Don’t Set Goals, Make Commitments. A Modern Take on Goal-setting

There’s a growing trend of companies not only putting more focus on goal setting but also working to refine their goal-setting processes earlier in their life stages. While I applaud any and all goal-setting efforts, I have found that some approaches work better than others.

Goal-setting Methodologies: The Usual Suspects

The two best-known goal-setting techniques are equally popular, but very different:

1. Classic Goal Setting: Inspired by the approach of higher-performing, traditional companies, this strategy is built around establishing specific (usually quarterly) goals, which cascade in a very formal way throughout the organization. This method is typically used by manufacturing or industrial businesses with large workforces, such as GE.

2. Objectives and Key Results (OKRs): This more contemporary approach, popularized in large part by Google, involves setting lofty, almost unreasonable goals that you know you’re not likely to hit. It’s more flexible than classic goal setting, giving people a sense of where they need to go without locking them into a specific path or otherwise constraining them. This approach gets a lot of love in the tech space because it’s more fluid and agile, allowing individuals and teams to set big, aggressive goals and then measure directionally whether they’re moving toward them (and what percentage of each objective has been completed) without setting the expectation that any OKR will be completed 100%.

While each of these approaches has its strengths, they also each have inherent weaknesses.

Classic goal setting is often too rigid for startups as they try to deal with changing markets, shifting resources, and moving targets. OKRs, on the other hand, can be too loose. Most OKRs would say, for instance, that if the team gets 70% of the way to the objective, they’re “green” on a performance scale of green-yellow-red. That might fly for some companies, but if my son got a C- at school, it’d probably land him in trouble, if not after-school tutoring. Likewise, the OKR approach isn’t always the best fit for startups in competitive markets.

Commitments: A Smarter Way to Get Where You’re Going

When you’re trying to find the right goal-setting solution for an organization, you need to look carefully at the purpose and philosophy behind each of your options.

The purpose generally has to do with creating some level of alignment, to provide an effective framework for making decisions about how to use the limited resources within a company. The purpose of any planning exercise is to give the team some sense of not only where you’re headed, but also which work should take priority.

Philosophy comes into play when you’re thinking about the degrees of empowerment and accountability that people have within the goal-setting structure.

Studying goal-setting techniques through the dual lens of purpose and philosophy, I have found that making “commitments” is more powerful than setting traditional goals or OKRs. Whatever approach you take for goal setting, the language matters. Using the word “commitments” clearly conveys that you are committing to delivering something. It’s a bit of a public company mentality, which isn’t universally applicable across all areas, but which makes a lot of sense when it comes to setting goals. Making a commitment forces you to get very real about whether or not you can deliver what you’re saying you can deliver. If you aim for a “goal” and miss it, you can still say you tried. But, a “commitment” is different. It says you’re accountable and will deliver.

Tips for Goal-setting Success: The Painted Picture

I am a big fan of setting goals at the leadership level, but I believe that setting goals at that level and then cascading them down to each individual in the company is an old-school approach that’s ultimately a waste of time or, at the very least, one that doesn’t deliver enough ROI for the time involved. I’ll tell you why in a minute.

For goal-setting at the leadership level you want to get your leadership teams together, have a strong operating plan, and identify the drivers in that operating plan. Then, you can do an exercise called the “Painted Picture,” which will help you identify which strategic initiatives will need resources allocated to them, allowing you to set appropriate goals at the C-suite level.

The Painted Picture is something that has become very popular with my clients. It’s a way to create some balance between the short-term operating plan (usually one year out and broken down by quarters) and the lofty mission statement or “forever purpose” (which doesn’t come into play on a daily basis). What I found was that companies were struggling because there was nothing in between those two extremes to help guide day-to-day resource decisions.

Using the Painted Picture technique, the leadership team creates a three-year view of what success would look like across different elements of their company and for different stakeholders such as customers, partners, and teammates. This approach works because it takes you beyond the tactical goals around tasks and projects you have to get done today, ensuring you focus your efforts to help you identify and assess strategic initiatives that go across teams, require additional resources, are longer term, and have a greater potential for big impact.

