Goals and Measuring Outcomes -Success in Business
Many startups have struggled with growth and scale. They have ended up as failures. The leaders in those companies have established the goals, set timelines, showed a clear direction, and made it crystal clear of the required actions from each individual. Still, the companies failed. Why? One of the reasons behind their downfall is the ‘feedback’ system. They neglected to measure their progress.
The last part ‘measuring progress’ is essential. Otherwise, the business will be directionless soon.
In a cricket match, the teams will have mini targets within an innings. While batting first in an ODI, the team will have specific goals in mind for the 10th, 20th, 30th, and 40th overs according to the pitch conditions and several other factors. During the match, the targets may undergo a revision. Nevertheless, they will compare the progress against those mini targets. It gives a direction to the batsman and the rate at which he has to score runs(Required actions).
PEOPLE TREASURE WHAT YOU MEASURE
In many companies, CEOs had presented great strategies in mutual consultation with everyone from the organization. As everyone agreed, the leader thought that the people were carrying out the required changes. Unfortunately, the CEO failed to inspect the progress of the plan.
Lou Gerstner writes, “A few leaders confuse expectations with an inspection. Execution is about translating strategies into action programs and measuring their results. It requires a deep understanding of where the institution is today and how far away it is where it needs to go.”
He further adds, “Proper execution means building measurable targets and holding people accountable for them.’’
In the book ‘Measure What Matters’, John Doerr writes “Ideas are easy. Execution is Everything.” Measuring that execution is paramount.
John Doerr also talks about the secret weapon behind Intel’s operational excellence in the 1970s and 1980s. It was Andy Grove’s management principles. He used the company as a laboratory for his management experiments.
Andy’s previous company ‘Fairchild’, was a leader in Silicon Wafer Research. Still, the company had one problem -The company valued only expertise & people got hired or promoted because of that competence. However, the company failed in translating that knowledge into actual results. The team completely ignored the importance of achievements. Andy learned the lesson. When he started Intel, he knew what needs to be done.
In Intel, it didn’t matter what an employee knows but what he or she could do with whatever he or she knew. Andy made it clear that Intel would value only the accomplishment. The outcome is important. That’s why the company slogan -“Intel Delivers”.
The ‘outcomes’ became one of Andy’s most successful management principles.
To every new executive, Andy explained two key phrases -Objectives and the Key Results(OKRs).
An objective, John Doerr explains, is simply about what to achieve -It’s a concrete, action-oriented statement. An example of an objective-“We want to dominate the mid-range microcomputer business”. Remember, Setting objectives is a collaborative process.
A Key Result determines how to achieve that objective -John Doerr writes -It should be precise and time-bound, hard-hitting yet practical, assessable and verifiable. Example -Key results for that quarter for the above objective: “Win ten designs for the 8085' is one of the key results”. The key result has to be measurable.
At Intel, Andy created an ecosystem that measured and valued outcomes. He believed that emphasizing on output is the way to increase productivity.
Andy showed how to set objectives and key results to his people. He encouraged his employees to develop their collection of monthly goals & key results which would fit the company’s purposes, core values, and aspirations.
OKRs became a vital part of the organization. It communicated the direction with clarity. Because of OKRs, People knew where they were going -how far they had gone -how far to go -how to go and at what pace. OKRs helped Intel to become the industry leader.
Another factor that will help a business to grow quickly is the commitment from everyone to focus all their efforts in the same direction.
“If you tell everybody to go to the center of Europe, and some start marching off to France, and some to Germany, and some to Italy, that’s no good -not if you want them all going to Switzerland. If the vectors point in different directions, they add up to zero. But if you get everybody pointing in the same direction, you maximize the results” -Andy Grove -From ‘Measure What Matters’.
ALIGNING REWARDS WITH MEASUREMENTS
Jack Welch, former Chairman, GE, also stresses on measuring the outcome to achieve your goals. He recommends the addition of another factor to the exercise of measuring the progress -He advises us to combine profits & rewards with those measures. It would act as a wonderful motivation. He also reckons that linking reward with intermittent goals will also help in imparting the specific behavior a company needs in an employee.
Is it possible to estimate how much profit an activity has brought to the company while measuring its progress? Is it possible to link a reward for the employee for every milestone?
When Jack was CEO of GE, one of the divisions had a goal of reaching a specific revenue in the third quarter. Their measurement unit was ‘Revenue’ & they achieved it. However, Jack saw they had no income to go with the revenue. They ignored the necessity of margins. Though they achieved revenues, it didn’t add any value to the company. He says “What you measure is what you get.” So, measuring the right unit and adding profit margins to every activity will help in achieving your organization’s goals.
Measure the outcome with the right parameter.
Note: The above content is part of the following book -
References: Only The Paranoid Survive’ by Andrew S. Grove, Jack-Straight From The Gut by Jack Welch, Why Elephants Can’t Dance by Louis V. Gerstner.