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History of Performance Management System and OKR
According to some historians, the Performance system is believed to date back to 221 AD. It is mentioned that the records of the performance management system for these dates are found and it was administered during the period when the Wei Dynasty Emperors rated the performance of their family members. Let's take a look at the history of the Performance System together.
The long road to OKRs
It began in the 1800s when Robert Owen had "silent monitors" that monitored the performance of his workers at his cotton mill in Scotland. This system focused on the individual performance of the employees and did not look at the overall performance of the factory.
Frederick Taylor, an American mechanical engineer in the early 1900s, focused on increasing industrial efficiency. Published in his 1911 book Principles of Scientific Management, management theory embraced the idea of simplifying things to increase efficiency. Frederic Taylor in his book "Principles of Scientific Management"; suggested that productivity would increase by optimizing and simplifying work. He also argued that workers and managers should cooperate with each other. Taylor's methodology; prioritizing the way the work is done, keeping the productivity of the employees or how hard they work in the background. Taylor's Scientific Management Theory supports the idea that there is "one right way" to do something. Therefore, it contradicts the Management by Objectives approaches.
By the 1920s, some sources indicate that performance appraisals were invented by Walter D Scott of WD Scott & Co. in Sydney. Despite being arguably the oldest documented use of official performance appraisals, WD Scott's system was not a widely recognized concept, and not many outside of his firm had even heard of it.
In the 1920s and 1930s, operational efficiency and effectiveness became more important. The concept of ROI was introduced during this period; To get the most out of their budgets, organizations wanted to make sure results such as company performance and net income met expectations.
Management Consultant Peter Drucker wrote a book in 1954 called the Practice of Management, in which he defined a concept called Management by Objectives, or MBOs. Its principle was based on the need to manage the business based on needs and goals.
Peter Drucker opened a new window in the approach to business management by arguing that successful leaders should put people first, rather than focusing on profitability and rigid work patterns.
To him, efficiency was more important than efficiency and was the foundation of every organization. According to Drucker, it was the management style that would lead organizations to success by setting SMART goals and spreading them throughout the organization from top to bottom, and increasing communication by alignment.
According to Drucker, companies that adopt the system he proposes; could increase productivity and create an open and ethical working environment.
Peter Drucker is known as the father of modern and people-oriented performance management system MBOs and has been an inspiration to many companies and leaders. One of them is Andy Grove. MBOs inspired Grove and led to the emergence of the OKR System for the first time.
Grove brought a new approach to the performance management system by asking 2 questions to the organizations.
- 1.Where do I want to go?
- 2.What steps will I need to take to get there?
In this transparent, visible, alignment-oriented system, all employees would feel a part of success by adopting a collaborative work culture that could see the big picture.
During this period, leading companies began to see that they could improve their operational performance by aligning team, individual and department goals with company goals.
The OKR methodology was first used at Intel.
As Intel embarked on the transition from memory to microchips, Grove needed the company to align with its goals. John Doerr, who was at Intel at the time, immediately picked up Grove's OKR system to help focus the team.
I remember being intrigued by the idea of having a sign or north star in each quarter that helped me set my priorities. It was also incredibly powerful for me to see Andy's OKRs, my manager's OKRs, and my coworkers' OKRs. I was able to quickly connect my work directly to the company's goals. I kept my OKRs in my office and wrote new OKRs every three months and the system has stayed with me ever since.
Intel has successfully completed this transition period and continues to use OKRs.
By the end of the 1990s, OKR was also being used by many companies, including Google.
Today, many pioneering and visionary companies apply OKR methodology in their organizations by adopting what John Doerr tells about OKR in his book 'measure what matters'.