My last post featured key takeaways from Goal Summit 2015 on Objectives and Key Results (OKRs). I left the summit even more convinced that BetterWorks is ushering in a new era of goal setting and transparency that will drive better execution.

Donald Sull, MIT researcher and management expert, referred to this new era as "Goals 3.0" in his presentation titled: Goals 3.0: Harnessing the Power of Social to Get Work Done, he discusses the effects of technology on the evolution of MBOs and goal-setting.

Sull’s engaging presentation compelled me to summarize his Goal 1.0, 2.0, 3.0 model and explore the implications for if and when to purchase Enterprise Goal Management software.

Goals 1.0 - MBOs: Autonomy and Alignment

Pioneer: Alfred Sloan, Prophet: Peter Drucker

Sull positioned General Motors as the “Google of the 1920s.” Instead of acquiring software companies, GM acquired start-up automobile companies. GM had to solve the problem of integrating new business units while preserving their entrepreneurial spirit. Alfred Sloan took the helm at GM and introduced the notion of committing to an objective with complete autonomy in terms of how to achieve it. Sloan was the pioneer, Drucker was the prophet. Drucker coined the term Management by Objectives (MBOs) to describe Sloan’s approach. By 2008, Sull notes that roughly 80% of companies used MBOs or a variant. MBOs enabled alignment and autonomy, but the MBOs model still had its problems.

The problem with MBOs is that they were too static and prone to sandbagging. They were not conducive to the rapid changes that were becoming the norm of modern business. As MBOs were often tied to compensation, employees did not set aspirational goals. Sull noted that while most employees would never claim to be sandbaggers, most employees advised new hires to “make commitments that your feel sure you can achieve.”

Goals 2.0 - OKRs: Agility and Ambition

Pioneer: Andy Grove. Prophet: John Doerr

As first documented in his book High Output Management, Andy Grove took MBOs to the next level. With just a couple tweaks, he developed Objectives and Key Results (OKRs). Although MBOs tend to take an annual cadence, Andy Grove and Intel used a more frequent cadence to set and reset goals. OKRs are most often set quarterly, but Intel was actually on a monthly cadence as noted in my last post.

• Agility: With OKRs, a more frequent cycle replaced the static MBOs model. OKRs added agility with its emphasis on making key results easier to adjust throughout the quarter and the decoupling of key results from objectives. Goal owners could quickly modify or add key results.
• Ambition: OKRs solved the sandbagging problem by decoupling goals from the incentive compensation system and setting a target level of achievement around 60-70%. If you’re hitting 100% on all your goals, you’re not aiming high enough. It is fine to use OKRs as part of your performance review process, but managing OKRs and the performance review process in separate systems encourages employees to set higher targets.

The problem with OKRs is that they do not create a culture where everyone knows the big picture. While OKRs tends to create alignment within teams, OKRs does not enable goals to be clearly linked across teams.

Goals 3.0 - Networked Objectives and Goals: Big Picture and Coordination

Kris Duggan, CEO of BetterWorks, and Donald Sull are prophets for a new era in goal setting and transparency. In this world, goals are more social and exist in a transparent network.

• Big Picture: TheOKRs model propose that everyone should be able to see everyone’s goals. Modern goal systems make this much easier. One new BetterWorks user called his manager and said, “There must be some mistake with my security settings. I logged in to my account and I can see the CFOs goals and the company’s financial targets!” This produced a few laughs at the conference. Goals 3.0 is all about this kind of transparency. By tracking and visualizing how goals connect, workers can more clearly connect their work to the bigger picture.
• Coordination: AsSull describes in his recent HBR article, coordination across silos is a big challenge. Modern goal systems support linking goals across units. Perhaps creating a more social system that standardizes the effect of peer pressure could even reduce silo effects.

In closing, Sull asked us to imagine a future where an organization can identify leading indicators where interdependent goals are likely to break down. Rather than a hierarchical, cascading goal-setting processes, what if we had a self-organizing system with peer pressure? For more on Sull, check out Simple Rules for a Complex World and his recent interview with BetterWorks.

Final Analysis of Goals 3.0

I am very excited about Goals 3.0. As I work with my clients as OKRs trainer and coach, I see huge potential for modern systems to enhance the value of OKRs. However, many organizations are stuck in Goals 1.0 and have an annual cadence similar to MBOs. Some may not have any goal system in place at all, so I guess they are stuck in Goals 0.0.

Ready for Software? If your organization is at Goals 0.0 or 1.0, I advise starting by piloting the OKRs process with off-the-shelf tools such as MS Word or Google Docs. In my experience, it’s usually best to first define a process and then implement software to support that process rather than trying to do both at once.

If you already have a Goals 2.0 system in place, making the move to a modern solution, such as BetterWorks, should add value immediately. Look for more on the emerging Enterprise Goal Management software space in my upcoming vendor landscape report in scheduled for publication in early 2016. In the meantime, here are some questions to ask before you buy.