Situation: It is early December and the Board of Directors has approved the final 2011 budget that took 3 months for the senior team to pull together. As the new CFO, while you are anxious that “the number” for 2011 is aggressive compared to what the company did in 2010, you feel pretty good that the team was highly engaged in building the plan and laying out the major milestones required. The senior team knows what it has to do and feels sufficiently uncomfortable, but is not screaming in pain with what will be required.
One day, while you are refining the management reports and tracking tools that the team will use to measure performance and forecast resource investment, you decide to walk into the CEO’s office to discuss what changes the company should make in its employee goal setting and evaluation process to accommodate the 2011 company goals. Jim the CEO, while a big fan of company events and building employee morale, has never been an advocate of investing in formal individual employee goal setting, evaluation and feedback processes. “It is our job to communicate the revenue and expense goals to the employees and tell them what they have to do. If they do it, they get rewarded, if they don’t they should be worried about their jobs. Big formal employee quarterly or annual evaluation processes just add administrative burden and take up time better spent out with customers closing deals. Remember we are not IBM, we are a $50mm company.” You respond “Jim, you are right that it takes time for each employee and his / her manager to sit down and talk about individual goals, how they are linked to company goals, and then follow-up with written reports on performance. If we don’t do that though, how will Jenny the new hire in marketing understand how what she does every day contributes to the bigger goal of growing revenue 100% for the year? It also makes it clear to her what she has to do to shine, get promoted and make more money.”
How strongly should you push?
Setting and achieving big goals requires detailed planning, team buy-in, broad communication and clear connection of individual performance to the goal.
All of us have goals and dreams, small and large. Except for a gifted few that are born with IQs of 180, have music flowing out of their fingers at age 4, or are lucky enough to have unlimited access to resources, most of us are forced to set and achieve little goals on the path to reaching our dreams.
For an organization, the effectiveness of that goal setting, the planning involved, and the techniques used to direct and motivate a workforce will determine whether a company will achieve great things and have ecstatic stakeholders or be mired in mediocrity or worse – out of business. Will it climb the mountain or stand in the meadow wondering what it is like to hang on the side of El Capitan.
Goal setting is a basic function of a successful organization. Set a long term vision / plan, detail the milestones necessary to meet that vision / plan, then drive the team to hit the milestones. Pretty simple, pretty basic. Planning and tracking progress whether it is long term forecasting, yearly budgeting, monthly goals, or weekly staff meetings is an essential part of the DNA of an organization and the only way to get a group of people working together toward a mutual goal.
The senior management team and the Board understand clearly how setting business and financial goals, planning, reporting / tracking, accountability, etc. directly relate to creating value (financial and otherwise) for the business and themselves personally. The challenge for senior management and the Board is institutionalizing “buy-in” of those goals throughout the organization.
While employees get satisfaction when an organization is successful and achieves great things, I believe most people look at goal achievement in generally three ways:
(1) the financial and other personal benefits of achieving their near term individual targets (hitting sales goals, new client / product goals, cost reduction goals, closing that deal, etc.);
(2) the feeling of pride and accomplishment of being a part of a winning team / an industry success story / being a game changer; and
(3) a general knowledge that if the company does well and they have a stake in the success - at some point in the future when the company goes public, is sold, or gives capital back to the shareholders, they will get something.
In order to align personal success with organizational success, the company must create “buy-in” throughout the organization and directly connect individual employee goals with corporate goals and the long term vision. How do you do that?
• At the top of the organization set a long term vision for the company and communicate that vision often – “This is our long term goal”.
• Set reasonable intermediate and annual stretch goals with the Board and investors that layout the path to reach that long term goal.
• Get input and buy-in from the team on the intermediate and annual goals, adjust as necessary and layout the major milestones to hit those goals.
• Drive the company to build team and individual action plans that set forth what has to happen on a day-to-day, month-to-month basis to hit those goals.
• Build individual and team incentive plans that reward goal achievement and over reward over achievement.
• Institute individual and team employee performance evaluation systems and tools to measure performance against those goals.
• CREATE MANY OPPORTUNITIES TO “RING THE BELL”. Success breeds success, strong and excited employees attract more strong and excited employees, achieving small goals will lead to achieving big ones and result in many reasons to celebrate individual and group performance. This last point is the critical connection point between the corporate goal and the employee. If done properly, it lays the foundation for a great corporate culture.
Organizational success is directly tied to goal setting and achievement. If you set a long term goal people believe in, reasonable short and medium term goals that create many opportunities to “Ring the Success Bell” and reward performance then you will be building a “winning” corporate culture that will attract the best and the brightest and maximize the chance for success. If you set unrealistic goals that lack buy-in and rarely allow you to celebrate “wins”, then corporate culture will suffer, people will become unmotivated, the best will leave, and achieving the organization’s long term goals will become very difficult. In business, as in climbing El Capitan, the cost of failure of setting unrealistic goals can be devastating.
-Bob
For those of you interested in knowing what it is like to hang on the side of El Capitan in Yosemite Valley, this clip will show you what it is like.
Youtube Video - El Capitan Climb
Youtube Video - El Capitan Climb
