OKRs vs. performance management

While the performance review process appears to serve a similar purpose as Objectives and Key Results (OKRs), its role differs fundamentally.

OKRs (Objectives and Key Results) are a simple tool to create alignment and engagement around measurable goals and one of the keys to successful implementation of OKRs is to separate OKRs from compensation and promotions. Rick Klau, then an executive at Google, is cited in John Doerr's book:

OKRs are not synonymous with employee evaluations. OKRs are about the company’s goals and how each employee contributes to those goals. Performance evaluations –  which are entirely about evaluating how an employee performed in a given period  –  should be independent from their OKRs.
— Rick Klau (Google)¹

Most larger organizations already have elaborate processes for goal setting in place, based upon which the annual performance reivew is conducted. This process goes by different names but features prominently in the human resources (HR) toolkit of most organizations.

The objective of this process is to support career development and encourage the continuous improvement of employees' skills, competences and contributions to the organization. It is touted as

• an opportunity to celebrate achievements,
• reflect on where to improve,
• get feedback on past performance and, finally,
• to realign with the leader on expectations and career development.

As a consequence, the annual performance review process differs from OKRs both in its purpose and scope, as outlined below:

For this reason, John Doerr suggests to use OKRs only as one input among many for performance reviews.

It is not a legal document upon which to base a performance review but should be just one input used to determine how well an individual is doing.
— Andy Grove (Intel)¹

In my own implementations of OKRs, I have always defined the OKRs independently from the individual. This means that if a new person had inherited the role of someone, the OKRs would not have changed. But their performance evaluation very well might have been quite different.