The current process of yearly goal-setting practice in most of the companies is dead. The 3 major reasons for this dead-end process are:
- It doesn’t make sense to employees, managers, and management.
- It doesn’t help in getting work done on business objectives which the company wants to achieve the next 12 months.
- It only states WHAT needs to be achieved, the HOW part is missing.
Let’s look at how this traditional process works in a typical company
Why it’s done in a way it’s done: The current goal-setting is done to get the annualized rating of an employee & take that rating to decide who will get how much money this year. Against every goal, the employee declares how much she has achieved, and the manager reviews and correct the rating based on his perception. And them someone sitting at the top does normalization(adjustment of the rating) to put people and their rating in bell-curve shaped.
I am not saying that these activities are not important. Differentiating people based on their performance is important; otherwise how someone who is performing average will aspire to perform better. And how the company will come to know who is not performing and need coaching to perform better.
Being an employee & manager while working in corporate, I never liked the process; it was too theoretical.
Someone who is good at acting & driving perception in the last 3 months of the year will get the maximum benefit of the current goal-setting & rating process of the company
The future of the goal-setting process should be business-centric & data-driven; it should support in getting work done on the business objectives which the company wants to achieve in the next 12 months
The high-level process of this future goal-setting process should be something like this
The progress on these goals is driven by the milestones that define the method of achieving that goal. And these milestones are defined, achieved and refined every month or quarter. I call them as Agile goals, and few companies call them OKR’s. And those of you who have not heard about OKR, they are invented in 1978 at Intel and used by leading companies like Google, Walmart, Uber, and many others leading new-age companies.
How the future ready goal-setting can be implemented successfully:
- Create a core team: This can be implemented successfully then the company creates a core team of a senior business person who understands company business horizontally + a human resource professional.
- Spend time in coaching people on how to set agile goals/OKR: For the first 2 years, invest in coaching employees and manager on how to set the agile goals/OKR. Don’t consider to generated score in the final employee rating for 2 years.
Why the company should take this pain(what’s the business case): Why someone in human resource or CEO should think of changing this current approach of goal setting; here are a couple of reasons
- Implement the new approach of goal-setting to achieve your yearly sales & operational targets. If done right, it can increase your top-line by 3% to 8%.
- It can help the CEO and company to achieve a higher level of alignment across teams.
- It will help HR to get this activity closer to company 12-month strategy and contribute towards company growth.
The future of goal-setting has already arrived. The new-age goal-setting process should create the habit of thinking, planning and executing goals that will drive company agenda & growth ahead.
- The traditional goal-setting process leads to a bureaucratic culture in your company
- The traditional goal-setting process is not data-driven
- To implement the new-age goal-setting process, create the core implementation team which is a mix of business and HR.