The 3 Levels of Company Goal Setting

When I bring up the concept of “goal setting” with an executive—especially if it’s the CEO—the reaction is rarely enthusiastic. The term sounds so tactical. It contrasts with the strategic orientation of most high-level leaders. To the executive’s ear, “goal setting” sounds like a tedious task HR should be handling. Part of our mission at Khorus is to empower organizations to execute their strategies more consistently. Good goal setting is critical to that process—including at the very top of the organization. It will not be news to you that the vast majority of strategies fail, mostly due to poor execution. Historically, leaders have not done a great job of translating company strategy into a set of short-term goals their teams can really sink their teeth into. Once ideas are formed in the executive team meeting, leaders typically struggle to communicate those ideas in a way that enables good goal setting through all the layers of the company. To get better at this discipline, it’s extremely helpful to understand the three levels of goal setting that take place within a company. Each level has a different aim: to drive the performance of either an individual, a team, or the company overall. These aims overlap, of course, but if you begin to look at goal setting through this lens, you’ll see why even CEOs should be invested in the vital third level of goal setting explored below.

1. Individual goals are about employee performance

Managers have long been trained to equip each of their employees with a set of goals. Usually, this is treated as an exercise in evaluating the performance of the employee. In other words, not much time is spent on what the goals are and how they impact the rest of the organization. Instead, the unspoken attitude is this: “We need a way to rate this person at the end of the year and decide on a bonus, so we’ll give him/her a couple of goals to measure performance by.” This is the low-level goal setting that repels many high-level leaders. No one else is very keen on it either. It usually reminds people of terrible performance reviews. It has an impersonal, punitive flavor. This is not to say that employees should not have performance goals, but instead that the project of defining goals with employees should take place within a larger context and be relevant to the overall business. More on that in a moment.

2. Cascading goals are about team performance

The next level of goal setting is cascading goals: a set of goals for an overall team, with supporting goals held by each team member. Linking up goals in this way is an important practice for ensuring that team members’ efforts are aligned around the same common objectives. It’s important to not be too rigid or stifling with cascading goals, but when done smartly, they can enhance a team’s focus and communication. Crucially, the practice of linking up employee goals to the team’s shared objectives builds a sense of engagement. Employees can now see exactly how they contribute. Their goals are now less about rating their own performance and more about achieving valuable outcomes. So we see that cascading goals are about driving a team’s performance rather than focusing on individual performance.

3. Cascading goals with predictions are about organizational performance

Third comes the type of goal setting that every CEO and executive team should concentrate on, and the type that will be least familiar to most leaders: cascading goals across the company, with regular predictions on goal achievement from employees. This type of goal setting is aimed at managing the organization’s top-level performance. It’s a way of singling out a few key priorities across the major areas of the business and ensuring that the whole company executes against them predictably. This is how good CEOs drive change in their companies and stay focused on the future. If you use Khorus, you’ll be familiar with how the process works. The CEO defines no more than 5–7 company goals in a quarter. Executive team members each do the same for their organizations, using the company goals as a starting point. The process continues until all employees have created their own set of goals, most of which will cascade down from the company goals. Then comes the prediction part. Once goals are in Khorus, employees update each goal weekly, with a quick color-coded confidence indicator on how likely the goal is to be met. Khorus rolls these updates into a Predictions Matrix for each of the top company goals, giving the CEO and executive team a real-time look at how likely the top goals are to be executed. They can also see where problems may be developing, even in the lowest levels of the workforce. You don’t have to use Khorus to practice cascading goals with predictions. In years past, plenty of good CEOs have developed ad-hoc systems to help employees set strategically relevant goals across the whole company. Plenty of CEOs, too, are skilled at cutting through the noise of all the historical data generated by the company and surfacing the predictive insight of their teams: Will we get this done? If not, how can I help? At Khorus, though, we’re working with organizations to evolve to the third level of goal setting with minimal hassle. Goal setting is hard. We’re trying to make it as easy as possible. If you’re interested in getting your employees to predict business outcomes so you can ensure predictable execution, we would love to give you a personal demo and learn more about your company.

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