Time to Rethink Goal-setting
In a changing environment where technology, knowledge and business models become obsolete in the blink of an eye, companies need agility.
Today organizations need to explore what happens beyond their limits in search of new opportunities and emerging trends. They have to be aware of themselves to avoid the dangers of blind spots, and take decisions rapidly, and as close as possible to the places where those decisions have an impact. They also have to be able to reconfigure their structures so they can acquire, integrate, develop or reallocate a wide variety of capabilities as circumstances change, and learn from their mistakes and failures, as they do from success.
In this context some companies adopt agile methods of work organization, such as Scrum, now widely used in software development firms, while others question their management practices and eliminate those that add no value, or limit their ability to adapt to a changing environment. For instance, this is what Google did with its people management processes through a celebrated initiative baptized as “the big scrub of the rules”.
However, many companies still use working methods, processes, and hierarchical structures inherited from the industrial age, originally designed to maximize efficiency or quality in relatively stable environments, but which do not fit well in the turbulent business context where most organizations operate nowadays.
Goal-setting is one of those management processes.
The objective setting practices of many organizations are inspired by Peter Drucker’s Management by Objectives (MBO), a method he devised in the mid-twentieth century to ensure priorities are aligned across the different hierarchical levels of organizations, and the consistency of those priorities with the company’s strategy and its overall goals.
To achieve this purpose, Drucker designed MBO as a process “whereby the superior and subordinate jointly identify their common goals”. But still this participation is usually very limited or nonexistent on the practice. Objectives are typically dictated from the top of the organization and from there they are “cascaded down” to the lower levels of the hierarchy.
The first consequence of that is a disconnect between the objectives executives set in their offices and what the members of the organization, closer to the reality of the markets, think their goals should be. Sometimes those discrepancies are related to the performance indicators companies focus on when setting objectives, as they may not be the most relevant metrics in the eyes of employees, while in other occasions the bar is so high that goals are impossible from day one, leading to frustration or apathy, or even to the development of a culture of concealment and lies. This is what happens in some companies whose CRMs are populated of made up data for the only reason that their targets on “daily visits to customers” are simply unworkable.
Another drawback of those vertical and downward goal-setting practices is that the members of one team often do not have any visibility into the objectives of other teams and organizational units they need to work with. This results in a lack of lateral alignment that prevents those teams and units from moving forward in parallel, one of the fundamental principles of any agile organization.
Besides, objective setting systems are often linked to compensation practices that reward goal achievement, in some cases disproportionately. This makes people focus primarily on those goals neglecting other equally important things, and increases the risk that, once they have achieved their objectives, employees “lift their foot off the gas” pocketing gains for the next period; or that they waste time and energy negotiating conservative goals to secure those economic incentives.
In addition, in many organizations those objectives are set on an annual or biannual basis, without any mechanism for their review in the meantime, which may lead to people pursuing those goals even after the circumstances have radically changed and those objectives have lost all their significance. And this is a problem that can get bigger if objectives are formulated at a very low level of definition, without milestones that allow monitoring progress and early detecting if people are off course; and the same happens when goal-setting processes are way too bureaucratic and slow.
Finally, many organizations also suffer from a lack of tools. Just a few companies use technology to visualize and understand how individual objectives are interrelated, or how the relationships of collaboration around these objectives evolve over time. Even if there are already several solutions available in the market that can provide organizations with such insights, the same way as football teams learn from their previous matches by viewing videos, and using software that keep track of the passes between the players.
In summary, a long list of reasons that should lead us to question to what extent our goal-setting methods help us increase the agility of our organizations or, on the contrary, they represent a burden that can compromise our chances of success in a world that has radically changed.
