There is a lot in an organization that can follow a ‘design once and deploy several times’ approach. Right horizontal and vertical structure of goals is one such thing.
Strategy building is an art. It takes capability, information, tools, analysis, decision making and finally the courage to commit yourself and the organization’s skin in the game. Much happens in trying to understand a market need, review macro-economic trends, figure out feasibility and longevity of a business opportunity and thereafter commit to a direction for business. Thereafter comes the next summit to peak, breaking the strategy down to strategic focus areas for a given year, and then going through a rigorous planning to find the goals that the functions, teams and individuals will execute.
It is at this point, that strategy and strategic initiatives fail to get translated into implementable elements. According to The Economist Intelligence Unit Survey in 2017:
- The average organization fails to hit 20% of its strategic objectives through poor or incomplete strategy implementation.
- 59% agree with the statement, “We often struggle to bridge the gap between strategy development and its practical, day-to-day implementation,” with fewer than one in seven disagreeing.
- Only 10% organizations succeed in implementing all their strategic objectives over a three-year period.
While this data is a bit dated, the covid period and a series of corporate debacles in the recent times, only go to say that these facts could hold-up even now, or may be even worse. Nevertheless, it’s the ethos of these failures that we need to tap into and resolve.
While there is a bunch of reasons that this survey called out, and are also known from other sources, there is one that stands out. It is bad alignment plus missing interlinkages of the functions and teams to the organizational strategy that causes a significant slip in strategy implementation. The result is poor performance management at an organizational level. This performance management is not what most of us are used to. Performance Management done by most organization means an HR initiative, where goal setting is to be done at the beginning of the year or quarterly if it is OKRs. Then doing some conversations and if lucky feedback. Then at the end of the year, doing reviews and closing with a rewards, promotion, and talent cycle.
While, on the process or toll gate side, this is fine, but on the quality side this isn’t enough, and the problem starts here.
Performance Management in true sense is an organizational function, not a HR responsibility. The first step of this is for the strategy design team and the strategy implementation team to come together and contribute to strategy crafting. This can be a once in 18 – 36-month event or even further spread-out depending on the industry. Not all organizations or sectors need a regular rewrite of strategy. They may need a yearly or six-month reality check and refinement so that 12 – 18 months down the line there is no struggle. Even several strategic initiatives picked-up by organization are never doable in just 12 months; so, no rewrite required here.
However, what all organizations need is a yearly strategic objective crafting & review, and a reality check through the year on what’s working and what needs to change. This is the second place where a strategy design and strategy implementation team need to work together – and not in isolation, so that performance management can further come alive. This will need time, conversations, and a lot of other ingredients as described in the introductory para.
The real work begins now. Once the strategic objectives are written, each function of the business and subsequently all the teams and individuals need to know what they need to do at their level and with each other to feed into a goal. The control of such goal crafting can be a grave challenge in large organizations. Hence, leaders at the top level, do a laundry list of goals under the strategic initiatives and leave the rest to their directs and people managers to manage. Often by the time goals are being written even half-way down the organization – the vertical and horizontal linkage between the goals of functions and teams are already missing. Thereafter, we all know the push and pull of performance or getting things done.
A productive way for breaking down the strategic objective into effective-aligned-interlinked goals is to break them down into:
- Outcome and impact goals
- Followed by process goals to meet the outcomes
- Followed by performance goals / capability goals to fulfil the process goals
- And as you do each step, ensure that alignments and linkages are clear between all functions and teams. This also includes any external Suppliers, vendors, consultants, and channels and channel partners.
There are three alignments to be looked at:
To understand this process, read through the definitions and example below. (The example I have used here, is real, but broad and indicative across industries. This can be used as a guide to do actual exercises in an organization, so that nuances can be built in from the actual work perspective. Additionally, I have used % as targets, but these can also be absolute numbers)
Outcome and Impact goals:
Are the goals which measure final impact for either Consumer / Customer, shareholders, or measure of success for the organization.
- This goal can be shared by all functions of the organization. Sometimes functions contribute to the goal partially and other times fully.
- These goals are mostly financial goals, customer matrix goals, brand positioning goals, awards, or credential goals etc.
- They are also bold, and ambitious, if growth of industry or the stage of the company allows.
- They can also be incremental given a limited scope to grow or scale.
- This is the first level at which goals need to be well-connected across functions.
