Achievement oriented business people love goals. Ask a salesperson to go sell widgets. Now have an agreement with that person to go sell ten widgets in three months. This simple change in approach and language makes all the difference to that salesperson’s focus and motivation.
Goals and goal attainment is obviously important for organizational performance. But the process of making and agreeing to goals is only the tip of the iceberg with respect to organizational performance. I added the adjective curious to the title of this article. I am not referring to curious as in “the curious cat”. In the sense I am using it, it is defined as “strange, unusual… unexpected, surprising”. Done well, setting and achieving goals has a profound influence on organizational performance. Used inappropriately, they can cause more harm than good.
Bad leaders, at any level of a firm, use goals to achieve their purposes and use the people reporting to them as mere pawns to get what they want. What they want in this context is usually incentive compensation for meeting or exceeding the set goals. For example, there was a CEO of a recognized company in Dallas, Texas years ago who would stroll through the call center when sales were down saying “You people are causing my wife to shop at Wal-Mart and not Neiman Marcus. Unless this changes, heads will roll”. True story. Nearly everyone hated working there.
Good leaders at every level of a firm, use goals to focus their teams on accomplishing things all will be proud of and from which all will benefit in terms of advancement, incentive compensation, and the great feeling winning provides. It sets the vehicle for future rounds of accomplishment and benefit making. This is a very “virtuous cycle”.
For the purpose of this article, let’s not get hung up on the distinction between goals and objectives. Here I use these two words interchangeably. George Odiorne wrote a great book in 1965 titled Management by Objectives and there have been variations on this work ever since. The Balanced Scorecard is one of many recent variations of George’s work. All of the variations use some form of the acronym SMART. Here goals need to be Specific, Measurable, Agreed Upon, Realistic and Time-based. Any rational and achievement oriented leader should like SMART goals. How could they not?
But here is where the curious part of the title of this article comes into play. Goals can be gamed. The target set can be very low to almost guarantee achievement. Here is where the “agreed to” part of SMART comes into play. Leaders one level up from the unit setting goals will almost always want a good deal of stretch in the targets set. For example, they might want fifty widgets sold in two months. The unit can try to game the target to set thirty widgets sold in three months. This negotiation to get to the “agreed to” amount and timing of the target is crucial here. Done like the Dallas CEO from above and you have built in resentment and cynicism. But set too low for too long a time frame means the unit is leaving money on the table and missing achievement for the organization as a whole. If goal setting becomes to be viewed as one big game, the whole process causes more harm than good.
Solving the Dilemma of Vague Goals
What is the way out of this dilemma? In my experience over thirty years of working as a consultant and in my efforts to set goals with teams under my leadership, I have found an approach that works for me. The approach is more of a shift in mindset and not in the mechanics of setting the targets. Here is my approach:
- In the beginning rounds of goal setting, establish the targets so that they are easy to achieve. Agree to the targets and set out the project plan to achieve the targets.
- Work the project plan hard. Celebrate small wins along the way.
- At the end of the agreed-to time period and if the target is achieved, have a big celebration and award recognition and incentive compensation in a fair way among the entire team. This creates a “success and confidence” platform that is infectious. By the way, in my experience signaling out one or two individuals as big winners is usually a big mistake. The team as a whole needs to be recognized and rewarded as in today’s world it is almost always the team that wins, not individuals.
- If the easy target is not reached, re-work the project plan to deliver on the agreed to target and fast. Counseling may have to be administered and some team members may have to be re-assigned. But recall the first targets are set to guarantee eventual and timely achievement.
Now here is where the real test of the leader comes in. It is creating a reason why the team will want to, not have to, achieve higher targets in the next round of goal setting. In my experience, this is accomplished by asking the team “What would you want and do if you were the owner of this unit or business?” If and this is a big if, you have good people in your unit or business, they will in every case take to heart this frame of reference of being an owner. They know that setting and achieving higher targets not only is good for the business or unit, but is good for them as well. They get a dry run so to speak of how they will think and behave when it is their turn to be leaders. This “on-the-job” training in being a future leader is greatly appreciated by good people. They gain financially by achieving higher targets but most importantly they gain a sense of personal fulfillment in this early training and education and accomplishment.
Now, what if your firm or unit does not have good people? These kind of people are usually self-centered who want only what is good for them in the here and now. If this is the case in your firm, this is a much bigger problem. The senior management team, board, and the human resources group must make the big decision of getting good people or living with mediocrity.
Goals and goal setting in firms are indeed curious. Good people and SMART goals and a transparent process for setting the goals can aid immensely to overall firm performance. What if your firm has only a cadre of self-serving people who will try to game the process? I know what I would do if I were CEO.
This article is part of a series on what causes a firm’s value to increase
Dr. William Bigler is the founder and CEO of Bill Bigler Associates. He is the former MBA Program Director at Louisiana State University at Shreveport and was the President of the Board of Strategic Planning in 2012 and served on the Board of Advisors for Nitro Security Inc. from 2003-2005. He has worked in the strategy departments of PricewaterhouseCoopers, the Hay Group, Ernst & Young and the Thomas Group. He can be reached at email@example.com or www.billbigler.com.