A study on how to link OKRs model with incentive compensation

Abstract

As an emerging tool of Management by Objectives, the Objective-Key Results (OKRs) model has been widely used in management practice in recent years; however, the academic community has not reached a consistent conclusion on whether OKRs should be linked to incentive compensation. The author argues the benefits of the linkage in terms of the common ground of the two concepts, the importance to employees' sense of fairness, and the strengthening effect on key indicators. From a practical point of view, the author believes that OKRs need to take advantage of KPIs in the process of application, using employees' personal KPIs as the basis for determining goals and employees' self-evaluation and score correction as indicators to measure the degree of completion, and the combined KPI+OKR model formed will be able to realize the linkage with incentive pay and play an important reference role in employees' future merit evaluation and promotion. Therefore, this paper proposes a scheme by elaborating the theory, focusing on two aspects, namely goal setting and result measurement, to optimize and improve the operation process of OKRs; and supplemented with practical cases to fully illustrate the promotion of OKRs to employees' initiative and the guiding effect of OKRs on employees' self-growth.