Organizational Excellence: How to Set Company Goals?

Goal setting is an important part of any business cycle and a very necessary step when it comes to achieving company targets. Yet despite spending time in workshops and meetings to discuss goals, companies often experience a sense of disappointment when things don't work out as planned. This not only can be discouraging for the team but can quickly spiral into negativity. Indeed goal setting is not straight forward and leaders increase their ability to achieve goals when they master this skill.

Avoid the negativity cycle

In their HBR article "The Power of Small Wins," Teresa Amabile and Steven J. Kramer shared research on how progress towards goals is one of the most powerful triggers of positive inner work life, including overall mood, specific emotions, and motivation levels. In fact, progress towards goals is more likely to trigger a "best day" for employees, while setbacks are more likely to trigger a "worst day." The research revealed that progress and setbacks influence all three aspects of inner work life. On days when progress was made towards a goal, employees reported more positive emotions and higher levels of intrinsic motivation. On setback days, they reported lower levels of both intrinsic and extrinsic motivation, as well as negative emotions.

Therefore, to set goals effectively and achieve desired outcomes, here are five essential steps that organizations can follow:

Step 1: Focus on Initiatives, Not Outcomes.

One common mistake leaders make when setting goals is focusing solely on lagging indicators, such as revenue or profit, which are outcomes beyond their immediate control. Instead, effective goal setting in organizations requires a focus on leading indicators, which are behaviors or actions that are within their control and have a direct impact on the desired outcome.

For example, a common goal in businesses is to increase revenue. However, simply setting a goal to "increase revenue by 10% by end of Q3" is more of an illustration of an outcome. A better approach would be to identify the initiatives that will drive revenue growth, such as improving customer satisfaction or launching a new product line. Then, set specific initiatives around those goals, such as increasing customer satisfaction scores by 10% or launching two new product lines within the next six months.

By focusing on initiatives rather than outcomes, leaders can take ownership of the process and feel empowered to make the necessary changes to achieve success. This approach also enables organizations to measure progress more accurately and make course corrections along the way, rather than waiting until the end of a period to see if revenue targets were met.

Step 2: The Vital Few

To identify key goals, start with a bottom-up approach. Leaders in each area of the business should be tasked with identifying and presenting the initiatives they believe will create the best outcomes. By allowing all team leaders to identify these initiatives together with their teams, the organization gains a comprehensive view of its priorities and obtains buy-in from those who know their fields best.

The next step is to create a process to identify the critical few initiatives that the company will put resources behind. In his book "Essentialism: The Disciplined Pursuit of Less," McKeown emphasizes the importance of focusing on what is essential (“The vital few”) and cutting out the non-essential (“The trivial many”). Companies may want to consider focusing on five critical initiatives per quarter as a general guideline.

The best process to reach that vital few number is to use a simple but highly effective process.

• VOTE: The leaders start by doing a round of voting to identify the most popular initiatives.
• ADVOCATE: If someone feels that an important initiative did not make the vital few, and strongly believes it should, then they advocate for the initiative explaining the reasoning behind pushing it higher.
• VOTE AGAIN: There is then a revote, and the final list is reached.

Just voting may neglect to take into account some critical information that if considered would sway the decision.? This process avoids that. As Daniel Kahneman explains, when making critical decisions we need to tap into both System 1 (Intuitive) and System 2 (Analytical).

Once the top 5 have been decided, the rest of the initiatives can go into two buckets, the first is to continue to still work on them but with less focus and attention or second, to be reconsidered for the next quarter along with any new initiatives that come up.

Step 3: Getting down to business!

After identifying the most critical initiatives, the next decision, which should be pretty straight forward, is to decide what will be done by when and by whom. This step is crucial because it assigns a champion for each initiative. A champion is a person who takes ownership of an initiative and ensures its success. Research has shown that having one champion for an initiative is more effective than having several people responsible. The champion should have the necessary expertise, influence, and resources to drive the initiative forward and ensure that it stays on track.

The first role of the champion is to break down each initiative into smaller tasks and assign timelines to them.? This helps to ensure that progress can be tracked and also allows everyone involved to know what they need to do and by when.? Once broken down and before finalizing the goals and initiatives, it's important that the team reconvenes and each champion share that breakdown with the rest of the top team to ensure that everyone understands the steps and that they make sense. It also provides an opportunity for feedback and discussion, which can help to identify potential roadblocks and solutions before the process is sealed off.

Bringing it together

Effective goal setting is a crucial skill for leaders and a precursor to success. By following the five essential steps outlined above, organizations can set themselves up for success and avoid the sense of disappointment that often accompanies failed goals. By focusing on initiative goals rather than numerical goals, using a bottom-up approach, embracing essentialism, and assigning champions to each initiative, companies can take ownership of the process, measure progress accurately, and make course corrections along the way. By doing so, leaders can ensure that their teams remain motivated and focused, and ultimately achieve the desired outcomes.