Link goals directly to incentives. Sometimes it's money, bonuses, stock. Other times it's awards, time off, promotions. Make a direct linkage between the goal and the reward. If you have a commit/stretch situation, have the bonus be on a sliding scale instead of "all or none." A team gets extremely frustrated when they hit 90% of the stretch and get nothing for it. They should get 90% of what was possible.
- If you want your people to hit their goals, you should probably give them an incentive for doing so. Sometimes incentives are money. They can be salary or bonuses. They may have incentives that are stock or options. Other incentives can be awards, time off, or promotions. Something that's going to be meaningful and exciting to that associate. When you set the incentives, make a direct linkage between the goal and the reward. For example, if you have a commit goal and a stretch goal, put the bonus on a sliding scale between those two instead of creating an all-or-none scheme.
Teams can get extremely frustrated when they hit 85% of their stretch goal and they get nothing for it. They should get 85% of the possible bonus. I've been in both of these situations. I was in one organization where we had a commit of $50 million of profit and a stretch of $75 million of profit. At $50 million dollars, our bonus was going to be zero. We hit the commit, there was not gonna be a bonus for that. At $75 million of profit, the bonus was going to be 10% of our salary.
At the end of the year, we had hit $62 million. We got a 5% bonus because we made it halfway between the commit and the stretch. There was a sliding scale. Did we get all the potential? No. Were we happy with a pretty good sized bonus for the effort we turned in? Absolutely. I know another organization where the division failed to meet its goals one year and they got zero bonus, which was appropriate. They missed their goal. They missed their commit. The next year they worked really hard.
They exceeded their goals by 20% so they were into that stretch territory. The bonus should've been pretty large. However, corporately, the entire organization missed the high-level goal, and what the organization decided to do was zero out everybody's bonus. Nobody got an incentive that year, even the division that had exceeded their goals by 20%. Needless to say, everyone was pretty frustrated with that situation, and the next year, when it came time to exceed goals, they looked at it and said, "Why should we bother? "We won't get a bonus this year anyway." The incentives weren't properly constructed to drive the right behavior.
When you look at your goals and your team, think through the incentives. Think through what do they get if they hit the commit, what do they get if they hit the stretch, and how are you going to create that gradient between the commit and the stretch to compensate them appropriately for the efforts that they turn in.
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