Example: (this is connected to the example in the next two sections also)
Organization focused outcome: Improve profitability by 10%
Outcome and Impact focused functional goals (indicative, not exhaustive)
- Marketing – Increase customer retention – x%
- Sales – Increase repeat orders (reduced customer acquisition cost) – y%
- All functions – Reduce wastage – z%
Customer Focused Goal: Improve customer advocacy by 14%
Outcome and Impact focused functional goals (indicative, not exhaustive)
- Engineering – Increase in defect free delivery – x%
- Sales – Increase in customer sales experience – y%
- All functions – NPS Improvement – z%
Process Goals:
Are goals, that feed the outcome or impact. These processes in the organization need to deliver so that the organization performs, or the customer gets what they need.
- Most of these goals can be about the final effectiveness of the process.
- It is better to avoid efficiency measure for these goals as the final measure as they are only a measure of a process working – not delivering. E.g., Accuracy – is effectiveness, timeliness is efficiency.
- Some of these goals can be a lead measure – but the lag measure goal also needs to be clarified.
- Process goals are the next level at which goals and responsibilities need to be tightly integrated at the horizontal level and across each value chain in the organization.
Organization focused outcome: Improve profitability by 10%
Process goals at functional level / team level (indicative, not exhaustive)
- Marketing – improvement in effectiveness of messaging channels – xa%
- Sales – Improvement of Key Account Management matrix 1: increase in opportunity identification and propositioning – ya%
- All functions – NVA (non-value add) activity reduction – za%
Customer Focused Goal: Improve Customer advocacy by 14%
Process goals at functional level / team level (indicative, not exhaustive)
- Engineering – First time pass rate improvement – xa%
- Sales – Turnaround accuracy improvement on enquiries – ya%
- All functions – First time resolution rate improvement – za%
Performance Goals / Capability Goals
Are individual or team standards of performance and capability that will ensure the process goals and the impact goals are met. This is where the final essence of productivity kicks is.
- There can be a year-on-year improvement goals here or there can be a new area of performance identified.
- Team goals are owned by team managers – and they need to meet these for or through the team.
- Individual contribution goals can be assigned to both managers and individuals, where they are responsible for delivering whole or part of a result on their own.
- All individuals in the organization, even at senior levels, can and must have individual contribution goals. The quantum increases as we go to actual individual contributors / frontline in any function.
- This is the final level at which goals need to be interconnected for any team or individual contributing to the same or similar goal.
Organization focused outcome: improve profitability by 10%
Individual or Team Performance / Capability Goals (indicative, not exhaustive)
- Marketing (brand team) – Campaign engagement rate improvement – xaa%
- Sales (KAM – Key account managers) – Increase in AP (active presentations) – yaa%
- All functions (people managers) – Automation effectiveness increase (penetration & outcomes) – zaa%
Customer Focused Goal: Improve Customer advocacy by 14%
Individual or Team Performance / Capability Goals (indicative, not exhaustive)
- Engineering (Design Lead) – Reduction of design gaps – xaa%
- Sales (Pre-sales lead) – Scoping & estimation accuracy improvement – yaa%
- All functions (people managers) – Key capability gap reduction (of all ICs) – zaa%
Once Strategic Objectives are broken down into goals like this, it becomes easy to man-mark each of the 3 layers to relevant levels of the organizations. But a thumb rule is:
- Outcome and impact goals: to be owned by CXOs and Functional Leads or manager of Businesses.
- Process goals: to be owned by N-2s or other Departmental Leads or Manager of Managers
- Performance goals / capability: to be owned by Team managers, teams, and individuals. Some performance goals to be there at all levels.
The next step in true performance management is to identify and manage performance bottle necks. The management of performance bottlenecks can take interventions ranging from quality to IT, to Rewards to any other function that can support or unlock performance. But the crux of all this is to get the right kind of interconnected goals. Rest is all the drill to make the organization achieve the goals.
One more thing for leaders and organizations is to ask, how much of the 3 levels of goals are changing Y-o-Y. If the strategy and strategic initiatives have both not changed, then the structure of those goals may still be relevant. In this case, only the targets can be changed. Hence, if we were to work mindfully, we may not need to do a massive goals rewrite exercise every year. There is a lot in an organization that can follow a ‘design once and deploy several times’ approach. Right horizontal and vertical structure of goals is one such thing.
So, this time, when you are beginning the year or recalibrating, give your strategic objectives and strategy implementation a chance to survive. Get the right structure of goals going. Give performance and productivity a chance to thrive!
Sai Kumar Chandran is the founder of OrbitShift. He is a coaching and consulting practitioner and an entrepreneur at heart. He can be reached at saikumarchandran@orbitshift.com.
