Understanding the connection between OKRs vs. Performance Management

The movie "Air" details the intricate relationships that led to Nike signing a young Michael Jordan to his first basketball sneaker contract, and the creation of "Air Jordans." As part of the negotiation, Jordan's mother pushed for -- and received -- a stipulation that the family would earn a percentage of sales for every sneaker sold. 

The movie ends with Nike CEO Phil Knight (played by Ben Affleck) pondering how many sales they might possibly generate, which Nike estimated to be $3 million in the first three years. The movie later revealed staggering sales of $126 million in year one for Nike, and Jordan winning Rookie of the Year and making the All-Star team on his way to becoming the greatest player of all time.

Talk about crushing your goals!

I bring this up because there are a lot of elements of "goal setting" at play here ... Nike as a company, Jordan as an individual, sales targets, CEOs, agents, customers, and other stakeholders.

At Microsoft Viva Goals, we often get questions around the intersection of goals and performance management / personal development. After all, we're talking about goals, right? What's the difference between the goals we set as a department, and the goals I talk about with my manager at our 1:1?

That led us to publish our point of view:

Understanding the connection between OKRs vs. Performance Management

Within the document you'll see we present 4 key pillars:

1. OKRs are designed for collaborative, strategic goal setting for your business and teams.
2. Performance Management is used to define individual priorities in support of the larger team effort.
3. OKR output could be one of many inputs into an assessment of an individual’s performance, but it’s important that it’s not the only input.
4. OKR output should generally not be directly tied to an individual employee’s compensation.

If we apply these to our Nike story, CEO Phil Knight would have set company-wide OKRs for his entire organization. In addition to goals around their running sneakers and clothing, they might have had an aspirational objective of expanding their market share for the basketball division (people forget at the time, Nike was a distant third to Converse and Adidas), and a key result metric of exceeding $1 million in sales a year of Air Jordans. (Boy, would the percentage results in Viva Goals have been off the chart that year).

For the use of this example, remember that Michael Jordan wasn't technically an employee of Nike. A better analogy might be Peter Moore, the designer of the shoe. While he might have had a team OKR around the launch of Air Jordans, his individual priorities would have been judged on a broader basis ... how did he contribute to his team, what was his individual impact, how well did he work with his peers, etc. If he was in his personal review, while the success of Nike selling $126 million in year one certainly would have been one of many inputs to his review, it shouldn't have been the only input.

Here at Microsoft, we love aspirational goals. So whether yours is for your company to launch a $100 million brand, or a personal goal to become the greatest of all time at what you do, OKRs and Performance management can lead the way.

To learn more, review our document:

Understanding the connection between OKRs vs. Performance Management