Managing with objectives and key results. Innovation management as a new benchmark for management culture?

A study shows that one in four employees is unfamiliar with their company goals, while one fifth of all line managers are similarly unaware of superordinate corporate goals. However, 80 percent (most specialists) are keen to find out how they can do their part to help the company succeed. The OKR method is one option.

But employees didn’t exactly welcome this with open arms when it was rolled out by management. For a whole year, developers at a medical technology company were tasked with moving into a separate building at the company headquarters and developing a new and innovative product. One to which nothing but a fixed budget applied. However, despite what was initially considerable scepticism and reservations on the part of the employees concerned, it all ended successfully, so much so that even the project initiator was surprised. 

After twelve months, the team had developed a completely new product, which now complements the current range. As for the employees, while initially feeling somewhat side-lined, they were now quite at home on their “island of innovation” after all. They had more than taken on board how beneficial it was to be able to set their own goals independently and adapt as flexibly and quickly as required.
 
“The new work approach has set a creative process in motion and increased job satisfaction for all involved,” says Angela Westdorf, Managing Partner at the international executive search and leadership consulting company Signium Germany, about a client’s experience. “For employees, getting motivated and above all remaining that way within an ever-more complex working environment depends on understanding the significance of their actions and not losing sight of why they are doing what.”

At the start of the year, many companies have target agreements on the agenda. According to a November 2018 study, almost every managing director in Germany – 94 percent – is entitled to annual variable remuneration and how each of them performs is a decisive criterion used to determine the take-home amount. “Having said that, what you set out at the start of the year may no longer match the company’s objectives over the course of the year, due to change in either competitive circumstances, the legal framework or sales markets, for example, due to things like Brexit or a trade war,” observes Westdorf, who is also Vice-Chair of Signium’s International Board of Directors. Amid a corporate environment of uncertainty, volatility and dynamism, managers need to be absolutely on board with the decision to change. 

Which is why an ever-growing number of companies are testing new methods to boost motivation and achievement of targets. “This also applies to the life sciences and healthcare sector, which has to remain one of the most responsive areas of the organisation, given the high pressure to innovate,” observes the personnel consultant, who occupies management positions and internationally oriented managerial positions for pharmaceutical and medical technology companies, diagnostic companies, laboratory chains, biotech companies and private clinic operators. 

The so-called OKR method offers an alternative to the usual target agreements in Germany. Invented in the mid-1970s by US semiconductor manufacturer Intel and deployed successfully by Google, among others, it helps companies focus, deploy their resources efficiently and get their workforce more closely involved in the process of defining goals. The O in acronym OKR stands for objectives and the KR stands for Key Results. Employees and bosses team up to work out what they want to achieve and how. A rule of thumb for the OKR method, according to experts, is that 40 percent of the content should come “top down” and 60 percent from the workforce. Software is used to record who has set which goal and after the end of the quarter, the extent of progress made. If the prevailing conditions have changed, the ratio will be adjusted accordingly. “Thanks to timely evaluation, all involved in the process can see who contributed to the overall success and how. This very result-oriented and versatile approach also promotes transparency, helps avoid duplication of work and eases the strain on employees,” emphasises Westdorf.

One example: A young medical technology start-up has developed a biofeedback system. The vision could be like this: We want to offer patients with knee problems a biofeedback system to prevent severe pain, accidents, and surgery.

One objective at the corporate level for the upcoming quarter could involve testing an initial prototype, for which the company defines four key results:

1. Present prototype at a leading med tech trade fair and test impact
2. Present prototype to 30 orthopedists
3. Discuss possible financial support for the biofeedback system with ten health insurance companies 
4. Clarify the conditions for sale in the EU

“If the OKR method is to produce the desired results, managers must be capable of letting go and delegating effectively. And since their own contribution to success is also measurable and transparent, a high degree of openness is also required. From the employees’ perspective, a high level of identification with the company is needed as well as a strong sense of belonging, as typified by start-ups or very homogeneous albeit thriving groups such as those on Google or Facebook”, opines Executive Search Consultant Angela Westdorf.

“Provided these conditions are met, the OKR method can help companies shed light on the key goals, focus on milestones over a quarter and simultaneously bring home to employees the nature of their contribution to overall corporate success,” Westdorf concludes.