Goal Setting - The Finer Points

It is obvious that right objective/goal setting of employees is key to the growth of the company. If people do not know what their goals are or if goals are set in a fuzzy manner, the company is likely to be in a mess. Most goal setting models stress on goals being specific, measurable and time-bound. So I will not touch upon those. There are many other important aspects of goal setting:

1.    Linkage to organization objectives

There is a vast difference between saying “Chop the wood” and “Chop the wood so that we can build a ship that will sail around the world”. It should always be clear to the employees how their efforts will contribute to their organization.

The best method to achieve this is to set the organizational goals for the period and club the goals/objectives in one of the buckets of organizational goals. It should be extremely clear to the employees how their goals contribute to the organization goals during the quarter and what will happen to the organization if they don’t achieve their goals.

2.    Set by employee or set by manager

Employees are clearly more motivated when they set the goals by themselves (of course within the overall framework of organizational objectives). However, sometime organization has to push some goals down to the employees too. There is no right formula for it and it can vary immensely according to the industry, but there should be a balance between what employees want to do and what is best for the organization.

3.    BHAG vs achievable goals

Many established organizations stress on setting achievable goals i.e. goals which have a good chance of being met through hard work and right strategy. However, many start-ups use Big Hairy Audacious Goals (BHAG). Both the approaches make sense for the kind of stage the organizations are in. When we go in a completely unexplored field or a new market, what is actually possible is often much more than we think is possible. Startups also have go-to-market pressure to be faster than everyone and achieve sustainable revenues fast. Thus, BHAGs is the right way to go. The best way to set BHAG goals is through the process of OKRs, but it is a separate topic in itself.

However, if the organization choses BHAG, it is important to set a psychological safety net around failure. BHAGs, by their very nature are often unachievable. If someone achieves more than 70% of BHAGs goals, even if they were working 24x7 and using all possible leverage it means the goals were not really BHAG. There cannot be any penalty on job security, compensation or promotion on not achieving BHAG goals. Else employees will sandbag their goals. In such cases a longer trend is more important than a one-time outcome.

But when the organizations are doing more of the same and stability is at a premium, achievable goals make more sense.

4.    Amount of control given to achieve the goals

Not giving control over process and team to achieve the goals is like handcuffing a violinist and then asking her to play a sonnet. On the other hand, there is a saying in corporate world “If you set the target for 100% revenue growth, the revenue may or may not grow by 100% but cost will surely grow more than 100%”. That warns against use of giving too much leeway. This is especially true for BHAGs. Since people will try nearly everything to achieve BHAGs and that may expose the organization to unwarranted risks.

As a rule of thumb, employees should get as much control as possible for achieving the goals but not over levers which can expose organization to large risks. So, there should be strict controls against unethical behaviour, too much variance in prices or in costs, violation of company culture etc.

5.    Input metrics vs Output metrics

Output metrics refers to the final output we would like to see. For example, number of positions closed within Turn Around Time (TAT). Input Metrics refers to the levers we really have control over, for example employer brand, number of candidates reached & screened through push & pull channels, successful candidates/shortlisted candidates, offer conversion ratio etc. In short term all our energies should be focused on the input metrics because that is all we can control. Over a longer-term output metrices are more important since that is what we want to achieve. If we are not achieving our output metrics despite hitting all input metrics than we have chosen the wrong input metrics and we have to rework the model.

Thus, goals should be a combination of input and output metrics, and as far as possible tilted towards input metrics (except for functions like sales)