Rethinking Goal-Setting for Better Performance in 2015

Leaders are judged on “performance,” meaning their ability to promote positive results for their organization. One way to promote performance is to connect a big-picture strategy with individual tasks that employees can carry out on a regular basis. If the management team fails to do this, then the organization will become highly inefficient. Each individual or department will begin to act according to its own instincts, detached from the direction the executive is trying to establish. In many companies, the only guidelines may be the annual budget, the same budge you may be working on now.

In addition to producing a budget, start off 2015 right by communicating the organizational goals and having a system that aligns every employee’s day-to-day job with the high-level goals of the organization. CEOs need to facilitate the process of reducing corporate goals into actual behaviors that individual employees can undertake. In addition, the entire management team must embrace its role in coaching employees on these fundamental behaviors.

Set the right goals — Each quarter the CEO should create corporate goals for the company. Typically there are about five to eight corporate goals per quarter.

Corporate goals take on two forms. The first type is called a priority goal. These are new initiatives that the CEO is asking the company to undertake. These goals set timely priorities for the quarter and should be specific. For example, “Generate $20 million in revenue,” “Launch new product,” “Complete headquarters move,” or “Improve operational efficiency by 2%” are priority goals. It is important that any department have no more than two priority goals in a given quarter.

The second type of corporate goal is a sustaining goal. These capture the normal operations of the company on an ongoing basis. For example, I would often use a goal of “Continuous improvement in operational excellence” to align employees who didn’t have a direct tie to the priority goals (HR, accounting, etc.).

Once the CEO establishes the corporate goals, each executive should work with his or her teams to develop departmental goals that are tied to those corporate goals. Then, each level in the organization works with their manager to develop goals that support their manager’s goals.

Help employees set goals — One of the biggest mistakes I see companies make is not taking the time to go through the process of identifying the business fundamentals with employees. It is crucial that managers engage employees in a mutual goal-setting process. At the end of the conversation the employee must take ownership of the goal and agree that it is achievable and worth pursuing. In my opinion, this conversation is one of the most critical roles that managers fulfill.

Many people struggle to set the right goals and need guidance. Recently I had a conversation with a product management executive at an early-stage software company. We had not worked together before, so I had asked him to think about the primary responsibilities of his job. He told me that his number-one priority was to deliver an exceptional product. I agreed that this was the most important responsibility of his position, but then I asked, “How would we know if it was an exceptional product?”

He said he thought an exceptional product would be easy and quick to implement. I suggested that an exceptional product would also have a high conversion rate from demo to purchase. We also agreed that the better the product, the fewer support calls the company would receive, and the higher the renewal rate would be. Then, we set metrics for each of these areas. For this individual, we went from a high-level corporate or departmental goal to specific, measurable, individual goals that highlighted the fundamentals for this area of the business.

Use a Goals Management System

Next, goals should be codified, written into a system. A quarterly cascading goals system aligns employees and formalizes each person’s contribution to the whole. It shows each employee clearly how he or she is contributing to the goals of the organization, while allowing the CEO and division/department managers to verify that each group is working on the right fundamentals.

As employees enter their goals into the system, they will begin to understand how their efforts contribute directly to the success of the company. In addition, they can see what other groups are doing to contribute to the same corporate goals. The final piece of the puzzle, and what is significant to the CEO and management team, is having each employee update the status of their goals each week.

Ask for the right status updates — It is important to ask for specific status updates. Simply asking where an employee is on a particular goal is not enough. This is because most employees will typically respond, “Oh, I’m about 60% done” or provide a list of what they have done so far and what they haven’t. This doesn’t help anyone understand how or even if that unfinished work will get done. The employee may not know how to get the other 40% accomplished. On the other hand, they may know exactly how they are going to achieve it. The point is, the manager is still in the dark.

A better system for communicating goal status is to ask employees their perceptions of likelihood and quality. Managers should ask every employee: How likely are you to achieve each of your goals during the quarter? This captures the employee’s confidence in achieving his or her goals during the quarter. Another useful metric is qualitative. How do employees feel about the work done towards the goal?

These types of status updates help to pinpoint additional resources employees may need to reach their goals. Over time, employees become better predictors of their work schedules, which is also useful to the entire organization. Also, they can focus on doing the right things well instead of simply getting them done.

When likelihood and quality information from each employee is combined with everyone else’s updates, the CEO, executives, and managers have valuable insight into what goals are in danger of not being completed – or completed well. This valuable foresight can allow them to take action to solve issues before deliverables slip and goals are missed.

Goal setting with a purpose — Without a formal system of goals and clear communication about vision and values, leaders risk playing a giant game of telephone, in which company direction is passed down verbally. By the time it makes it to the frontline employee, the meaning has been so contorted as to be unrecognizable. Then the management team is surprised when they find out employees aren’t accomplishing the critical initiatives. Additionally, leaders are not getting information directly from the people who know the most about what is happening on the front lines of the business.

Setting clear goals and helping employees align their daily work to those goals is the most important work the management team can do. In between, be sure to obtain regular updates on how employees are tracking towards their goals. This will promote greater alignment and ultimately, performance.