DON'T SET GOALS FOR 2017 UNTIL YOU'VE DONE THIS...
Many organisations hold strategic planning sessions at this time of year, to take stock of where they’re at, clarify priorities, and assign actions.
That is all to the good. Your correspondent heartily endorses a structured approach to management, which considers what’s going on internally and externally to the organisation, clarifies what’s important, and defines accountabilities for who does what by when.
However, there’s a fly that perpetually lives in this ointment and that is this: when setting goals, account is rarely taken of last year’s performance; specifically how that performance compared to last year’s goals.
How Strategy has Shifted
There has been a real shift in strategic planning over the past 20 years or so. Prior to that, goals were seen as paramount, as things that you started the planning process with. And so the process kicked off by discussing and agreeing goals: We want to increase earnings by this much; we want to reduce costs by that much.
But in an increasingly interconnected, globalised, deregulated digital world, there was simply too much complexity. Things were too fluid and consequently too many strategic plans were dead-on-arrival, rendered obsolete by events before the plan was printed and distributed. It simply wasn’t good enough to take last year’s figures and inflate them by three percent to generate this year’s goals.
And so a new understanding came to the fore: that goals are emergent. Goals are still vital, but rather than things you start the strategic planning process with, they emerge out of an analysis of the current environment.
Scanning the Strategic Environment: Necessary but not Sufficient
Most managers and senior managers are attuned to the need to scan the environment: businesses should analyse movements in the market climate (customer trends, costs, competitor manoeuvres etc.) while Government and not-for-profit organisations should map the stakeholder environment. These analyses are important both for the process by which they’re undertaken, and the results which they yield.
And yet, on their own they are not enough: they give no insight into the organisation’s ability to produce results, or to deploy. Or how realistic its take on the environment was. Or what has worked – and not worked – for the organisation. And why.
These latter factors need to be taken to book before goals are agreed, so that the right (or at least, better) goals can be set. Not doing so is the organisational equivalent of the individual who each year haplessly sets a New Year’s resolution: exercise more, drink less, eat less chocolate, and so on. Noble perhaps, but essentially empty aspirations rather than solid undertakings grounded in a clear sense of what does and doesn’t work.
Examples and Case Studies
What does this review of goals and results look like in practice?
A business might decide it needs to cut its operating costs by 10 percent to stay competitive. Yet when management reviews last year’s results against a similar goal they realise an across-the-board staff cut combined with a hiring freeze starved high-performing divisions that needed resourcing, while going too easy on low-performing areas that could have copped a 15 percent cut. They therefore decide to adopt a new target with a more finely-grained approach to cost control.
A Government department may have aspirations to acquire another Government organisation. Yet in reviewing last year’s goals and results, management realises that their own operations need stabilising before they can credibly make a bid to acquire another department or properly absorb it. So they focus this year on consolidating their operations.
A not-for-profit’s fund-raising goal might be modified when, after their review, they find that their fund-raising efforts have typically centred more on their own organisational convenience than on what works for their donors. So they change their fund-raising target and program accordingly.
Short-Circuiting Organisational BS
A wise head cited in the business classic Good to Great observed:
…when you set your objectives for the year, you record them in concrete. You can change your plans through the year, but you never change what you measure yourself against. You are rigorous at the end of the year, adhering exactly to what you said was going to happen. You don’t get a chance to editorialise. You don’t get a chance to adjust and finagle, and decide that you really didn’t intend to do that anyway, and readjust your objectives to make yourself look better. You never just focus on what you’ve accomplished for the year; you focus on what you’ve accomplished relative to exactly what you said you were going to accomplish – no matter how tough the measure. (p. 122, emphasis in original)
This contains perhaps the best reason to review performance against last year’s goals: because we are the biggest victims of our own spin.
How convenient it can be to indulge in the collective amnesia that enables executives to slide around last year’s goals in a whirling dervish of commentary about the year’s accomplishments (or at least activities). I’ve seen it more than once. It’s too common, and it leads to mediocrity at best.
So: revisit your 2016 goals, and how you performed against them. Then do a strategic scan of your environment. Then set your goals for 2017.
It’s a powerful way of reality-checking, of short-circuiting our tendency to produce BS simply because as senior decision-makers we can. And it is evidence-based, grounding the whole effort in reality.
As one of the most successful CEOs in recent times – Alan Mulally of Ford – was fond of saying: ‘Facts and data set you free.’ What better basis for strategic goal-setting than a fact-based review of results relative to goals?
And so, with that in mind, I recommend putting 2017 on a solid evidence-based footing by setting clearly defined goals based on a realistic review of last year’s goals and results.
Director I Michael Carman Consulting
PO Box 686, Petersham NSW 2049 I M: 0414 383 374
Jim Collins (2001) Good to Great Harper Business.
© Michael Carman 2017