January 25, 2018

Enterprise goal-setting is broken. Here's how to fix it

BY: Charles Watson
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Six tips for setting goals that have impact - How does your business stack up?

Only 8% of companies believe performance management drives high levels of value.[1] So it’s unsurprising that 79% of global executives say redesigning performance management is a high priority.[2]

Companies that are rethinking performance management are reaping the rewards, with 90% enjoying improvements in employee engagement.[3] 91% of companies say they now have better data to inform their people decisions.[4] 

Goal-setting is the first step in the performance management journey. And it’s something that organisations often get wrong, relying on outdated processes to set irrelevant, rigid and uninspiring goals that achieve little.  

That needs to change. So here’s a clear blueprint to set better goals.  


#1: Business-aligned individual goals 


The old way.

Cascading goals from the CEO down to the most junior team member used to be a staple of goal-setting. The principle was to ensure goals connected to what the CEO was trying to achieve.

So the CEO set their goals, then the next level down set their goals, then the person under them set goals based on their managers goals, all the way to your front-line employee. This wound up focusing team members on other team members, not on enterprise or even department goals. 

It also meant employees’ career aspirations weren’t taken into account as part of the goal-setting process, which is critical to motivation, engagement and performance.


The new way.  

Effective goals improve both the business and the individual, balancing enterprise performance with employee development.

Managers should help employees understand enterprise and departmental goals, to help individuals set goals that align personal performance to business objectives.

The idea is that each employee should have meaningful personal goals that progress their own career, and that also tie into team and business goals and outcomes. The most effective managers are facilitators for this process, guiding employees to exciting goals while clarifying the bigger picture. 

How we track and measure performance towards those goals has fundamentally changed too, with employees encouraged to give feedback about their own performance, upwards about their manager and sideways or downwards to colleagues.


#2: Real-time, relevant goals 


The old way.

The dreaded annual – maybe twice-annual, if an organisation was really innovative – appraisal. Which is almost entirely useless, given Deloitte’s 2015 finding that 82% of companies felt annual performance evaluation wasn’t worth the time.[5]


The new way.

There’s no point having goals unless those goals help you do a better job. But businesses face changes through the year, so the priorities and challenges facing individuals need to change with it. What’s needed are dynamic goals that can flex to accommodate change, so they stay useful and relevant through the year.

Managing goals through an annual appraisal is like managing a marriage through a discussion on your anniversary.

Employees today respond best to continuous performance management, with on-the-go progress check-ins and flexibility to keep goals relevant. Businesses that provide that see increased productivity, improved employee engagement, faster innovation and better agility.


#3: Simple, measurable goals


The old way.

Goals were set and measured based on complex formulas, often calculating performance using percentage-weighted goals.

This often meant too many goals were set, with many less important ones distracting the employee. 


The new way.

Organisations today recognise the need to set fewer goals (3 to 5 at a time works well), with clear metrics to measure achievement. SMART (Specific, Measurable, Attainable, Relevant and Timely) is, as Harvard Business Review points out, a useful ‘spellchecker’ for goal format (as long as you don’t over-rely on the formula[6])

Weighted goals don’t need culling completely - helping employees understand goal priority helps them more profitably allocate their time. But avoid percentage weightings in favour of clarifying priority.


#4: Social, transparent goals


The old way.

Goal-setting and performance appraisals used to happen behind closed doors, between manager and employee. Or just manager. It was an added bonus if the employee was involved in setting those goals not just meeting them. It was very rare for team members to know each others’ goals.


The new way.

Transparency is best practice; a community conversation where employees play a central part in setting goals and everyone has visibility over everyone else’s goals.

The reason is two-fold. First, it makes goal management part of the everyday conversation. Crucial to creating a culture of active goal-setting.

Second, research consistently shows we’re more motivated to achieve when we’re publically accountable. When poor performance can be swept under the carpet, expect poor performance. Or give everyone the best chances of success by making goals transparent across the business. 


 #5 – Achievement-based goals


The old way.

Goals were often lifted straight from a job description. They related more to activities than achievements, like ‘oversee portfolio of assigned clients’ and ‘develop new business’.


The new way.

Instead of listing activities, goals should define a specific, measurable end result, with a set deadline and clear reason for having that goal. That way, employees are much more likely to meet the goal because they know what’s required, when, why and how to quantify their achievements.

Instead of ‘oversee portfolio of assigned clients’, try ‘increase client satisfaction rating by 5% in end-Q2 survey’, for example. Instead of ‘develop new business’, try ‘grow EMEA client portfolio by 10% in Q3’.


#6 – Stretch goals


The old way.

Either employees set goals they could achieve with their eyes closed, or managers set goals employees couldn’t achieve if they never closed their eyes again. Either way, the result was the same: demotivated, uninspired and unproductive employees.


The new way.

You’ve probably heard the phrase, ‘stretch goals’. Stretch goals are goals that push employees that extra 20%. Even 50%*. Done right, studies prove stretch goals increase effort and improve performance.

 *It’s totally normal for stretch goals to be missed, by the way. When goals are seen as the minimum acceptable standard you arrive back at the old way, where employees set basic goals they know they’ll meet.

Stretch goals are a simple concept, but more difficult to get right in practice. The problem is, one person’s stretch is another person’s strain. And another person’s steady.

The best way to effectively implement stretch goals is to establish those collaborative processes we spoke about earlier. Every individual should get help to define goals that stretch them.


Better goal-setting for better business


When the business gets goal-setting right, everyone feels it. You’ll know what we mean – it’s that feeling where everything slots neatly into place. Your people are pulling in the same direction. There’s a buzz in the air. Challenges are exciting, not threatening. The extra mile becomes the everyday.
That’s why hundreds of big businesses from GE to Adidas to Netflix are embracing radical new performance management strategies. Because here’s the thing - when you get the most from your people, you get the most from your business.


New goal-setting demands new tools. Watch this short video to find out how TalTrack’s smart platform helps transform your talent management, to transform your business: LINK  


[1] Deloitte, ‘Performance Management is Broken’.

[2] Deloitte, Global Human Capital Trends 2017, p65.

[3] Deloitte, Global Human Capital Trends 2017, p65.

[4] Rock et al., ‘Is transforming performance management worth it?’ Cited in Deloitte, Global Human Capital Trends 2017, p67.

[5] Deloitte, Global Human Capital Trends, 2015. Cited in Deloitte, Global Human Capital Trends 2017, p65.

[6] Harvard Business Review, HBR Guide to Performance Management, 2017. P14.

About the author Charles Watson

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Watson leads the TalTrack team and is a proven marketing and sales executive with over 25 years’ experience developing and managing results oriented, customer-focused and revenue driven teams. He is an operational and innovative partner to HR on critical and complex organizational and leadership issues such as employee engagement, talent development, corporate values, acquisition integration and cultural change.