In many organizations, the annual objective setting process is badly broken. Several diseases plague the process: it’s bureaucratic, fails to set real priorities, lacks relevance and cements silos - to name just a few of the worst symptoms (see my featured topic for more).
Most managers I know loathe the annual ritual, consider it a waste of time and experience it as a source of many frustrations. That’s too bad, since setting objectives is probably the most important managerial responsibilities of all.
Without direction and objectives there’s nothing to manage. Without objectives, you and your team are condemned to fighting a battle you can’t win: keeping up with the many conflicting demands for your time and energy, constantly fighting fires as you struggle to cope with your daily workload. To what end?
So here’s a few suggestions to make the annual objective setting process engaging and meaningful. And better: to make it relevant, allowing you to work smarter, get more done and have more impact throughout the year.
Define what’s most important
To be effective, objectives have to set real priorities. This involves tough choices, but if everything is important - then nothing is. Ask yourself this question: if there’s only one thing we can achieve next year, what would that be? It can (and should) be a big goal, but it should be a single goal. Something’s got to be most important. Patrick Lencioni calls this your “thematic goal”.
Tell a story on a single page
Since you’ve chosen a big goal as your most important one, you’ll need to break it down into smaller ones. Ask yourself: in order to achieve our thematic goal, what do we need to do? Patrick Lencioni calls these your “defining objectives”. Say you’re a quick service restaurant chain and your thematic goal is “Revamp our offering to help people live healthy lives”. Then your defining objectives may be “Change menu to offer fresher, healthier choices”, “De-centralize supply chain to include local producers”, “Upgrade restaurant kitchens where required”, “Train kitchen and service staff in new menu & basics of healthy eating”, “Launch marketing campaign to re-position brand” and “Explain new strategy to investor community”. All of this easily fits on one page and enables you to tell a succinct and convincing story about what you’re trying to achieve. And how you intend to do it. Good stories have 3-7 defining objectives which are qualitative in nature.
Become more specific as you cascade objectives
This story now provides the context to define finer granularity departmental and team objectives which in turn will translate into specific projects and initiatives. The more specific you get, the more you should also think about making the objectives measurable. You don’t want to start a project without measurable objectives, but do resist the temptation to already introduce measures at the level of “defining objectives”.
Choose inspiring, meaningful objectives
Good objectives inspire people to give their best every day. To do so, they’ve got to be meaningful. To be meaningful, they’ve got to have a strong rationale which clearly states who will benefit and how if you meet your goals. The most powerful goals transcend the organization - they state how customers (not the organization itself) benefit from meeting your goals. In the above example it is to “help people live healthy lives” (customer benefits) - not something like “to become the premier quick service restaurant brand” (organization benefits).
Don’t confuse thematic goals with standard operating objectives
Thematic goals are time-bound by definition. It’s what’s most important right now, for the next 8-12 months. Once you’ve met this goal, something else becomes most important (your next thematic goal). “Standard operating objectives” (another term borrowed from Patrick Lencioni) on the other hand are always important: his year, next year and the following year. Revenues, cost, quality, customer satisfaction, employee engagement and so on are always important. It’s what you need to keep an eye on while you work on attaining your thematic goal. After all you don’t want to “revamp your offering to help people live healthy lives” while your cost shoots through the roof and revenue collapses. But you’re not in the business of controlling cost or growing revenues. And you’re certainly not done with it at the end the year. That’s why “we need to grow market share by 10% while cutting cost by 15%” fails to inspire anyone in any organization.
Make objectives team-based
And I mean fully team-based. First, define your thematic goal and defining objectives together with your team. There’s nothing more fruitful than a passionate discussion with your whole team about what’s most important for the organization. Next, make sure the objectives are shared by the whole team and that you reward the team for meeting the team’s goals - not individual objectives. If the executive team of our quick service restaurant fails to meet its thematic goal, then its pretty much irrelevant that the CFO may have done a brilliant job explaining the strategy to investors or that the COO may have designed the world’s best supply chain.
Use objectives for daily guidance
Having a clear story for what you’re trying to achieve can be of tremendous help for daily, tactical decision making. Always relate back to what’s most important: is that next meeting helping you achieve this or not? Will project proposal A or B make a more significant contribution? Or none at all?
Regularly review progress and adjust objectives if required
Together with your team, take as step back, forget individual projects and look at the big picture once a month: are you satisfied with the progress in light of your thematic goal and defining objectives? Are they still the right ones? Do you need to make adjustments? Contrary to popular belief it’s ok to tweak objectives in mid-flight - but you need to do it with a strong rationale and make the changes very explicit.
Implementing these simple steps can bring new excitement, meaning and a very rewarding sense of accomplishment to your organization. The choice is yours: business as usual or goal setting 2.0?
(A big thanks to Patrick Lencioni who inspired much of my work and thinking in this area. His ideas around thematic goals were first published in Silos, Politics & Turf Wars).