With the Painted Picture exercise complete, an organization can then develop strong quarterly or annual “goals” for the leadership teams and the people one level below them (managers that own large teams or sub-functions). But – and this gets back to my earlier point of not cascading those goals down to everyone else – from there, you want to trust your leaders and managers to allocate the people on their teams appropriately. It takes an incredible (and largely unproductive) chunk of time for each individual to input goals into a system like BetterWorks, link their goals to their manager’s goals, get sign off on those goals, and so forth. That’s time that could be spent getting actual work done. And let’s be honest – much of the energy and cycles around goals has little to do with the organization moving forward. It’s about gaming the system to set oneself up for a good performance rating and ultimately a better annual pay raise.

Instead of requiring all that administrative effort, empower your teams to spend their energy and brainpower on figuring out how to get their actual work done. You don’t need a heavy goal architecture that rolls countless individual, teams, department and company goals up in a complicated hierarchy. In fact, my rule of thumb is to define no more than four goals per functional area (eg. marketing, finance, Hr ,etc.) per quarter, and then just give people some structure and a framework, and turn them loose. Again and again, I’ve seen this approach improve an organization’s productivity.

Measurement: Do’s and Don’ts

Of course, setting goals is only half the battle. Once you’ve figured out what you’re aiming for, you need to figure out how you’re going to measure performance against that objective. Just like some goal-setting approaches work better than others, some measurement methodologies work better than others.

What you don’t want is a gaming system for goals. This is a common pitfall that many organizations fall into by directly and overtly tying goal achievement to the performance review process and – ultimately – compensation. It’s not hard to see why this approach can quickly become problematic. To prepare for a goal-driven performance review, the typical employee is going to create goals that are just hard enough to earn manager approval, but easy enough to achieve without too much trouble.

Instead of measuring performance based on goal attainment, it’s more effective to ask whether the person took full advantage of their opportunity for impact. At the end of the day, what’s more valuable to an organization – hitting potentially meaningless goals or maximizing real-life impact? If you pay people based on whether or not they achieve their goals, you’ll end up creating an environment in which people don’t stretch. But, if you pay people based on their relative impact (the impact they actually had vs. the opportunity they had to create impact), they’ll swing for the outfield.

The trick is to find the right balance between stretch goals you may never reach and more attainable goals that help motivate the team. One way to find the sweet spot is to work on goal setting as a group. If you have the leadership team individually draft their goals and then bring them to a larger group for open debate, the groupthink will tell you pretty quickly whether a particular goal is too hard or too easy. If something looks like a soft ball, the other team members will call it out. On the flip side, teams can encourage each other to stretch by engaging in a little friendly competition.

Once you’ve sorted out how you want to handle the relationship between goals and performance reviews, you can look at measurement at a more tactical level. Each goal has a mix of quantitative and qualitative measures. You want to track not only whether you got the outcome you wanted, but also did you actually deliver and build the capability (i.e., develop the programs or move the work you said you would move)?

Sometimes, moving the work doesn’t move the needle as much as you’d hoped, but you still want to recognize the work that’s been done and acknowledge that you’re adding capabilities that can be fine tuned and used in other capacities. I recommend setting and reviewing goals on a quarterly basis in a very visible way that allows you to share progress across the company. The question to ask at these reviews isn’t whether you’ve achieved the goal, but a) what kind of progress have you made so far, and b) do you believe you’ll be able to achieve the goal by the end of the quarter? After all, one of the outcomes of this process should be to improve your ability to predict and gauge what’s possible. Yes this is a public company mindset, but a valuable one for all companies. Just think about pitching your investors on your future performance and how that lines up with your next attempt to raise funding. It matters!

That last question is important not only for operational planning, but also because it’s an excellent tool to help teams develop the skill of accurately predicting their ability to deliver work. Building this muscle is an important part of a business’ ability to forecast – using goal setting as a way to not only give people in the company a direction, but also to help them understand how the big functions come together and where their team fits in.

Once you understand the bigger picture, it becomes clear that goal setting and measurement aren’t just about hitting numbers. They’re about building critical capabilities and the kind of culture where people understand where their function fits within the company’s goals and are eager to be empowered to get the work done so they can have a real impact.