If you don’t give your teams the resources they need, they’re not going to hit their goals.

Once your goals are set, you have a responsibility to provide the team the resources it needs to achieve those goals. These resources should be identified during the goal setting process. Include those resources in budgets and project plans. Failure to conduct resource planning and allocation is going to frustrate your teams. They won’t have what they need to achieve their goals.

At the business unit level of goal setting, resource allocation can be easier in some respects, and more difficult in others. The ways it can be easier are first, you have more control over your business unit’s resources. You can shift those resources more easily. There are also known processes like budgeting that can be linked to your goal-setting process. This ensures that the resources are available for the goals you’ve set.

Now it can be more difficult, too. Getting additional resources outside your business unit can be a challenge. Those resources have to come from higher levels, or you have to negotiate with other business units to get resources allocated to you. It’s not often they’ll give those resources up. If you don’t allocate resources during the budgeting process you either have to either wait to shift resources, or reprioritize all your other efforts due to this new goal.

Review goals that are falling short in your organization. Make sure they’ve got the right resources. If they don’t, shift them appropriately. Ensure your goal setting, budgeting, talent management, and staffing processes have explicit links to one another. If you don’t give your teams the resources they need, they’re not going to hit their goals.

Conversely, if you really think through the goals you’re trying to hit and make sure they’re appropriately resourced, your teams are going to drive the success that you expect.

Want to learn more about setting business unit goals? How about taking an entire course on it? Check out the video below to learn more about the course and get started. Or you can go directly to the course and start learning how to set business unit goals. The entire course is available at LinkedIn Learning. Enjoy!

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Troubleshooting your incentive plans can help you avoid undesired behaviors.

Goal setting processes can sometimes lead to unintended behaviors or undesired behaviors. If you don’t understand how compensation and incentives relate to how your team members work, they may do the wrong thing. Troubleshooting your goals requires you to look at the irrational behaviors that can arise from the goals you set. When you find those situations, you’ll need to either revise the goal or change the incentives.

I worked at a credit card company at one point and I ran part of the collections division. We were trying to get delinquent customers to pay us money back and get their accounts back to current status. If they didn’t pay us back, they were charged off as bad debt and we lost that money. We looked at our call center and we said, “How do we want to change their behavior? How do we get more of our money back?” We changed their goals and their incentives to move from being focused on curing accounts to just dollars collected. We thought if we collect more money, we’ll perform better.

What this led to was a behavior we didn’t expect. Our call center associates started getting smaller payments. They made the telephone calls shorter so they could collect more dollars. This led to more customers charging off down the road because our associates weren’t helping them pay down their balance and get their account back to current status. We said, “Well, that’s not what we want to happen. We need to change the plan.”

So, we changed the plan and we said, “No, it’s not dollars collected anymore. Now it’s the number of accounts that you cure back to current status.” Well, the associates said, “How can we make the most money doing this?” What this led them to do was focus on really small accounts and they let those big accounts go because they were too hard to work. We said, “Well, that’s a problem. Now we have a lot of bad debt charging off. How do we change the plan?” We stopped and we thought and we said, “What behaviors do we want out of our associates?” And we changed the incentive to focus on the cured dollars, how many dollars are you moving back to current status. This finally got us the behavior we wanted.

If you want to fix your goals and make sure these bad behaviors don’t happen, pretend you’re the person on the incentive plan. Set aside doing the right thing and think about what would benefit me the most if I was on this incentive plan. Be willing to go into the gray area where you’re not breaking the rules, but you’re not exactly following the spirit of the incentive. This is how you’re going to find those places where behaviors won’t match the actions that you want your people taking.

At one point, I used to do this regularly with one of my associates. Before we rolled out a new compensation or incentive plan, JC and I would sit down and say, “How do we break this plan? What are all the things that we can do to put the most money in our own pocket?” And we would break that plan. We would figure out all the behaviors that were not desirable but they put a lot of money in the associate’s pocket. What was important then was we changed the plan until we found a plan where we couldn’t break it and we were getting the right behaviors.

Spend that time troubleshooting your incentive plan. Think through from the incentive to the behavior. Think about what could go wrong and make sure you don’t roll out that incentive plan until you have the right behaviors identified. This extra time you spend in the troubleshooting process will prevent your associates from doing things that you don’t want them to do and it’ll get them to focus on the right behaviors that drive your overall goals.

Want to learn more about setting business unit goals? How about taking an entire course on it? Check out the video below to learn more about the course and get started. Or you can go directly to the course and start learning how to set business unit goals. The entire course is available at LinkedIn Learning. Enjoy!

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A commit goal gives your team a clear target to aim for, while a stretch goal gives your team an incentive to go above and beyond. 

A goal setting technique designed to provide predictability and generate excitement and upside potential is setting commit and stretch goals. The commit goal is a promise of what will be delivered. It’s non-negotiable. Missing it has big consequences. The stretch goal is something for the team to aspire to. If they reach it, the rewards can be really large.

Let me walk through an example of what this can look like. Let’s say we have a corporate profit target of $150 million. Each business unit is given a portion of that target. And when you add those up, it’s $155 million because we want to have a hedge in this situation. Those are commit numbers. One business unit has a $40 million commit and a $45 million stretch. Let’s say at the end of the year they come in at $41 million. Well, they get 20% of the extra bonus that’s available because they got one million of the five million possible.

Let’s say another business unit had a goal of $50 million as their commit. They come in at 45 million. It’s a bad year. No bonuses and poor reviews are going to follow in the performance management process. Another business unit has a $27 million commit and a $30 million stretch. They come in at $32 million through some really good luck and a lot of hard work. That team should get 166% of the possible bonus if it’s an uncapped bonus structure.

The final business unit has a commit of $38 million and a stretch of 45 million. They come in at 40 million and they get a 28% of the available bonus. The corporate result of this entire goal-setting structure is coming in at $158 million on a corporate commit of 155 from this business unit.

When you look at setting these commits and these stretches, it’s pretty clear that the team knows what they have to hit with the commit. They understand what the consequences are. Having the stretch gives them that incentive to work even harder and deliver above and beyond.

One thing I invite you to do is to create a commit and a stretch for all major metrics for your organization. Ensure there are consequences for missing the commit. Make sure there are rewards commensurate with hitting the stretch. By laying out these goals and letting people know broadly across the organization what the commit and stretch are, as well as the consequences and rewards, you can drive exactly the behaviors you want to hit your higher level goals.

Want to learn more about setting business unit goals? How about taking an entire course on it? Check out the video below to learn more about the course and get started. Or you can go directly to the course and start learning how to set business unit goals. The entire course is available at LinkedIn Learning. Enjoy!

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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.

Quantitative Goals

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.

Qualitative Goals

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.

Want to learn more about setting business unit goals? How about taking an entire course on it? Check out the video below to learn more about the course and get started. Or you can go directly to the course and start learning how to set business unit goals. The entire course is available at LinkedIn Learning. Enjoy!

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