OKRs vs. SMART Goals: How They Differ and When to Use Each
KPIs, OKRs, HRIS, SMART goals… so many acronyms floating around in the universe of HR (yet another acronym!). A familiar scenario for many in the profession is sitting in a meeting where certain acronyms are being tossed around while everyone nods and smiles, pretending to know exactly what they mean and how they apply to the business (even if they don’t).
When it comes to effective goal setting, there are two widely used methodologies — OKRs and SMART goals. If you’re using one or the other (or neither), it’s important to understand not only what the acronyms stand for but what they really mean and how to apply each framework to your own organizational goals.
Formalized goal setting is essential for any organization that wants to achieve high performance. Well-crafted goals using a standardized system help employees focus on and prioritize the right things at the right times. And when you use the appropriate framework to motivate employees and tap into their intrinsic motivations, they’re more likely to achieve their goals (or at least get pretty darn close).
SMART goals and OKRs both provide specific steps to develop a realistic and time-bound plan for an organization, team, or individual to reach their goals. But the way the two methodologies are structured is quite different. Read on for a high-level overview of each framework, what makes OKR and SMART goals different, and how to choose the right one for your organization.
What are SMART goals?
SMART goals have been around for a few decades, developed as part of Peter Drucker’s Management by Objectives (MBO) system. In the MBO system, the objectives of an organization are decided and agreed upon by managers and their employees to help the employee understand what’s expected of them and, therefore, what their individual goals should be.
In this system, goals should be “SMART,” which stands for specific, measurable, achievable, relevant, and time-bound.
Specific: Goals must be specific and clear
Measurable: You need to be able to track progress
Attainable: Goals should be achievable (not stretch goals)
Relevant: Goals must be relevant to the person and their role
Time-bound: Goals should have an established deadline
SMART goals provide top-down direction and are typically best for organizations looking for repeated behaviors and processes rather than long-term improvement or growth.
Here is an example of a SMART goal for a salesperson:
“Exceed sales quota this quarter by increasing activity to 10 prospect demos each week.”
You can see how this goal is specific (exceed quota), measurable (10 demos), attainable (we assume it’s achievable for this person), relevant (sales), and time-bound (this quarter).
What are OKRs?
The OKR (Objectives and Key Results) framework can help organizations, teams, and individuals define and track business objectives and outcomes. The OKR methodology was created by former Intel CEO Andy Grove, then introduced to the general public by John Doerr, who outlined it in his bestselling book, Measure What Matters. In the book, Doerr shares how using OKR goals has helped companies like Intel, Google, and Microsoft achieve exponential growth.
The OKR formula looks like this: I will do ‘X’ as measured by ‘Y’
This means an individual or team will complete a specific objective as measured by the completion of a determined set of key results. Objectives are aspirational, inspiring, and less specific than those you would see in a SMART goal, and Key Results are grounded in data, time-boxed, and numeric.
Here are three OKR examples:
Objective: Turn our best customers into loyal brand ambassadors.
Key results:
- Develop and launch a customer community in Q3.
- Publish 10 new customer case studies by the end of the year.
- Increase NPS score from 6.5 to 7.5 between Q2 and Q4.
Objective: Recruit & hire top talent to rocket our organization to the next level.
Key results:
- Launch an employee referral program in Q2.
- Re-evaluate and adjust compensation by the end of the year to be more industry competitive.
- Deploy hiring campaigns on three top job sites this month.
Objective: Build a high-performance sales machine.
Key results:
- Increase average close rate from 24% to 29% in Q3.
- Increase BDR prospecting call goals from 25 per week to 30 per week.
- Grow average deal size from $9K to $11K this year.
SMART goals vs. OKRs: What makes them different?
Both SMART goals and the OKR framework provide a specific and measurable process for setting and achieving goals. They also each focus on tracking success based on business outcomes rather than just providing a checklist of tasks to complete. However, the two frameworks have many differences in how they’re structured.
The SMART methodology focuses on a very specific objective and doesn’t typically include the tactics to achieve it, while OKRs use a less specific, more aspirational objective with specific key results to reach the objective. SMART goals provide guidelines for writing specific, attainable goals. In contrast, the OKR framework offers more of a process to reach for stretch goals that promote higher performance and personal or business growth.
In many organizations, SMART goals are also tied to compensation. This is not typically the case in companies using the OKR framework. With OKRs, failure to achieve a goal isn’t necessarily a bad thing; what matters is that the individual or team strives for improvement or pushes themselves harder toward an aspirational objective.
How do I know which goal-setting framework to choose?
One goal-setting framework isn’t necessarily better than the other (though we use and recommend OKRs at 15Five). But deciding which one to choose can depend on many factors, like the type of industry or business you’re in and the types of roles within your organization. In some cases, it could even make sense for one department to use OKRs, while another works better with SMART goals.
Primarily, OKRs are used when an organization or team wants to achieve (or strive for) an ambitious goal (e.g., “Build a high-performance sales machine”). They can help align the organization — from the C-suite to each individual contributor — around a common mission or vision.
SMART goals are often used in more task-oriented roles or teams, when the work involved doesn’t necessarily roll up to a more strategic plan at the organizational level (e.g., “Assemble 15% more widgets this month”). SMART goals also typically measure a single metric, while OKRs may be measured by several different key results, each with its own metrics.
At 15Five, organizational, team, and personal OKRs are an integral part of a comprehensive performance management strategy. We use them to provide a clear vision for everyone in the organization to align with to achieve success, so each employee can contribute in a meaningful way and do their best work.
Want to learn more about OKRs?
A standardized goal-setting process like the OKR framework can help employees better understand what is expected of them and how their work maps back to company objectives, which can increase employee engagement and performance.
Learn about the importance of goal setting, how OKRs can fit into your performance management strategy, and common pitfalls to avoid in our comprehensive OKR playbook.
