One of the most frequent comments we hear about the OKR system is that “OKRs should never be directly linked to compensation and reward”. Indeed, looking at best practices, expert thoughts or researching featured books all come to the same conclusion: “If you link OKRs to compensation, you cannot encourage employees to set challenging goals and fail freely when necessary.”
For this reason, institutions that have reviewed the performance system and have decided to apply the OKR methodology often ask:
- How to evaluate the Key Results with the new system?
- What will come instead of the mechanical evaluation?
- How to make the year-end evaluations?
You can answer these questions differently depending on the nature and needs of the organization, and it may not be possible to find a definitive solution in a single article.
Let’s examine the goal evaluation and year-end evaluation. While seeking answers to these questions, we can also see the application proposals that have developed successful solutions.
Let’s say at the beginning what belongs to the end. The saying “Don’t directly tie OKRs to compensation and bonuses” is true. It is all about the realization of Objectives and Key Results. Therefore, it is necessary to distinguish between the “goal” and the “employee” evaluation.
The evaluation of a goal and assessment of an employee are processes that can operate separately. New-generation performance management systems also remove the mechanical link between these two evaluations.
In other words, you can still make the “employee-related” year-end evaluation (without making a mechanical connection with OKRs) and use this evaluation result for compensation and bonuses.