In my previous post, I recommended that teams move to a collaborative process for setting performance objectives. It’s a practice I encourage because of the disconnect that comes from highly interdependent individuals having poor visibility to what their teammates are being held accountable for. You can read that post here. In today’s post, I’m fast forwarding to the point in the year when it becomes clear that there’s no way for everyone on the team to meet their objectives.
I don’t know about your team, but here’s what I most commonly see at that point in the year. Let’s play out an example from a food company. How about a big company that makes a variety of snack foods. You be the President of Potato Chips. Here are your objectives at the beginning of the year:
- Grow potato chip revenue by 7% maintaining gross margins above 13%
- Launch three new “healthy” potato chip products and secure shelf space for them in 35% of Tier 1 retailers
- Increase customer satisfaction with all products to >85%
Now you aren’t a one-man-potato-chip-band, so achieving these objectives was always going to require lots of help from your teammates.
- Increasing potato chip revenue required more volume and more volume meant more potatoes. That was an objective for the head of Supply Chain. Sadly, the draught in Idaho meant potatoes became expensive (hard on margins) and hard to come by. Not only that, the ones you could get were lower quality (hard on customer satisfaction).
- Launching new healthy potato chip products required significant work for marketing and then for sales, who needed to work with customers to secure shelf space. Marketing was happy to sign up for growing the core brand while also launching new brands, but they might have bitten off more than they could chew. Sales is telling you that the grocery chains are asking for more money than expected to secure prime shelf space.
In most cases, you suffer in solitude. The Supply Chain person is inclined to procure subpar potatoes because she’s only measured on volume and price. She meets her targets. The Marketing person chooses to keep doing everything and lobbies you to stay on course with the 3 new brands so that he can check off each objective on his scorecard. The sales person is being measured on total spend and on the three new launches, so he moves spending from the core brands to the fledgling new ones. As a result of all these other activities, you miss your targets by a mile.
Lack of information and coordination coupled with everyone’s drive to meet their individual targets is sub-optimizing the whole system. That’s why: a) performance objectives being locked in for a full year doesn’t make sense in today’s environment; b) changes to any one person’s objectives must trigger the team to re-open some or all of the others.
Here is the process:
- Use regular meetings to highlight any risks to plan in any part of the team. It’s important to anticipate these issues as they emerge, while there is time to course correct.
- When one team member flags an issue (potato shortage, increasing cost of shelf space) or an opportunity (company approaches you to do a white label product for them), the entire team talks about implications.
- Revise the business plan. Does it make sense to hold back on 2 of the new product launches and do the white label product instead? Should you follow your competitors and raise prices in response to potato shortages? Is it time to find a new source of supply instead?
- Revise individual objectives accordingly. If you chose to channel resources from Marketing to Sales, how will the personal objectives of the two leaders be adjusted to reflect greater or fewer resources? If you shift to sourcing to a new state or new country, how will that affect the capacity in Supply Chain to work on other projects?
You might not be the President of Potato Chips (or of anything else for that matter), but the same basic idea applies. If you and your teammates are dependent on one another for success, you need to make decisions about how you will spend your energy, and about what constitutes good performance, together.
If your company’s performance management process doesn’t work that way, color outside the lines. Nothing is preventing you from discussing objectives and getting them aligned. If you can’t officially revise objectives mid-year, at least make sure your boss and everyone else on the team is aligned with the decision to change focus. If you get penalized at the end of the year for doing what you all agreed was right for the team, it’s time to find somewhere else to work.
I’d be interested to hear what your team does when targets become unrealistic. Share your stories in the comments.