OKRs vs MBOs: How Modern Goal-Setting Evolved from Management by Objectives
Last verified: February 2026
Overview
OKRs (Objectives and Key Results) evolved directly from MBOs (Management by Objectives), a framework Peter Drucker introduced in 1954. Andy Grove at Intel refined MBOs into OKRs in the 1970s, adding measurable key results and shorter cycles. Understanding this lineage helps explain why OKRs have largely replaced MBOs in modern organizations.
Key Differences
| Dimension | OKRs | MBOs |
|---|---|---|
| Origin | Intel, 1970s (Andy Grove) | Peter Drucker, 1954 |
| Cycle | Quarterly | Annual |
| Direction | Bottom-up + top-down | Primarily top-down |
| Transparency | Public across the org | Often private, manager-report |
| Tied to comp | Explicitly decoupled | Typically tied to bonuses |
| Ambition | Stretch goals encouraged | Conservative, achievable |
| Measurement | Quantified Key Results | Often qualitative objectives |
Why OKRs Replaced MBOs
1. Speed of Adaptation
MBOs were designed for an era when annual planning made sense. In today's market, quarterly OKR cycles let teams pivot when priorities shift.
2. Transparency Creates Alignment
MBO goals were typically private between a manager and their report. OKRs are visible across the organization, which reduces duplicated effort and creates natural alignment.
3. Decoupling from Compensation
When goals are tied to bonuses (as with MBOs), people set conservative targets to ensure they hit 100%. OKRs are deliberately decoupled from compensation, which encourages ambitious thinking and honest progress tracking.
4. Measurable Outcomes
MBO objectives were often vaguely defined. OKRs require 2-5 quantifiable Key Results per Objective, making progress concrete and debatable.
5. Bottom-Up Input
MBOs flowed from leadership down. OKRs encourage roughly 60% bottom-up contribution, giving teams agency over how they contribute to company goals.
What MBOs Got Right
MBOs introduced foundational concepts that OKRs preserved:
- Goal clarity — writing down what you want to achieve
- Alignment — connecting individual work to company strategy
- Regular review — checking progress, not just setting-and-forgetting
The Transition from MBOs to OKRs
If your organization still uses MBOs, the transition typically involves:
- Shortening the cycle from annual to quarterly
- Adding measurable Key Results to each objective
- Making goals visible across teams and departments
- Separating goal attainment from compensation reviews
- Encouraging stretch — redefining "good" as 70% achievement
How Krezzo Helps
Krezzo is purpose-built for OKR management, incorporating the lessons learned from MBO shortcomings. The platform supports quarterly cycles, cross-team visibility, and progress tracking — without tying results to compensation reviews.
Sources
- Drucker, Peter. The Practice of Management. Harper & Row, 1954.
- Grove, Andrew. High Output Management. Vintage, 1983.
- krezzo.com