Performance management systems have often stood still, assuming that objectives once set are good until the next annual review. Yet today’s goals must rapidly respond to ever-changing needs: this has revealed many dysfunctions in traditional performance management systems. How can insurance companies redesign their existing performance management system and precisely tailor it to the current market requirements? In this article, I will explain why new solutions for performance management are required and how to successfully implement the agile method “Objectives and Key Results” (OKR) that promises to drive 10x growth and has also helped Google and other BigTech companies to achieve what they have today.
When redesigning performance management systems, we usually "encounter" an existing system landscape in which different management methods and procedures that have evolved over time coexist. The first step is to understand their origin, purpose, degree of utilization, etc., in order to initiate the right redesign for the individual insurance company. However, given the current market demands, firms are open to “new” performance management solutions as they require greater flexibility, a faster response time, employee participation, a certain transparency of the objectives, and free space for creativity and innovation.
It quickly becomes clear that the traditional performance management systems are not or not fully suitable for meeting the requirements. Instead, it is necessary to develop a clearly defined "tool set" that is precisely tailored to the current market requirements.
As Google has grown (and grown), it has periodically issued OKRs as their performance management methodology. In simple terms, OKR is a collaborative goal-setting tool used by teams and individuals to set challenging, ambitious goals with measurable outcomes. At the same time, it is used to track progress, create alignment, and drive commitment to measurable goals. Continuous feedback from experienced colleagues, forming goals from the ground up, and focusing on a maximum of five objectives per quarter are all key aspects of the OKR methodology.
In essence, OKR is an agile framework. Based on a company’s mission statement, it links the tasks of the employees/teams with the strategic goals of the company and makes the progress of results transparent. The main idea of OKR is based on two simple questions:
The OKR framework connects the insurer’s corporate mission and values, which are generally designed for the long term, with the corresponding short-term OKRs (goals and results). In between, mid-term goals, or “Moals”, are defined by the management team once a year.
In the long term, an insurer will only achieve its strategic goals if its OKR methodology is consistently based on the following agile values and principles:
To successfully implement OKR, it is necessary to define three objectives per team as well as three results per objective on a quarterly basis and check them regularly every week or month. Furthermore, insurance companies should make them public for all employees and define a target achievement level – the sweet spot – of 70 percent. Done right, OKR serves as the ideal cornerstone for effective performance management that allows insurance companies to significantly boost their efficiency and meet the current demands of an increasingly volatile and challenging market environment.