(If you have read this article and are checking this site out to "test your thinking"  go to the end of this page)

Achieving Happiness

Have you ever had an employee accomplish the goal that you had set out for him/her and yet you were still not happy?

Defining intelligent goals for performance appraisals or incentive plans requires careful, skeptical thinking. The key question (for the manager) is: "How might the employee achieve the goal and yet leave me (the company) unhappy?" If you think creatively enough, you can frame the goal in a way that will greatly improve your chance of being happy with the ultimate result.

Think Tension and Triangles

Setting goals in a comprehensive manner often involves thinking in sets of three goals, which have tension between them. For instance, in a production environment it is said that it is difficult to meet all three of these goals:

Put another way, this might relate to 1) meeting production schedules, 2) keeping quality high, while 3) maintaining low unit production costs. It is possible to meet any two of these goals relatively easily. It is the challenge of meeting all three that makes production jobs difficult. (It is the challenge of developing "reasonable," relevant goals that makes the manager's job difficult. You may have noticed in the news that NASA has been wrestling with its "faster, better, cheaper" process - trying to figure out how to balance the three desirable objectives.)

Anticipate employee "games" or manipulation. Think deviously in determining ways that the stated goals might be achieved, yet the spirit of the objective might be missed.

Another example relates to the CEO level in most firms. This position is expected to:

Again, it is possible to accomplish the first two relatively easily if you sell off assets. The challenge of doing all three is difficult. The selection of the specific goals must relate to the business and its specific mission.

Clarify "who, what, and when" in defining goals. Determine the measures that are critical to defining success. For instance, merely stating that the new human resource information system (HRIS) be implemented by July 1^st leaves too much room for shenanigans. It would be better to clarify the "what" question; for example, what modules should be included and how long should it take to process a defined transaction or what user satisfaction rating is expected?

It is possible to identify more than three measures for most goals. Although some activities require more than three, having too many measures tends to obscure the key focus and clutters the picture so that employees find the goal impossible. The challenge is to find the mix of key factors that frame the issues fully and concisely while creating a certain amount of tension or conflict in attaining all the factors.

Good and Bad Goals

For the purposes of determining the balancing measures within a major objective, it is important that the measures:

• are able to be impacted (directly or indirectly) by the employee,
• can be measured (or can be assessed by an independent "judge" who is viewed as credible by the employee and the company), and
• do not encourage "unhealthy" trade-offs.

An example of this last item might be employee safety. We do not believe that an incentive plan would be well received if it appeared to allow more lost-time accidents as long as profits were high enough. Some items (such as lost-time accidents, environmental spills, security of confidential customer data, sexual harassment problems, and unionization) should perhaps be off-limits from any assessments that balance one measure against another.

We feel that it is important to underscore the issue of measuring goals. An old cliché says "what gets measured gets done." Too often factors like customer service are included as goals, but without clearly identified, quantifiable measures. We believe that it is important not to settle for poorly specified goals, but to take the time to develop clear, comprehensive standards for important goals. This will aid the employee and the organization in understanding what is really desired.

Think Alignment

Setting goals while focusing only on an employee or a department tends to diminish the end result by only focusing on part of the issue. It is important to be sure that the goals of different employees and different departments are aligned when they are related. This means that the IT department needs to have the same understanding of the roll-out schedule and performance expectations of the new HRIS module that the human resource department has (because both need to support the effort for the new system). Both departments need to understand the objective using the same success measures.

It often makes sense to develop corporate objectives from the top down, developing supporting goals as the process cascades from the highest level. Along the way, however, it is important for those involved with setting the supporting goals to validate that they are synchronized with others performing related activities throughout the organization.

Alignment can also relate to the setting of goals that are appropriate for different levels of the organization. For example, not everyone in the organization can impact the overall corporate revenue. The employee should have the ability to make an impact on the goal being set. It wouldn't be appropriate for the fiscal goal for a production supervisor to be total company revenue. Cost of goods produced may be a better goal at this level as it would be something the employee can impact (and can see the linkage to his/her own efforts).

If a goal is set that an employee does not believe he/she can impact, the employee will not perceive it as reasonable. This may result in the employee vainly trying to impact the goal (perhaps through inappropriate efforts) and/or becoming frustrated in not knowing what to do.

How High Is "Acceptable"?

How tough should goals be to achieve? Should they be set so that they match the budget, prior year results, or competitor norms, or should some other standards be applied?

Sometimes the corporate plans require a specific goal to be reached. This might be the result of a budget, compliance with a new law, a change in strategy, or any of an infinite number of pressures that organizations face. For instance, the organization may "require $10 million in new revenue," it may need to have the new computer system up and running by May 1^st, or it may need to have customer satisfaction ratings improve from 3.0 to 4.0 using an independent scale. These may be real and significant "needs" of the business.

