Organizations often struggle with setting meaningful goals and making sense of what they want to achieve. In today’s VUCA and complex world, goals can give an alignment on what the organization should focus on. Followed by tools, such as KPI or MBO, those goals can also be misleading and used too much as a commitment to achieve. In complex environments, this can be hazardous.
In our experiences, the wordings around goal, forecast and commitments are often used interchangeable. If an organization does not take the effort to define the semantics of each word in their context, this might be confusing. Already, when following a Scrum Guide and trying to create a Scrum environment, teams often fail with clear expectation with those words. Looking at the dictionary, we find the following definitions:
A Goal is a future status we aim for. It is not an absolute truth, but rather an educated idea of what we desire for our future. A forecast is an analysed assumption, of what we can achieve in a given time. The most significant difference between goal and forecast is that a goal is a desire and a forecast is a more realistic assessment of what can be achieved. While tools such as SMART goals can help to achieve a realistic assessment of the goal, they are usually more focused on the outcome, while forecasts focus on output. A commitment is a guarantee or a pledge: We are certainly sure to achieve the planned activities unless the surrounding conditions change significantly.
Often organizations do Financial Forecast with a more or less realistic analysis of the market, product and own assets. Based on this information, they set their desired goal for a certain time period and sell it to the teams to give their commitments to achieve that goal. In very hierarchical situations, this makes actual sense.
The fallacy starts when the Financial Forecast requires quite some efforts. Then changing environments rarely impact the forecast, goal and commitment. As a consequence, teams and individuals focus on the output to meet their commitments, instead of focusing on the highest value. In the end we often measure individual performance based on how close they came to their “commitment”. Companies rarely take the effort to analyse the value delivered by the individual. We live in a world, where complexity is the norm. Changes happen more often than not. With such an approach companies therefore might achieve their initial goals, but miss out on opportunities. They focus on the output of the activities; rarely on the outcome.
The Latest by 2020 we all know, that the world is volatile, uncertain, complex and ambiguous. In such an environment, we do not know what the future brings. Hence, having a plan for the future and just sticking to it is a waste of time. This is where Planning as the activity becomes important.
“Planning is everything, a plan is nothing!”Dwight D. Eisenhower
Planning is important to be ready for the future is important. Having a plan to just follow and execute might be too slow. I am pretty sure, we all had plans at the beginning of 2020: Company Growth, Sales Plans, bigger business. These plans are now not usable anymore.
The Corona Pandemics might be the clearest example for that, but we had such signs all the time visible: Thai Economic Crisis, 9/11 and World Economic Crisis starting from 2008 are all signs for such a volatile environment.
The bigger the company, the harder it is to stay aligned. Therefore, use goals as something your whole organization can rally for. Set them rather short terms. If you use the OKR framework, you might want to be able to set goals every quarter and then look at the new reality. You can adjust and be adaptive towards a changing environment constantly.
Teams and individuals who are empowered, aligned and follow a vision are more engaged to reach their goals with you. If you look at companies, which have been showing steady growth over the last decades, are companies with a strong purpose: Google, Apple, Gore or Southwest Airlines. Especially team members of the two latter ones are famous for being inspired and happy throughout.
Therefore, it is important to have a strong vision. From there you can develop better inspiring goals with short feedback cycles. Based on the feedback you are receiving (e.g. every quarter), you can adapt much better to set out new goals. If those goals and vision make a difference, the company’s financial situation is just a natural consequence.