Hitting the Mark
New research from Bersin by Deloitte connects "high-impact" employee-goal-setting practices with improved business outcomes.
By Kecia Bal
When leaders at the former publicly traded software company Geac were faced with a financial crisis in 2001, then-HR Director Stephen Bruce and others at the Markham, Ontario-based company turned to aligned employee goal-setting, implementing what he calls a "change pie"-a set of goals from executives to each employee, all driven by organizational objectives within each piece of company structure.
Leadership aligned goals and innovation over two years, says Bruce, who is now the commercial affairs senior vice president at talent-management software provider PeopleFluent. By 2006, they sold Geac for $1 billion, or $11.10 per share, compared to just $1.12 five years earlier.
"How to did we transform a company with historically declining revenue?" Bruce says. "Everyone had to participate. We all had a piece of it. It wasn't just, 'Here's your goal.' It was, 'Here's the change pie. Here's how you, as an employee, can impact the entire organization for the better.' "
A "what's in it for me" element-connecting goal-setting with career-planning-is among three principles researchers identified as effective employee goal-setting and management strategies in a study by Deloitte Consulting that pulls data from three surveys with more than 650 respondents to examine the link between goal-setting practices and business outcomes, measured as an average score of financial performance compared to peers, cost structure and market size. The other two principles are enabling goal clarity and continuing that through frequent and ongoing review.
The study, which is part of a series on performance management, finds that organizations which make it easy for employees to set clear goals are four times more likely to score in the top 25 percent of business outcomes, says Stacia Sherman Garr, vice president of HR and talent research for Bersin by Deloitte in Oakland, Calif.
"What we found was that the cascading process, which a large percentage of organizations use, isn't executed in a standardized way," she says. "The way that people communicate about goals varies a lot among organizations but also within organizations."
Among respondents, while 51 percent of senior leaders say they convene a series of meetings throughout the year to discuss goals with business leaders, only 6 percent of those business leaders use the same approach to communicate goals to their direct reports. And while nearly 60 percent of organizations said senior leaders revise their goals during a year, only 36 percent of respondents indicated middle managers make similar revisions to align with new directions.
"If you think about the implications of that, that means people are not talking about when goals are changing," Sherman Garr says. "They are not talking about how strategy might need to be adjusted. They may not be having horizontal alignment because they are having kind of one-off conversations with direct reports. We found-and others have also found-that having a clear sense of your goals, having your goals connect to the broader organization, knowing how they connect to your team is a huge driver of engagement and, ultimately, performance."
Organizations that have employees revise or review their goals quarterly or more often were three-and-a-half times more likely to score in the top 25 percent of business outcomes, study results show.
More frequent reviews is among seven "high-impact" practices outlined in the study, which also suggests moving away from strict concepts of cascading into a greater focus on alignment as well as better information tracking and using technology for social goal-setting and collaboration.
"You still have to be aligned," Sherman Garr says. "The alternative approach we're seeing some organizations try is to do a cascade at the highest level: the CEO and his or her executive team and then down to business leaders. But then what happens is more of a collaborative goal-setting, more team-based with open sharing so people can see where they conflict and how they align."
While social platforms and technologies, such as Waltham, Mass.-based PeopleFluent's Mirror Solutions software-built around social collaboration, video, analytics and mobile-can help track results of goal-setting, proving return-on-investment for the time and expense of a goal-setting program remains challenging, Bruce says.
"I think it's more a mixture of: Are HR systems tied to financial systems to show outcomes?" he says. "It's done but it's always done manually."
Both Sherman Garr and Ravin Jesuthasan, global head of talent management at Towers Watson's talent management practice in New York, suggest using control groups to illustrate the impact of goal-setting initiatives.
"It's really tough to isolate any one HR practice and draw a link to a bottom line, but one of the things we've seen in our work with clients where we've helped organizations cascade company level goals down to the individual is to do a comparison of with a pilot group," he says. "We've seen some really good results that would validate what this research suggests."
Towers Watson's "Performance Management in Real Time" white paper explores how organizations can make the best use of new and available tools, such as social media-style platforms.
Jesuthasan also is author of an award-winning article on performance management that, he says, "really showed that there is a defined method for cascading goals through an organization, using value driver analysis, where you take an organization's strategy, translate it into key pivot points and drill it down in a way that shows that goals are mutually exclusive but collectively exhaustive."
The article also explores the return on improved performance in varying roles.
"While there is an accepted method for [creating] cascading goals, goals for different employees really need to be different," Jesuthasan says. "There are some roles where you want 100 percent of people operating at standard."
One such example is airline pilots, he says. "You need 100 percent of them operating within specifications," he says. "You don't really want any one striving to be great, because it introduces risk. For other jobs, such as sales, you really want people to strive to be great."
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