How to Set Goals: Part 2 – Looking Forward
“If you don’t know where you are going, you’ll end up someplace else.”
Now that we know where we ended last year, it’s time to make sure we’re headed in the right direction for the next year. Pull out the reports you generated by reading the previous article. Pick 3-5 areas where things did not go as planned. Measure the importance of each item by asking, “if this problem was fixed, how much more profitable would my company be?” This should be your focus…money.
Your company cannot stay in business if it is not profitable. Prioritize your 3-5 areas to address based on direct financial impact to your business. It’s easy to get caught up with pretty or popular trends in goal setting. Let’s put a few years’ goals into place before considering “soft” goals.
Identifying motivations
Take the first item you want to improve. Take a minute to evaluate how you feel about its historical performance. Measure your emotions and try to remain objective. Identify what behaviors you perform that impact this item.
Now look at all other employees and identify which employees have access or permission to manipulate or contribute to this item. Understand your employees will not have the same perspective as you. The sooner you understand this fact, the quicker you’ll get at understanding motivations.
*Motivation - the reason or reasons one has for acting or behaving in a particular way
Your employees show up for work (on time?) because they are motivated enough to do so. That motivation may come from not wanting to be evicted, protecting a sense of pride, or honest excitement about working for your company. No matter the reason for showing up, the employee shows up. The difficult part is that you can’t be totally sure what the motivation is!
The beauty of goal setting is that motivations are made transparent. This transparency is critical to receiving feedback from your employees on these goals. You may learn that the motivation you assumed was totally wrong! As we develop these goals, you may want to bring in your top leaders to get their buy-in as well as minimize any incorrect assumptions.
Here are a couple examples of how to set a goal based on an item needing improvement:
1. After reviewing all sales and purchase reports, you find that sales are lacking. Customers are only buying the basics and not exploring the number of services offered by your company. After meeting with your top management, you find that employees are reluctant to upsell a client due to a number of reasons (some you don’t believe).
You now have identified the problem, but motivations that drive behaviors are not clear. Our purpose is to create a functional solution and combine it with supporting behaviors. We get the supporting behaviors by designing incentives that encourage/motivate employees to perform those behaviors.
For this issue, sales figures, it might be prudent to set up a friendly competition among your employees that sell. If customers were only buying one type of service, you could identify other products and their profitability margins that you want employees to advertise to customers in hopes of increased sales. Measure the financial impact to the company and split a small portion of the increased profits amongst those whose behaviors made the difference. You can also use gift cards, free vacation, public recognition, advancement, and more to drive home the same acknowledgement for a little less cash. In either situation, be sure to explain to employees that any new programs are designed to make the company more profitable. This is a good thing for them because payroll is funded by profits.
The most important point of aligning a reward with behavior is to be mindful of “gaming”. Employees may try to achieve the reward through minimal behavior changes. This might not be enough to actually drive company profitability. Keep things simple and blunt. If your goal is more sales, consider offsetting sales with returns. If you observe the behavior-reward mechanics aren’t accomplishing the goal, change it!
2. After reviewing all project costs, you find that material costs for one project was way beyond expectations. Spend some time with your leaders and anyone involved to understand what caused such a deviation from expectations. Was it weather, scope, bad design, customer changes, bad materials, or some other factor that easily explains the difference?
Focus on root cause analysis rather than assigning blame. Note what information was available at the time of the decision. Using only that information, would the same decision be made again? If so, what processes could be put in place to ensure the same mistake is not repeated? If someone made a bad decision, address it with him/her another time. Instead, take this time to outline the whole decision-making process so the next project leader will be aware of past issues.
Sure, this may take a little time, but think about how much this mistake cost your company. The time you take now to understand the reasons behind decisions and behaviors will directly impact your bottom line! Spend the time and do it right.
Now that you have some goals in place, you can start measuring how effective your plans are. At the end of next year, you should also have clear objectives, responsibilities, and results for the goals you set this year. Having such clear data next year will make this whole process MUCH easier.
As you set and accomplish goals, don’t forget to reward those that are helping the most. The money you save by not repeating past mistakes directly impacts your profitability.
What could you do with some extra capital next year?
