Goals are set to change behaviors and generate different outcomes. Know what behaviors you expect to change once you set a goal and create incentives. For example, if you change from a revenue goal to a profit goal, do sales people start calling bigger accounts? Do they stop discounting so much? Which behaviors should change and how will you monitor those changes?
- The reason we set goals is to drive different outcomes, that means behaviors need to change. You need to know what the current behavior is, what the preferred behavior should be, and have the right incentives in place to make people change to that new behavior. Explain to people which behaviors should change and how you're going to monitor those changes. What new skills do you need to build for your people? Do you need to train them, coach them, give them different resources? What new information or resources will they need to demonstrate these new behaviors? If you want to hit your goals, tell people what the new behaviors are that you expect.
Only setting the goal without telling them what the behavioral guidance is, is a recipe for failure. Make sure they know how they should change the way they work and reinforce those changes regularly. There's a consumer package goods company who had a large sales force. That sales force was previously given incentives based on the revenue they generated. The company was trying to grow, that was their strategic imperative. So the goal of driving revenue was tied to that strategic goal of growth.
All the sales people had individual revenue goals for the year, the behaviors that led to was first, the sales people discounted heavily to drive revenue and steal share from competitors. Sales people also chased small accounts, they were easier to sell to, even if they were more costly to service. Lastly, sales people sold any product in the portfolio just to make the sale, rather than focusing on the products that drove profits.
Over time the company changed its goals. They said we're not gonna focus on growth anymore this year, we're gonna focus on profitability. So they needed to change from sales to gross margin. They told the sales people what behaviors to change. They said stop discounting, because those are all profit dollars you're giving away. They told them focus on larger customers, because they're cheaper to serve, so we'll make more margin by working with them. Lastly they told them to sell more profitable products.
They gave them the list of here are the products that are most profitable for us, you should sell those first. By the way, they also changed the entire incentive plan to align with these new behaviors. The result was those sales people started selling much more profitable revenue. They were selling to bigger accounts, selling more profitable products, and they were cutting out their discounting. That helped the organization achieve its broader goal of becoming more profitable. Look at the goals that you're setting, understand the behaviors people are demonstrating now, and what behaviors need to change to in order to achieve the goal.
The more you can spell this out for people, how you want them to behave, the higher the likelihood they'll change their behavior and help you hit your goals.
Along with providing guidance on how to link individual employee goals to organizational strategy, Mike walks you through the different types of goals, including bottom-up, zero-based, commit, and stretch goals. He also helps you use goals to change behaviors, build new skills among employees, and make goals actionable by using incentives and tying them to specific activities. He concludes with a comprehensive plan for setting and implementing goals, and some tips on dealing with challenges such as conflicting goals.
- Identifying goals and goal types
- Setting SMART goals
- Linking goals to business strategy
- Building goals from the bottom up or top down
- Creating stretch goals
- Outlining activities and resources to help employees achieve goals
- Reviewing and revising goals
- Reconciling conflicting goals