alignment and common Objectives and Key Results. After reviewing their individual work and all the Objectives and Key Results determined in the team OKR meeting, employees present their goal card to their manager.

Changes are made with the manager's guidance, and the employee goal card is finalized by consensus.

This participation strengthens employees' sense of being part of the team. Their commitment to the goals increases. Employees take on the role of solution partners, not just implementers. Bi-directional interaction supports a culture of trust and open communication within the organization.

Number of Goals and Focus

Traditional Performance Management System: Focus Fragmentation

Especially in large companies, an employee's annual goals can be numerous. These goals include personal development, process improvement, and operational goals.

Too many goals distract employees' attention. Resources are spread across multiple areas. This confirms the principle of "trying to do everything, doing nothing right." Employees generally focus on the easiest or most urgent goals. Challenging goals with the highest impact fall behind.

OKR: Limited and Critical Focus

The OKR system advocates for precise and limited focus. As a rule, an average of 4-5 Objectives is set. Limitation is made with a maximum of 4 Key Results for each Objective. This allows for prioritizing what is important and measuring it. Work is done and development is focused on goals that will move the Company and the employee forward and are prioritized, instead of daily routine work, repetitive operational tasks, or to-do lists.

In OKR, Objectives are qualitative. They should answer the question: What do I want to achieve? KRs, on the other hand, must be quantitative. They should answer the question: How will I know if I have reached the result? Measurable results are desired instead of a vague goal. For example, goals like "Increase Customer Satisfaction Score from 8.5 to 9.2" are set. This limitation ensures the organization focuses all its energy on the 3-5 most critical and strategic goals.

📝 Learn how to write effective OKRs with our comprehensive guide.

Goal Transparency and Culture

Transparency is the foundation of the OKR system. This approach is actually a cultural change for companies.

Traditional Performance Management System: Secrecy and Competition

Goals are confidential. No one sees the goals except the employee's manager and authorized Human Resources personnel. Employees do not know what other departments are focusing on.

This secrecy can create a competitive environment within the company. Silo structures between departments are strengthened. Information flow, collaboration, and a sense of common strategy are weakened. Employees find it difficult to see their goals' place in the organization's big picture.

OKR: Transparency and Collaboration

In OKR, transparency is a standard. All OKRs should be visible and trackable by everyone. Everyone, from the manager to the intern, sees the goals of others. Some sensitive goals may be hidden.

Transparency enables the creation of aligned goals that serve a common strategy. An employee clearly sees how their OKR supports their team's, department's, and company's OKR. This enriches teamwork and prevents resource conflicts. A culture of trust and accountability is established within the organization. Everyone learns from the successes of others, and process improvements are accelerated.

Feedback and Evaluation

Traditional Performance Management System: Annual Score Focus

It is based on an intensive year-end evaluation interview. This interview covers the entire year and results in a final performance score. The year-end interview addresses past events at a single point in time. Managers tend to remember the performance of the last few months rather than the performance at the beginning of the year. No updates or interim evaluations are made during the year. For this reason, goals set at the beginning of the year are calculated as planned, even if they have been subjected to changing conditions.

For example, production volume may vary according to demand. The production planned at the beginning of the year may change according to demand, changing market conditions, or machine downtimes. When these are ignored, the year-end achievements may not be satisfactory.

The score-focused system makes the main subject of the interview the "accuracy of the score." Important issues such as development, coaching, and career planning take a back seat.

OKR: Coaching and Continuous Communication

OKR encourages check-in meetings and a feedback culture. It prioritizes continuous communication and development. In OKR, feedback is instant and process-focused. Managers coach. Questions like "How can I support you to reach this goal?" or "Which obstacles can we remove?" are asked. The manager and employee are aligned on the same page throughout the year. There is no surprise situation at the end of the year.

OKR System provides continuous communication and development with check-in meetings and feedback focus throughout the year. Thus, by the end of the year, the points that need improvement are discussed throughout the year, and the Manager and the Employee are aligned and agreed on the same page.

💬 Discover the importance of feedback in OKR for continuous improvement.

To sum up, The Traditional Performance Management System was useful for stable companies in the past. In today's rapidly changing market conditions, the system's annual cycle and rigid structure hinder agility. The OKR system, on the other hand, centers agility with quarterly reviews, focus with limited and challenging goals, alignment with bi-directional participation and transparency, and continuous development with check-ins and feedback. It transforms companies into a more dynamic, transparent, and people-centric structure.

OKR is not just a goal tool. It unites the entire organization around a common strategy. It coaches employees to reach their potential. This system is a cultural change tool.

This transformation shows that success does not only come from achieving goals. It also comes from continuous learning, collaboration, and the ability to adapt.

🔍 Compare OKR and KPI differences in detail.