OKR, OGSM, Hoshin Kanri method… shedding light on various performance management techniques
With SWOT analysis, Porter’s 5 forces, game theory and so on, there are many techniques and methods that are used to determine a sound, forward-looking strategy, but then what happens? How can a strategy be built that will not then just be consigned to a desk drawer for lack of properly-managed execution?
In fact, the hardest part is not always determining the organisation’s vision and accompanying strategy, but successful day-to-day implementation. So how can the vision and strategy be perceived meaningfully by all employees, and performance successfully managed? Although some methods have existed for more than five decades, it is only fairly recently that specific approaches have blossomed, such as OGSM (Objectives, Goals, Strategies and Measures), OKR (Objectives and Key Results) or the Hoshin Kanri method. Let us investigate and see whether, despite the differences, any common factors emerge.
Back to basics: why do we manage performance?
“The road to hell is paved with good intentions,” as the saying puts it so well. Great ideas are generated left, right and centre, but sometimes lead to the worst outcomes for lack of the ability to effectively manage them at the highest level. The key to success lies in methodical and thorough management of applying these good intentions, also known as “strategic planning”. This entails ensuring proper operational execution in terms of both governance and supervisory resources, and ensuring employees are engaged with and responsible for their roles.
This is achieved by converting major strategy directions into practical, measurable, day-to-day tasks, for which deadlines and targets can be set for teams to attain. Regardless of an organisation’s size, trade sector or culture, the viability of any given strategy depends on the strategy execution plan and the set of accompanying objectives. Employees still need to buy into the plan, and the management technique needs to be sound.
OKR, OGSM and Hoshin Kanri – three strategy execution techniques
Of the many approaches that exist to manage strategy execution, we have opted to present those most frequently mentioned, namely OKR, OGSM and Hoshin Kanri.
OKR for Objectives and Key Results
OKR (Objectives and Key Results) is a management method based on the management of operational objectives assigned to teams derived directly from the strategic vision. It consequently offers a beneficial framework for prioritising and ranking objectives, one that proves fairly agile once in use. From a practical viewpoint, the main objective is set by the senior management team before being broken down into secondary objectives, which are run directly by managers in conjunction with their teams. The key results then serve to quickly assess whether the objectives have been met and, if need be, to adjust strategy directly at the operational level.
Used by Google from day one, the OKR method is very popular in North America as it builds shared responsibility. Its key strength is that it works from the assumption that when employees contribute to objective setting and the accompanying action plan, they feel more directly affected and involved. This first technique therefore tends to encourage perpetual use of teamwork to adjust and improve decisions continuously, while providing visibility over progress to each level of line management by using key results consolidated at the various different layers of objectives.
OGSM for Objectives, Goals, Strategies and Measures
OGSM (Objectives, Goals, Strategies and Measures) is less widespread at the moment, but it is nevertheless gaining ground by virtue of its all-encompassing and pragmatic aspect. Based on the vision established by the business, it serves to formalise the objectives related to that vision and how they will be achieved on a one-page document answering four vital questions:
- Where are we going?
- What goals are to be achieved?
- How can we get there?
- How can we tell if are on the right track?
The advantage of this method is primarily that it puts strategy objectives into words and engages employees on a path concentrated on the objective to be achieved. The principle followed is often to set an OGSM road map at the uppermost level, then at the business unit and department levels within an organisation. The use of OGSM roadmaps is consequently a collaborative process, prioritising co-creation so that each team is fully aware of its contribution to the goal to be achieved.
In operational monitoring, the method combines words and numbers. The objectives, formally expressed in words, are converted into goals expressed in numbers. Then the strategies that will enable these goals to be achieved are explained in words and then, in turn, converted into measures defined numerically in order to monitor successful execution operationally. All this output takes the form of straightforward summary documents, accessible to the organisation’s entire staff.
Hoshin Kanri management system
The Hoshin Kanri method, meanwhile, focuses all efforts and resources into completing progress initiatives over varying timeframes, giving each employee an active role in their achievement. Senior management determines its vision and strategic objectives at the highest level, then communicates them to operational employees. The operational teams then prepare appropriate action plans to obtain the expected results and convert them into operational objectives. The main benefit of the Hoshin Kanri technique is therefore being simultaneously top-down and bottom-up. Although the vision and strategic objectives come from the top, alignment with operational staff is decentralised, which makes it possible to question certain objectives if the implementation planning reveals shortcomings.
The mainstay of this method is therefore a top-down deployment of the vision, through an iterative, collaborative process, making it possible to set realistic objectives accepted by all within the organisation. As a result, it is highly agile as it exploits both PDCA loops enabling teams to change their course when necessary, and it applies Pareto’s Law to concentrate on those actions that truly pack an effective punch. These factors explain why the Hoshin Kanri method is often part of the Lean Management toolkit.
Three strategy planning methods with a single objective
Is there, ultimately, any significant difference between all these methods? For example, OKR is a perfect fit for technology business and start-ups, owing to its simplicity and great flexibility. In contrast, OGSM is mainly used in major multinationals such as Coca-Cola, Procter & Gamble, Honda and suchlike, one reason probably being that its simplicity compensates for the complexity of the organisation. Lastly, Hoshin Kanri enjoys great popularity in manufacturing because it helps to optimise production flows on the basis of objectives.
Some techniques seem more collaborative and others more focused on measuring results but overall, they all work towards the same objective of helping organisations execute a strategy. Their differences amount to just the terminology used in each one, and the maturity and culture of the businesses that use them.
Consequently, regardless of the technique chosen, the best way to incorporate it is to use an overview of the expected transformation to work on encouraging synergies and teamwork as a matter of daily routine. While we have previously wondered about the appropriateness of forming a general Competitiveness Department, one thing is certain: the business must adopt a holistic approach to its transformation, an approach that can be understood by all employees. The choice of a method to manage the execution of a strategy must therefore go hand-in-hand with determining the “Ways of working” to adapt its management and governance methods accordingly. This is the only way to ensure de-siloing of performances and thus a successful implementation of the strategy.
To get a head start in terms of competitiveness, download our guide to blending performance, progress and collaborative working: