The unintended consequences of goals

Goal setting has long been regarded as one of the key characteristics of an effective manager.  Goals are supposed to be SMART, according to business school dictum (Specific, Measurable, Achievable and Time-bound – i.e. with a “do-by” date).  Management guru Peter Drucker tells us “What gets measured gets done.”  Of course measurement is impractical where no goals have been set.

And yet goals can become self-defeating if they are not linked to the right activities.  That means activities that help to deliver the strategic aims of your firm.  The factors that drive success in those activities should form the basis of the goals.  Too often that is not the case.

At a very basic level, my first civilian job was in a business development role in the financial services industry.  The strategic aim was to win an ever-larger share of business from financial advisers, accountants and the like.  The single goal I was set was to hold twenty meetings a week with such people.  That was of course an input based goal; no output goal was set.  One might have been encouraged simply to go through the motions, focusing on the sheer number of meetings rather than their quality or the results.  I like to think that was not the case…

In a far more serious case, the Health and Safety Executive are currently taking the owners of the Smiler roller-coaster ride at Alton Park to Court.  This follows a crash that injured numerous people, some of whom suffered amputation of limbs as a result of their injuries.

The root cause is alleged to have been pressure placed on engineers to get the ride back into service following required maintenance. One said that he was aware that their performance was being timed in the control room and bonuses were at stake if they failed to meet the tight deadline.

US bank, Wells Fargo, has just fired over 5,000 employees following revelations that many thousands of bogus accounts had been opened by bank staff across the country.  The root cause?  The bank had set staff a target of cross-selling eight products per customer (the so-called “Great Eight”).  Leaving aside the wisdom of setting such an aggressive goal, one might also question the robustness of their internal compliance checks on new accounts.

As a final example of goal setting failures, three former senior executives at supermarket chain Tesco are currently charged with false accounting among other things.  It is alleged that they booked revenue before it had actually been received, thus massaging profit numbers.  One might assume that bonuses were once again at stake and leave aside the possible failure of auditors to highlight the problem.

What is a leader in a professional firm (indeed any firm) to do when setting goals?

  1. Define strategic success for the firm or for your part of it
  2. Consider the specific results that must be achieved in order to deliver that strategic success and what metrics are appropriate to judge them
  3. Consider the actions that the team as a whole and each member of it must carry out to deliver those results
  4. Communicate: discuss with the team as a whole and with each person individually their capability to undertake these actions and what they believe to be realistic results that can be achieved
  5. Where there is a gap in either perceived capability or results that can be achieved versus those that must be achieved, discuss how to bridge it
  6. Once goals and metrics are agreed, evaluate achievement regularly and frequently. Provide support as required
  7. Communicate and celebrate success
  8. If it becomes clear that required results cannot be achieved, despite best efforts, re-evaluate the goals.
  9. If it appears that the problem lies with the individual consider whether they can be developed so that they can be successful. If not, an early exit is probably best for all concerned.

Goals drive behaviors.  They are not the only factor to do so, but they exercise strong influence, especially if linked to rewards.  The second half of Peter Drucker’s statement is important: “What gets measured gets done.  What gets rewarded gets done better.”  Best make sure that you measure and reward the right things…

By Stephen Newton