By Gokul Rajaram:

“Show me the incentives and I will show you the outcome” - Charlie Munger

CEOs and leaders: as you finalize 2025 goals, please reflect on whether your outcomes and OKRs are a driver of employee behavior. You might think they are, but unless you use OKR attainment as a key input in employee evaluation and reviews (including comp and promotion), you will find that the day to day behavior of teams and people is not truly impacted by OKRs, and they become more of a performative exercise.

By “achievement”, I meant both in terms of actual performance vs key results, as well as how well owners manage to OKRs, which includes navigating the challenges encountered along the way and doubling down on successes.

Sales teams at most companies have clear goals that their performance (and compensation) depends on. However, performance reviews of non-sales teams at most companies is not tied to OKR attainment, but on more nebulous things like “have they built a high quality product”, “are they a good team player”, etc.

70-80% of performance should be tied to attainment against clear goals (OKRs), while the remaining 20-30% can be a bit more squishy / qualitative.

What is an OKR?

OKRs stand for objectives and key results, a goal-setting framework that can help your team set and track measurable goals. Originally pioneered by John Doerr, this framework pairs the company-level objectives you want to achieve with the key results you’ll use to measure progress—so your goals are tied to your team’s day-to-day work.

Examples:

Objective: Improve Product Quality

Key Result 1:

Decrease customer-reported bugs by 50% within the first quarter.

Key Result 2:

Increase automated test code coverage to 90% within six months.

Key Result 3:

Achieve a product quality customer satisfaction rating of 95% during the next quarter.