So often, companies set ambitious goals and leaders work hard to meet them with little success. Why does this happen? The answer is pretty simple, and we all get it: Setting goals disconnected from reality is a prescription for failure. Yet, prominent leaders and companies continue to make this mistake. And it’s pretty understandable. It’s much easier to set unreasonable goals than it is to do the right things that drive future growth and profitability.
There are three common situations that feed this problem:
- 1. Inability of a Leadership Team to Discuss the Business Intelligently. This should be pretty basic stuff. The real business needs should be considered carefully by the leadership team at least annually as part of the budgeting process. This should be done in an open and frank discussion, free from explicit or implicit intimidation by the CEO. Big presentations and reports tend to be vastly overused in these meetings and get in the way of productive discussions. The formula for success is to get the products & services, target customers and channels to market right. If this happens, the sales force will deliver the results. If this fails to happen, all the heavy goal setting and sales pressure will be a waste of time, de-energizing good people and weakening your culture.
- 2. Political Agendas of Aspiring CEOs. All too often, CEO-hopefuls contribute to setting unrealistic long-term goals to impress the incumbent CEO and the Board. Then, once they successfully reach the CEO role, they are saddled with these goals that do not connect to the future needs of the business. The result is a few years of weak performance and, not infrequently, the early dismissal of the CEO. In these cases, our advice to the incumbent CEO and the Board is not to buy into these over-ambitious goals that are not aligned to a reasonable business and growth strategy. Instead, think carefully about whether the proponent of these goals is really CEO material.
- 3. Over-zealous performance management. — Many companies impose fixed performance-rating distributions, setting the stage for exiting employees with low performance ratings. This “rank-and-yank” approach, spearheaded by GE under Jack Welch and copied by many companies that are heavily Finance-dominated, tends to inspire overly-ambitious goal setting to ensure that a reasonable percentage of employees will be rated at the lowest performance level. This syndrome is most likely where strictly financial metrics, rather than a balanced scorecard based on broad performance measures, is used to evaluate employees based heavily on manager discretion. It heavily undermines employee development and engagement.