Illustration by Rachel Revilla
I am often shocked at how bad most companies are at goal setting. It is one of the most misunderstood concepts in business.
Why is proper goal setting important? Compare it to a building’s foundation. Below each skyscraper is a solid foundation strong enough to support it. Before building up, construction teams will build down.
The general rule is: the taller the building, the stronger its foundation must be. The same is true for any business: the more you want your business to grow, the more you need to master the art and science of goal setting.
Stretch your goals
Goals should be stretch goals. The phrase was first coined by the Japanese as they used the concept to become number one in the production of steel, cars and other areas, even though they were not naturally set up to become a leader in any of those fields. Jack Welch of General Electric (GE), one of the most famous CEOs of the last century, used stretch goals to propel GE to unforeseen levels of success, profitability and growth.
Stretch goals are goals that are theoretically still possible but wildly beyond what is currently being achieved.
The benefits: you will force your teams to think “outside the box” and grow past their comfort zone. You will also improve the performance of your teams and your business by a magnitude you never thought possible.
What are the underlying principles that are responsible for this phenomenon?
1. Incremental improvements will only yield incremental economic growth.
2. Parkinson’s law: “work expands to fill the time available for its completion.”
Another way to say this is: “work contracts to fit in the time we give it” or “work is complicated to fill the available time.” In short: the longer time you give yourself, your teams, or your business to reach a goal, the longer they will need.
The secrets behind effective goal setting
The owner of a Brazilian family business requested our help because his company had been stagnant for several years, and he did not know how to get out of the hole.
The first question I asked him was: “What are your goals for the next three to five years?” All he could answer was: “I want to grow.” That is not a goal!
Most companies either don’t set effective goals or their goals are too vague. Therefore, it becomes very hard for them to grow and reach their full potential. It is challenging enough to hit an ambitious business goal but it is impossible to hit a target you cannot even see clearly.
A goal is something very specific, something you can measure, and that has a clear deadline attached to it.
If I want to lose weight and say “my goal is to lose weight,” it is just a desire, not a goal. A goal is: “I will lose 10 kilos by December 31st of this year.” That is specific and measurable. You could show up at my doorstep, I can get on the scale and you will be able to see whether I have reached my goal or not. Business goals have to be set in the same way.
While working with the owners of one of the world’s largest quick-service food conglomerates, I was impressed but not surprised that the founder, who was already over 70 at the time, had very specific goals that still stretched 50 years into the future. No wonder he had become a self-made billionaire with such a rigorous and disciplined approach to setting goals for himself and his business.
What gets measured gets done
Constant measuring is essential. A fundamental mistake most businesses make is to set goals and then measure them too infrequently. Most also have no constant measures in place to track whether they are on or off track.
A commercial airplane is, on average, 95-percent off course. How does a pilot still manage to get an airplane to its final destination? Through constant course correction.
What does this mean for any successful business? You have to clearly define what to track and how often to measure it to correct your course.
Measure what matters
You can only correct course if you measure what matters and adjust your course accordingly.
When I started working with one of the world’s largest quick-service food conglomerates, I was very impressed by the level of detail they applied when measuring. They went even so far as to measure how long it took customers to wait in line and how many minutes it took them to flip the burgers.
Every single link in the entire chain of their business was measured in detail: from every element in the customer experience to their supply chain and operational processes.
Your business might not require such detailed measuring but you still need to establish the key results you will measure and the measuring frequency. This has to be high.
Do it often
Referring back to a commercial airplane, if the pilot only checks if he is on course halfway into the journey, he would already be far off and it would take him much more time, fuel and energy to get back on course.
However, most businesses do exactly that. They measure so infrequently that they expend a tremendous amount of energy trying to get back on course, lose countless business opportunities along the way and then wonder why their profits are not up to their expectations.
Right before the global pandemic started, we were taking all businesses of one of our Philippine clients, a large family business conglomerate, through a five-year goal setting strategy and future-proofing process. We were initially shocked at how little discipline, knowledge and attention to detail existed in all of their businesses when it came to that process. Their new rigorous commitment to clear key results allowed them to fare much better through the pandemic and even allowed them to profit from some of its unique opportunities.
Embrace change
Since the pandemic, the economic landscape has been changing faster than ever before in history—in the world and the Philippines. The outcome will be a very unequal distribution of winners and losers.
On the upside, dramatic change always brings great opportunities. Paul Romer, an American colleague of mine, coined the phrase: “A crisis is a terrible thing to waste.” Every crisis is also full of new opportunities. If you look at history, some of the biggest companies were born or started during times of crisis or recession, like General Electric, General Motors, IBM, Disney, HP, FedEx and Microsoft, just to name a few.
But there is one fundamental mindset that the founders of these highly successful businesses applied when they were founded. All of them asked the following questions:
“How can I exploit this dramatic change, recession/crisis for my benefit?”
“What is the successful company no one is building?”
“What new trends are coming out of this dramatic economic change, crisis or recession that I can profit from?” How can we exploit change for our benefit?
Solutions and next steps
1. As a business leader, set stretch goals for yourself, your company, and your teams.
2. Determine the key results you need to measure to stay on course.
3. Measure these key results often and correct your course, if needed.
4. Embrace change. INQ
Tom Oliver, a “global management guru” (Bloomberg), is the chair of The Tom Oliver Group, the trusted advisor and counselor to many of the world’s most influential family businesses, medium-sized enterprises, market leaders and global conglomerates. For more information and inquiries: www.TomOliverGroup.com or email Tom.Oliver@inquirer.com.ph.