OKR and Smart Goals

When most people think of smart goal setting, they don't just think of developing intelligent goals. After all, S.M.A.R.T. is probably one of the most frequently used acronyms in management guidebooks and the setting of "smart" goals has long been common practice in most companies. But what role do SMART Goals play in the development of good OKRs and thus in the practice of modern goal management systems? The following article provides an overview of why the concept of smart goals also has a significant place in the digital age.

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What are SMART Goals?

The term SMART is an acronym and is composed of the terms Specific, Measurable, Attainable, Reasonable and Time-bound. Although there are variations on the individual components of the abbreviation, the core message of the concept remains unaffected:

Specific: Only specific goals make sense. This is because goals are intended to provide employees with orientation by defining a concrete, desired state in the future. Therefore, goals can only fulfill their function if the employee can imagine this state sufficiently clearly.

Measurable: Only measurability makes goals binding. If a goal is measurable, the employee always knows whether or to what extent he has achieved his goal. This allows the employee to monitor his or her own progress at any time and increase motivation to work.

Achievable: The demand for achievable goals is probably the most controversial part of the SMART concept. This is because users of stretch goals postulate that it is precisely goals that are set too high that optimally exhaust the productivity of employees. However, the calculation behind this claim and at the same time a counter-argument to stretch goals is clear: goals that are set too high and seem unattainable from the outset can demotivate employees and lead to incorrect planning. The formulation of goals in terms of their achievability is therefore also dependent on the culture of a company.

Reasonable: Even a formally well-defined goal is only value-creating if it makes sense. This insight may seem trivial at first glance, but when formulating their goals, many people often forget to fundamentally question whether the goal can be implemented, for example, in the face of a lack of resources or conflicting goals.

Time-bound: In order to create a binding character and to be able to serve as a coordination tool for employees within the company, goals need a deadline. Only then is it possible to assess whether or to what extent a goal has actually been achieved. In addition, the time-bound nature of goals also makes it possible to order and prioritize goals according to their urgency.

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How Do OKRs Relate to SMART Goals?

SMART Goals also retain their relevance in the definition of OKRs. However, in this context it is important to be clear about where SMART Goals can be applied in the formulation of Objectives and Key Results.‍

If you are not yet familiar with the OKR framework, take a look at our article "Objectives and Key Results (OKR) - A Definition"

Objectives: Objectives should inspire and be formulated qualitatively. This alone shows that the SMART approach should only be used to a very limited extent when defining objectives. This is because the SMART requirement for measurable, specific goals contradicts the qualitative character of an objective. The required achievability of the objective is also difficult to reconcile with the inspiring character that an objective should have. Only the principles of meaningful goal setting and time-boundness - as part of OKRs, objectives are always defined for a specific period of time, often a quarter - can be found in the objectives.

Key Results: It is all the more important to follow the SMART rule when defining Key Results. This is because the intention of Key Results corresponds exactly to that of SMART Goals. The achievement of the goal should be measurable and binding. Therefore, when defining each Key Result, it is necessary to check whether all the requirements of a SMART Goal are met. The immense importance of SMART Goals can be well illustrated, especially by examples:

Specific: It should always be clear exactly what a Key Result measures. For example, instead of the key result "Brand perception should improve by 10%", it is better to use the clear measure: "The net promoter score should increase by 10%". This makes it clear which parameter is to be used to measure the target success.

Measurable: Key results should be clearly measurable. For example, the statement: "The return on investment should increase significantly" is of little help. Better is the formulation "The return on investment should increase by 10 percentage points“.

Achievable: Even though the inspiring Objective almost inevitably leads to ambitious Key Results, care should be taken even with Stretch Goals to ensure that the goal does not lose all measure of what is possible. For example, a target of 1000% profit growth does not help an established company, but only robs the Key Result of measurability.  

Reasonable: It is important that each Key Result is closely examined to determine whether it contributes to its overarching Objective. For example, if the Objective is: "Become a beacon of innovation in the pharmaceutical industry", it makes little sense to place the Key Result "Increase the number of applications from qualified employees from 100 to 150 per month" under the Objective. 

Time-bound: It is often forgotten to assign a time frame to a Key Result. A frequently mentioned reason for this omission is that a time frame (e.g., a quarter) is given for the objectives and thus the key results themselves anyway, and a definition of a deadline for the individual key result is therefore superfluous. However, it may be that several Key Results build on each other in order to achieve an Objective.‍

Find out how to formulate good OKRs in our article on OKR Examples

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Conclusion

SMART Goals and OKRs are not simply two concepts existing side by side. Rather, the quality of OKRs depends heavily on whether the SMART Goal rule has been followed in their definition. The proven tool of smart goals thus retains its validity even in times of modern goal setting.

However, it should be noted that SMART should rather be used as a control tool and filter and is not a guarantor for effective goals and key results. In other words, a strong Key Result always meets the SMART criteria, but just because these criteria are met does not necessarily mean that the Key Result is meaningful. Furthermore, it is important to note that the principles of SMART Goals can be applied primarily to Key Results, but only to a very limited extent to Objectives.