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As important as it is to set goals with your team — and it is important — the goals themselves are not the end game. The process of setting goals is more important than the goals themselves. In my experience, however, the process of setting goals is somewhat contemptible and, not surprisingly, rarely leads to any interesting change or improvement of behavior.
I once had a boss who set goals that he thought were hard to reach. But when I easily attained them, he backtracked on the promised bonus payments. His reasons for doing so were understandable, but now he had a high-performing employee who no longer trusted him. The poorly executed planning process left him looking for a new VP.
I had another boss who set stretch goals that were so lofty the whole exercise was pointless. People rolled their eyes when reviewing the documents of which he was so proud. When the goals appear impossible, what is the point of trying?
Yet another company I worked for left the goal-setting process so subjective that it literally provided incentives to employees to bribe their immediate supervisors at the end of each year.
Related: Smart Tips for Setting and Actually Achieving Your Business Goals
The system is the goal
What really matters in the goal setting process is the system put in place to achieve the goals. The path is more important than the destination. People need a how as much as they need a what. The goals, therefore, simply allow us to measure progress. They do not cause progress.
The right system should provide incentives for people to work together towards the same overall purpose. It should also be achievable given the best efforts of each person. This means someone who is not doing their best should be called out by the system itself rather than pitting players against each other. If the system does not call out unproductive team members, it will be up to the other team members to cast judgment on their teammates, which never ends well.
How to create the system
Design the system based on the expectation that each person on the team will do their best work. I say best work because nobody gets hired to do less than their best. People should do their best. Doing less than their best should carry consequences and doing better than best should carry rewards. Better than best implies that a person took it upon himself or herself to improve their overall ability to perform. A person who seeks out additional education and training, for instance, would increase their capacity to perform.
Step One: The Corporate Goal
The team’s overall shared purpose should be the success of the firm. So, the first step is to set an annual goal for the company. The corporate goal takes into account the abilities of the team and disregards external shocks. It is important to disregard disasters because it eliminates excuses that can lead to mediocre performance.
The corporate goal has a couple of parts. The first part is financial and defines success for the team. Success means the company is moving forward to create an economic benefit doing company stuff that meets or exceeds the economic benefit of doing other stuff. For instance, if the company isn’t keeping up with the rate of return for an index fund, perhaps you should invest in the market and find something else to do with your days. I realize this oversimplifies a bit, but make sure your team isn’t wasting their time. Falling short of the goal may trigger a restructuring of the company. Far exceeding the goal will be cause for celebration and larger expectations next year!
The second part of the corporate goal is a momentum goal. Momentum implies that the company is not only meeting its goal but also doing so in a sustainable way. This helps to avoid overly rewarding windfalls like huge government contracts that, if lost, could put the company in jeopardy.
A corporate goal might look something like this:
- Financial: $10,000,000 in revenue
- Momentum: 1,000 new customers
This would be a logical corporate goal for a company that sells technology that averages about $10,000 per customer. Once the team agrees on the annual corporate goal it is chiseled in stone. Corporate goals do not change!
Step Two: Individual Goals
With the corporate goal in mind, each person on the team will have their own part to play in making it happen. Each person, therefore, should be held accountable for goals that represent their best work. Set these quarterly so you can adapt the strategy over time. Annual goals have too long of a timeline.
$10,000,000 in revenue breaks down to smaller chunks over the year and ramping up. So, maybe Q1 is $1,000,000; Q2 is $1,500,000; Q3 is $2,500,000; and Q4 is $5,000,000. A four-person sales team, therefore, might each have a Q1 goal of $250,000 and 25 new customers. If the goal is missed, the team will have to shift more to the following quarters.
The sales team will need leads, of course, so marketing might be on the hook for a lead generation goal of 250 new leads per salesperson who are expected to close 10 percent. If the marketing person is responsible for generating lots of leads, it may need the IT department to implement a new CRM program before the end of the first quarter.
And so it goes…each person on the team has their own part to play when it comes to reaching the corporate goal. By the end of the quarterly planning meeting each team member should have two to four goals that add up to their part of the annual corporate goal. Each quarter the team should evaluate their progress and adjust goals accordingly.
Now I’m going to make it interesting…
Step Three: Milestones
A milestone is a checkpoint along the way to a destination, aka the goal. To create a system that calls out unproductive team members, you will need milestones. A milestone is a step towards a goal that can be owned by someone that is not the goal owner. The IT manager with the goal of launching a new CRM program during the first quarter may need the sales process requirements from the marketing person. So, CRM sales process requirements might be a milestone owned by the marketing person. Other milestones might be the CRM budget for the financial person, the purchase decision for the CEO, contract finalization from the legal department and so on. Milestones are measures of progress towards a goal.
Now, here is the best part: when milestones are missing you have an early warning that a goal is likely to be missed. If a goal is missed, the corporate goal is at risk. Everyone knows who missed milestones so missing them is a humiliating experience — as it should be! If you are someone who habitually misses milestones, maybe you should be replaced!
Better still is that when milestones are hit, the team has reason to celebrate, slap high fives and send good vibes to the milestone owner. There’s nothing like a good, concrete reason to celebrate that isn’t a birthday or a promotion. Getting the right things done at the right time is a good reason to cheer!
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With a system in place that goes beyond just the goal, a young company can ensure that it stays on the path to success. Each person who is part of the system is part of the planning process and gets the opportunity to negotiate their own success. They all get to agree on what they can deliver and when they will deliver it. This kind of buy in can be hard to come by with traditional top-down goal setting.
Let’s keep it simple
A systems-based approach to goal setting is more complex than a lone manager sitting in her office telling her underlings what to do. The complexity is what makes it work, where the simplicity is often the fatal flaws of other approaches.
Goals are good, but they shouldn’t be the goal.
Related: The Wrong Way to Set Business Goals