After a briefing with an advertising agency and our goals for the coming year, the agency’s managing director came up to me and said, “I like your style. ‘To hit the trees, aim for the stars,’” he said. He was referring to our stretch goals for the year, and he was genuinely impressed that he thought I was pushing my team to accomplish more by setting goals too lofty that they are unrealistic.

I remember is that he said it was a good strategy to take. Many business leaders set targets so high that even if the company falls short of these, the company almost always ends up with substantial growth.

Sounds like a good way to manage a company, right?

Actually, no. Setting unrealistic goals is actually poor planning, and it can cause the following problems:

  1. Unrealistic plans will lead to bloated projections for resources needed, denying much needed capital for other high-yield investments or projects.
  2. A consistent pattern of unrealised targets will not give management the confidence to properly allocate resources to various strategies on the plate.
  3. It fosters a culture of mediocrity and underperformance. When managers are used to always being short with targets, there will be little incentive to perform. Targets will not be taken seriously, and managers will work instead to protect their jobs rather than to strive for better performance.
  4. Shareholder value for a company becomes distorted, when one of its businesses stay in the portfolio for too long, waiting for it to finally turn around.
  5. In the long run, a company and its management team will lose its credibility with investors, when it develops a reputation for always falling short.

These dangers are just on the planning side of the equation, when the execution side has a lot more risk involved. According to a study done by the Harvard Business Review, an average of 37% in potential financial performance is lost due to improper planning and execution (see chart below).

This chart shows the average performance loss implied by the importance ratings that managers gave to specific breakdowns in the planning and execution process, in a survey conducted by the Harvard Business Review.

In other words, when you aim for the stars, you should be able to hit quite close to it, if you plan and execute well.

How to aim for (and actually hit) the stars

Putting a performance framework in place within your team and company is how you can avoid such losses. It is the minimum set of habits that ensure that things done within an organisation. It includes proper goal-setting, and a regular schedule of logging, sharing and comparing tasks and progress. With such a framework in place, the performance loss can be minimised.

Proper goal-setting

Proper goal-setting involves establishing SMART (Specific, Measurable, Assignable, Realistic, Time-Bound) goals based on accurate information and insights from your key people/managers. It is critical that each key person and manager has ownership of the goals, and that they don’t feel that things were just handed down to them.

Action planning

Involving the key company personnel in goal-setting is the first step. The inputs of company frontliners can be very valuable as their perspective and first-hand knowledge can lead to solutions top management may not have considered. It also allows team members ownership of the solutions, when their inputs had a hand in the formulation.

While you might find your team deluged with a long laundry list of to-dos’, it is critical in this juncture to prioritise tasks that would have the most impact on total business performance while requiring the least resources.

Monitor performance

This is the part in execution that gets forgotten most often. The management team will be so satisfied that solutions are already in place, that they would soon forget that solutions do not happen automatically. Weeks down the road, the identified tasks would be discovered to have had little or no progress at all. The lack of regular monitoring would account for most of the performance loss indicated in the chart above.

With Optimum’s  Performance Framework, we use our proprietary performance management software called My EmployeeLife, which allows the real-time logging, sharing, comparing and monitoring of tasks, goals and progress from the convenience of your desktop, tablet or mobile phone.

My EmployeeLife is Optimum’s proprietary performance management solution that allows companies to log, share and compare work updates and goals.

With the software being cloud-based, work logs and updates can be posted by each team member, and viewed by the involved managers, from the convenience of their mobile phones, tablets, laptops or any computer with an internet connection.

Would you like a performance framework in place?

Drop us a line, and we would be happy to consult you on putting a performance framework in your company

Dino Alentajan – EmployeeLife Consultant

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