Sunday, June 17, 2012

Absolutes in Strategy

I read a great editorial by Dave Johnson in the June issue of Industrial Safety and Hygiene News (a publication I submit trade articles to a few times a year).  The editorial focuses on what happens when companies have explicit goals with a zero in them.  Zero injuries.  Zero defects.  Zero customer complaints.  

The problem with these absolute goals is that when employees are under the gun to achieve perfection, it increases anxiety and stress to levels that can hurt performance on all dimensions, not just the one that is supposed to be zero.  The pressure is extra high for a zero goal because you could have perfect performance for 89 days and then on the last day of the quarter some random event that you have no control over keeps you from achieving your goal. There goes your positive evaluation, your chance of promotion, or your merit raise.  This kind of pressure can focus attention so narrowly that other things slip by.

Another problem with absolute goals is that they are often great long term objectives but unrealistic in the short term.  A new CEO takes over a company with a really high frequency of customer complaints and wants to shake things up.  So she implements a new goal of zero.  But there is no way anyone will hit this number right away when the history is so bad.  It just takes time to change the processes, the mentality, and the company brand in the customers’ eyes.  So the immediate goals need to be more attainable.  When there is no chance of making a goal, employees often don’t even bother to try.  In this case, you never get to zero.  Or, employees will cover up defects and injuries or fudge the numbers.  Injuries become “visits to first aid for a bandage” so they don’t count.  The untreated injury gets worse and more expensive to treat later. 

Instead, he suggests something like this for  a high level strategic goal “We are striving for zero because this company is striving to be world class, best in class, in all facets of the business.  We will give you the tools, the training, the support and the freedom to come up with your own ideas to reach zero injuries, zero customer complaints, zero product defects, zero downtime.  If we don’t get there, we’re going to get damn close enough to make an unmistakable positive difference for you personally and for the business.”

And then in the actual Performance Management System (some of my previous ideas on these here) be realistic and use best practices for goal setting.  Then you get the best of both worlds.

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