Goal setting can have surprising impact on business outcomes !

Business Excellence Series Title - 6

The business results are dependent on large number of variables, internal and external to the organization. External factors like competitive landscape, market dynamics, socio-economic changes, customer preferences and macroeconomic policies can significantly impact business results. These are beyond our control and have to be anticipated and managed proactively, using gut feel and insights based on our collective experience.

At the same time, there are numerous internal variables that are impacting organizational performance like product design, manufacturing capabilities, technology deployment, quality processes, people competencies, leadership and organizational culture. These factors are relatively more in control of the organization and can be reviewed and aligned for expected performance.

However, there is one particular organizational process, which sometimes is not focused sufficiently, but has potential of impacting business outcomes in a very significant manner. This is the Goal setting process which involves defining, monitoring and achieving targets by every division, function, department, unit and individual.

Our Goals can only be reached through a vehicle of a Plan, in which we must fervently believe and upon we must vigorously act. There is no other route to success. Pablo Picasso

Have you encountered a situation that most of the employees, many departments and multiple functions achieve their annual targets and many of them even over achieve it (more than 100%), but the organization as a whole does not achieve its overall objectives set for the year!! This primarily happens because of loose goal setting lacking objectivity, stretch and appropriate linkages, leading to unreasonable expectations in terms of rewards.

There are some simple principles which need to be followed to ensure that the goals are set in a well synchronized manner, so that the whole system moves together and contributes to a common objective. After filtering from large number of actions that one needs to take to achieve above outcome, I would recommend few key priorities, which can add huge value to the goal setting process and lead to significantly higher outcomes.

Start it from the top

The goal setting exercise has to be started from the top of the organization. Many times, organizations try to use an easier route by initiating this exercise with junior most employee. It has been seen through multiple studies that this approach is not effective and leads to multiple issues including misalignment of goals.

Moreover, the targets of a team members have to align with those of the Team leader, so that it helps the Team Leader to achieve team’s goals. That leads us to the fact that the goals and targets of Teal Leader need to be finalized first, so that they become the input for Team member’s role. If the same is extrapolated to all parts of the organization, it will mean that the goals and targets of CEO have to be finalized to start this exercise, and then the same need to be cascaded down to the last employee.

Link Vision/ mission to goals of every employee

The most effective way to start goal setting exercise in any organization is to initiate discussions at top most level on what they will like to do in coming year, aligning their efforts towards achievement of Mission and Vision of the organization. The organizational priorities get derived from Mission and Vision, that are then consolidated with the strategic objectives and expectations of all stakeholders from the company during coming financial year.

The above becomes the input for finalizing organizational goals and targets, leading to CEO’s goal sheet. This then cascades to next level of business/ Function heads and then further down the hierarchy. This ensures that the collective achievement of all employees truly adds up to overall organizational targets, and effectively takes care of the situation, where most individuals achieve targets, but overall organization does not.

Cover all dimensions

Traditionally, financial measures have found maximum focus for setting goals in the organization. However, it has been established by multiple researches that the more effective way of maximizing performance is to balance financial measures with performance measures and objectives related to all other parts of the organization.

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Balanced Score Card is a very popular and effective tool for doing the same. In this methodology, the attempt is to balance focus on financial and non-financial objectives by defining goals across the organization in four perspectives namely, Financial, Customer, Internal Processes and Organizational Capacity. While these were prescribed dimensions by Robert Kaplan and Norton, but lately these dimensions have been tweaked by various organizations based on their priorities, maintaining the fundamental principle of covering multiple dimensions.

Address interdependencies

While carrying out goal setting exercise, it is critical to keep in mind that organization is a highly interconnected organism. As a result, the achievement of goals of one part are directly or indirectly dependent on other parts of the organization. Production cannot achieve its targets unless supply chain procures as per their target time lines; and supply chain cannot achieve their target unless finance arranges for the funds as per schedule.

It therefore becomes very relevant to understand these interdependencies and lock them, so that all parts work in sync and the organization as a whole is able to achieve its objectives.

Build objective measurable targets

Having identified the goals, the next step is to agree on measurable targets, so that an objective assessment can be made on a periodic basis for review, course correction and reward.

It is a best practice to have SMART goals, which are Specific, Measurable, Achievable, Realistic and Time bound. I would prefer to replace Specific with Stretched and Achievable with Ambitious. The targets that can be achieved by putting normal effort are not exciting enough for most teams, at the same time targets which seem unachievable may dis-engage the team. Therefore, it is critical to maintain right balance and provide just enough stretch, which provides sufficient challenge to their imagination, and helps in unleashing team’s potential much better. https://www.unleashpotential.in/post/shaping-high-performance-teams-in-smes

Constructive Review mechanism

All this meticulous exercise of goal setting will go for a toss, unless a robust review mechanism is put in place and effectively implemented. All the managers and team leaders need to be formally trained to carry out a periodic review of goals with their teams and provide constructive feedback, for helping them achieve the same.

The reviews have to be done not only at individual level but also team, unit, function and organization level. These regular reviews throw out possible gaps which can negatively impact achievement of targets and should be addressed within the team or in coordination with other teams, functions and departments on priority. The reviews have to be rigorously followed on a regular basis across the organization, for ensuring corrective actions in timely manner.

Agility to respond to market changes

In today’s VUCA world, where environment is highly Volatile, Uncertain, Complex and Ambiguous, every organization has to be watchful of the changes and be ready to respond quickly. The age-old practice of setting the goals at start of the year and rigidly trying to keep working for them, does not apply today. The ongoing internal and external changes need to be responded quickly, to bring required changes in goals.

Its not necessarily downward revision of targets which may be required but it may also be upward revision, because of increased opportunity or regulatory changes. The changing environment may also necessitate review on interlinkages and interdependencies. The periodic review of goals should be able to display objective assessment of progress and agility to respond in view the relevant environmental changes.

Meticulous goal setting can surprise you with unexpected business outcomes

Conclusion

Inability to effectively address above aspects during goal setting process, leads to multiple gaps in performance achievement throughout the year and across functions. The non-achievement can always be justified or rationalized with number of reasons, but does not help the cause.

Whereas, if these aspects are meaningfully taken care of, the synchronized delivery mechanism of the organization as a whole, where all units, functions, teams and individuals are working in perfect sync, can become a high-performance delivery organism, which consistently delivers ambitious outcomes on sustained basis.

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