Grades are one of the most talked about aspects of OKRs. The most common way for OKR grading is – key results are graded on the scale of 0 to 1 (or 0 to 10) along with any additional assessment that can be helpful in the long run. Grades of the objective are calculated based on average grades for corresponding key results.
At times (especially when adopting OKRs for the first time), too much importance is given to the numerical grades. Leaders try to pull them in the compensation management process without thinking through the ramifications. All along the way, its important to give due attention to the ‘subjective’ assessment of the OKRs.
Primary intent of grades in OKRs is to help you retrospect & refine the process in terms of – defining objectives clearly, setting up key results that are relevant & challenging as well as ensuring cross-functional collaboration.
Here are some important points to consider about OKR grading –
Progress of the objective/key result does not necessarily reflect grades
for example, consider a stretch goal that was known from the beginning to be difficult to achieve. Even then if the employee managed to achieve 50% progress due to skillful execution & mindful strategy, the grade may very well be 0.8+
vice versa, one may have achieved 90% progress but what if it was due to an unconsidered factor & did not remotely relate to the execution effort. In this case, 0.3 or 0.4 is also a possibility
Grades on previous OKRs should inform creation of OKRs for the upcoming cycles
if there were cases of low progress achievement due to insufficient cross-functional collaboration, this assessment should lead to improvement in that area
Grades do not always make for a compelling part in the compensation management process
this is because if they are pulled into compensation processes, the spirit of setting stretch goals would take a hit. Employees will create goals that are easily achieved.
best way to counter this is by deciding tentative grades at the time of defining OKRs
for example, 50-70% progress would mean a grade of 0.75. 71-90% would mean a grade of 0.85 etc.