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OKR vs. MbO: The transformation of classic management methods

Transformation klassischer Managementmethoden, Header Bild, Organisation Tasks

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In the dynamic world of management, the development of leadership methods always has a profound impact on the way organizations are managed and how they respond to rapidly changing markets. Two of these methods, management by objectives (MbO) and
and Key
(OKR), are often at the center of the discussion when it comes to defining effective leadership and goal-oriented management. In this Bessay we take a closer look at both methods and examine how the modern OKR system has developed from the classic MbO.

Definition: What is Management by Objectives (MbO)?

Management by objectives, a method developed by Peter Drucker in the 1950s, is based on the idea that employees are more effective when they have clear goals to achieve. With MbO, targets are agreed at an individual level between line managers and employees. These targets should be measurable and realistic, with the focus on achieving 100% of the targets set, whereby the aim may even be to exceed them. The target reviews are typically carried out annually or semi-annually.

MbO focuses heavily on output – the result or end result of a task, without necessarily questioning the benefits or the wider context. Motivation is often boosted by extrinsic incentives such as bonuses, salary increases or promotions. To find out more about MbO, read the following article: The potential of Management by Objectives (MbO).

The development from MbO to Objectives and Key Results (OKR)

In the 1970s, Andy Grove at Intel adapted the MbO concept and developed it further into OKR – Objectives and Key Results. Grove recognized that Intel’s fast-paced business environment required a more flexible and agile approach. The OKR method focuses on goals set at all levels of an organization – from individual employees to entire departments.

OKR differs from MbO primarily through the introduction of key results, which represent measurable steps towards achieving overarching goals. These key results are often ambitious, whereby a target achievement of 70% is already considered a success, as they are intended to push the boundaries of what is possible.

Entwicklung von Mob zu OKR, in einer Tabelle, Consultingheads Beitrag

Difference: Structure and implementation of OKR to MbO

The structure and implementation of Objectives and Key Results (OKR) differ significantly from the more traditional Management by Objectives (MbO). While MbO focuses primarily on individuals, OKR aims to involve the entire company as well as teams and departments. This promotes a more comprehensive and integrated objective.

OKRs are defined at all levels of an organization and can take different approaches: from top-down, where managers define the main objectives, to bottom-up, which involves employees in target setting, to cross-departmental, which promotes collaboration across departmental boundaries. This flexible approach enables every area of the company to contribute directly to the overall strategy.

Unlike MbO, where the main focus is on achieving 100% of the target, OKR encourages more ambitious targets. A target achievement of 70% is often considered a success, which supports innovation and the pursuit of challenging goals without shying away from the risk of failure.

OKRs are reviewed and updated very regularly, often through daily check-ins and weekly reviews. These frequent reviews allow for continuous adaptation and reflection, which is particularly beneficial in fast-moving industries.

Finally, in contrast to annual planning, OKR usually prefers quarterly targets for MbO. This allows for more flexible adaptation to changing market conditions and company priorities and ensures a more dynamic management culture.

OKR vs. MbO: The advantages of OKR

A decisive advantage of OKR over MbO is the company-wide transparency. All employees know not only their own goals, but also the overarching goals of the company. This transparency promotes better coordination and avoids duplication of work.

In terms of motivation, OKR relies on intrinsic factors. The method emphasizes the importance of autonomy and the meaningfulness of work. Employees are encouraged to improve in areas that they consider valuable, which leads to greater job satisfaction.

Vorteile und Nachteile Mbo vs. OKR in einer Tabelle, Consultingheads Beitrag

Into the future with OKR - commission Expert:in now!

OKR thus represents much more than a further development of conventional goal-setting methods – it marks the transition to a corporate culture that upholds agility and stability in equal measure. A culture that recognizes and promotes both the company’s vision and the individual contributions of each person.

If you as a company are specifically looking for expertise in the field of MbO or OKR in order to implement these dynamic methods of goal setting and thus sustainably promote your company’s success, consultingheads is the ideal partner. In our network you will find experienced consultants and interim experts who will support you in effectively integrating the OKR methodology into your organization and thereby optimizing the performance and motivation of your teams.

Don’t wait for the future – take active control of your organization. Hire an MbO or OKR consultant from consultingheads today and lay the foundation for continued success in a rapidly changing business world.

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