The related question is whether achieving the "needed" objective should equate to "meets expectations" or "exceeds expectations" or some other rating if the employee achieves the objective. We believe that it is important to qualify the objective with a reality check of how difficult it will be to attain. For instance, attaining $10 million in new revenue could be extremely easy or extremely difficult, depending upon the history of the business, current market conditions, and other factors that you should know about in your business. If the greatest year in the history of your company showed a $3 million increase in revenues, then we would expect that achieving $10 million in new revenues should result in an "outstanding" rating, unless a new law was passed requiring customers to use your product or all of your competitors just went out of business (in which case it might be an easy objective).

Our point is simply that achieved objectives that resulted from a budgeting or planning process might warrant different ratings based on their perceived difficulty. It may be appropriate to define in advance what types of outcomes would warrant different performance ratings.

ECI normally does not see goals as "toggle switches" that are either on or off (met or not met). We normally see that a range exists from "met minimal level" to "hit a grand- slam home run." The organization needs to thoughtfully develop a common approach as to the breadth of the range it will use in its goal-setting process. Where possible, we believe it is desirable for the organization to attempt to have some uniformity in difficulty in the goals established for various employees.

Mid-Course Corrections

Things change! A goal that is set at the beginning of the year might be irrelevant a few months later. Assumed support that makes a goal look feasible might fail to occur, making the goal much more difficult than anticipated. It is important for any performance assessment system to recognize the external factors that influence reality throughout the performance period. While the various goals might have been assigned different weights at the start of the year, it is important to modify them as change occurs. To avoid confusion and arguments at the end of the review period, it is highly desirable for the employee and his/her supervisor to discuss changes in the goals and weights during the review period. This avoids surprises and assures that everyone is headed in the same direction.

Just because we advocate having a plan with the flexibility of making mid-course corrections does not mean we support changing goals just because halfway through the year it looks like the employee won't meet the goal. Unless something extraordinary has happened to make the objective irrelevant, it doesn't make sense to change.

Weighting Goals

Clearly employees and managers need to agree on which objectives are major and which are minor. Different schools of thought exist as to how to weight the different goals that an employee might have. Here are comments on a few styles:

Although there is no one right answer or approach, clearly each organization needs to select the concepts that work best for its positions and management style.

Employee Communications

This entire white paper is about clarifying expectations and standards. Clearly employees must be involved for the process to work. While it is possible for a manager to "mandate" the goals, it is normally best if the goals can be developed cooperatively between the employee and the manager.

Where goals involve cross-departmental cooperation, it is important for the goals to be mutually defined with all those who will be involved.

Test Your Thinking

Comment on how the following goals might be improved/clarified:

Suggestions:

• clarify the goals using the triangle measurement approach (three defined measures in tension with each other (e.g., quality, quantity, timely, cost effective),  
• try to find objective ways of measuring goals that appear to be subjective (or if it must be subjective, identify a knowledgeable judge who will be perceived as fair and reasonable),  
• try to identify possible higher-level goals than those shown might support (goals that might be identified as supporting goals that could be assigned to subordinates of the target employee),  
• discuss your ideas with others to brainstorm possibilities, and  
• check out some of the responses for suggested improvements on our extensive Website: www.effectivecompensation.com - see the heading "Performance Issues" under the Resources section - or call us to have us fax you the information - see last page for contact information.

We hope that you have gained an insight or two from our thoughts about setting goals. Clearly the "bottom line" is to provide clear, relevant, and balanced goals that are mutually understood. This is much easier said than done. A well-coordinated program with training and monitoring can help every organization perform better and have more satisfied employees along the way.

EFFECTIVE COMPENSATION, INCORPORATED 

Effective Compensation, Incorporated is an independent consulting firm, providing a full range of compensation-related services on a cost-effective basis. We assist organizations in becoming more effective through improving their employee cultures.

We specialize in assisting organizations improve their effectiveness through employee culture programs and effective forms of compensation for diverse work forces. We provide customized, high quality, total compensation consulting services, including:

While we serve clients from coast to coast, ECI is the largest compensation consulting firm in the Rocky Mountain region, located in Lakewood, Colorado. We are an independent consulting firm formed in 1991. Our consulting approach is to work closely with key decision makers within the client organization, drawing on input from all parts of the organization, to develop approaches that are best for their situation.

Our professional staff members, with more than 12 years average professional experience, each have considerable relevant backgrounds that allows us to work effectively with our clients. In order to provide high quality, professional human resource consulting services efficiently and economically, we have established a network of more than 40 experienced experts with specialties in different areas of human resource that can work together to effectively help meet your needs.

We serve a diverse range of clients (considering size, industry and location). Recent clients include organizations in a wide range of industries, including: education, energy, environmental, governments, health care, insurance, manufacturing, non-profit, research, retail, telecommunications, transportation, and utilities. We believe that our multi-industry experience helps us bring a breadth of experience and ideas to each of our projects.

If you are interested in learning more about how ECI can assist you

with performance-oriented pay or other compensation-related issues,

please contact:

Effective Compensation, Incorporated

(303) 854-1000, toll-free: 877.ring.eci

E-mail: eci@effectivecompensation.com

Website: www.effectivecompensation.com

Some ECI Ideas about the "Test Your Thinking" Section

Here are some comment on how the goals presented in the "Test Your Thinking" section of the white paper might be improved/clarified: