When businesses and their staff share the same core performance goals, the sky’s the limit
By Professor Danny Samson FAIM
There is a lot of talk and not much agreement about the nature and extent of how managers and shop-floor employees should best be ‘performance managed’. I’ve been fortunate enough to visit and study some of the world’s best companies, where I observed that the organisation’s goals and those of all the employees were beautifully aligned: like two sides of a coin.
My favourite company in this regard, US-based Medco, ran incredibly effectively, based on five strong goals for the organisation overall, teams and individuals. Those goals, known as ‘The Five Pillars’ (cost, quality, service, timeliness and earned value add), were the profit drivers for the shareholder, the service goals for customers, and they also were hardwired to employee’s remuneration. They drove strategic initiatives, continuous improvement, and consciously guided how people worked. Everything was prioritised around them. Performance- and goal-directed management at its best!
How does your performance- and goal-management system stack up against these 10 points:
- All employees should have prioritised goals, derived from the organisation’s strategies and goals. Goal-directed behaviour provides clarity and structure that most people need. Without them, staff will lack focus.
- Management by objectives is fundamentally a sensible way to manage and achieve performance. Although this approach is sometimes seen as inflexible, it doesn’t have to be so. It provides a great framework for busy managers to work with employees to set goals, empower all to act on those goals, monitor then verify outcomes. It helps with ‘management by exception’ (handling cases that deviate from the norm). In highly dynamic circumstances, where goals need to be changed frequently, then this is worth doing, rather than saying it’s all too hard and leaving things to chance.
- Structure and the process disciplines of performance management do not have to stifle creativity. If a job role involves creativity, invention or innovation, then these can be specified as goals, with enough flexibility so as to stimulate, not stifle.
- Psychological rewards tied to goal achievement can be highly motivating. When managers acknowledge and thank their staff for achievements, as long as the style fits the overall culture, positive psychology can set in and lead to further good things.
- When linking pay and promotion directly to goal achievement, be careful of playing with fire. To quite a large extent people will often do what is inspected, rather than what is expected, and when their pay packet is attached to certain goals, you’ll certainly get them to focus on those goals, often ignoring other non-specified items of work. Linking pay and promotion to goal achievement does release energy and motivate most people, but not all. Some people thrive in it and some abhor it, so what type of cultural norms are you trying to set?
- One size does not fit all. While most people like quite a lot of structure, we vary in the degree of detail that we want to self-determine. Managers should customise to individual needs in most circumstances. If it is repetitive production, then standardised work instructions must be very detailed, but if it is creative work such as design or consulting work, then details can be nuanced differently by individuals to meet their client needs, within a standard framework, and goals can be at a higher level.
- Goals can reinforce organisational values and standards. Many organisations have value statements that embody service or quality standards. Without translating values into people’s goals, they remain abstract, general and possibly divorced from the desired behaviours. These can be effectively translated into people’s goals, making those values and standards practical and feasible.
- Goals can be for individuals or teams, or both. If teamwork is desirable, set team goals. The very definition of a team is of a collection of people with shared goals, and this can build camaraderie, effort levels, collaboration and other positive outcomes.
- Make sure we complete the cycle of verification of goal achievement. If we set goals but everyone knows there won’t ever be a day of reckoning, then we end up with a low-accountability culture, now that is soft.
- ‘SMART’ goals work. Goals that work well are Stretching, Measurable, Actionable/ Achievable, Realistic/Relevant and Timely. Poorly specified goals will lead to poor performance.* Danny Samson FAIM is a professor of management at the University of Melbourne and Chair of AIM’s Academic Board