There are two major types of goals you can set for your business unit: quantitative and qualitative goals.
When you set goals, there are commonly two types: quantitative and qualitative.
When you set goals that are quantitative, they’re going to focus on things like financial results, operational metrics, customer dynamics, or quality. You can typically track these types of goals pretty easily. That doesn’t mean you don’t have to be thoughtful about these metrics. A focused set of critical driver metrics is more valuable than a broad set of less relevant metrics that your team can’t affect.
Let me share an example. Let’s imagine you have a sales team. The overall goal for the division is to grow revenue. The driver metrics that affect revenue are price and volume. Now, we’re talking about the sales team here. They have no control over product price. If you just give this team a revenue goal for their business unit, it won’t focus their efforts appropriately. It could lead them to argue or complain about pricing policy. That’s just not productive. The business unit also doesn’t control customer service. Using total revenue for this team’s goal isn’t fair because they don’t control all of it.
When you go to set the sales team’s goal, focus their goals on what they can control. In this case, it’s new sales volume. Think about that sales team going out and trying to get more customers. The driver metrics, for their ability to acquire customers, are things like the number of prospects they talk to, the number of sales calls they conduct, and the conversion rate from a prospect to a paying customer. By focusing on these driver metrics for this sales team and focusing it on what they can control, you’re going to get better results.
When you think through your metrics for your business unit, think through the drivers. Consider the team’s ability to control those drivers. And make sure the goals you allocate to them are only focused on that which they can control. If you build your goals this way, you’re going to get a more concrete set of goals that your team feels empowered to actually drive.
In addition to setting quantitative goals, which are pretty easy to set, a lot of times you’ll have to set qualitative goals. You can look at things like major project completion or milestones in completing that project. Sometimes, you want to measure things that are difficult to measure. You’ll have to infer from indirect quantitative metrics whether you’re making progress on that desired outcome. Things like culture are hard to measure, but that doesn’t mean you don’t have to measure it. You can construct a set of indicators that let you know if you’re moving culture in the right direction. You can look at things that’ll tell you if you’re succeeding in reaching that higher-level end goal.
Let me offer a couple of examples. If we’re looking at culture, maybe we create a balance scorecard to measure our performance on cultural improvement. We want to be a top place to work. We want engaged associates. That’s hard to measure. But, we can look at quantitative metrics to tell us how we’re doing. We can look at associate retention, how many people stay in the organization. There are measures out there like a Gallup Q12 poll that can tell you which direction your culture is moving. You can look at things like absenteeism. I can measure if somebody’s not at work, and that’ll tell me if I have a good culture or a bad one. I can look at referral hires. Are people telling their friends, “Hey, you should come work here—it’s a great place to work?” Some organizations have kudos programs where associates reward one another for doing something great. How many people are using that program?
When I look at all of these quantitative metrics together, it gives me an indicator on whether my culture is strong or weak and if it’s going in the right direction. You may have situations where you’re doing a big project. And again, qualitative goals can matter here. Let’s look at implementing a large technology system. We may take an approach where we set goals based on milestones. We may set goals around use case completion, user acceptance testing, and training completion. Setting qualitative metrics is the same as setting quantitative ones. Understand the desired high-level outcome you’re trying to achieve. Think of drivers that point toward that outcome. For the ERP it’s things like “Are you hitting your milestones to get the project done?” For things like culture, maybe it’s several indicators that you tie together and say, “Does this picture tell me I’m going in the right direction?”
Qualitative goals can really help you understand how your organization is doing. Pay as much attention to them as you do to your quantitative goals.
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