[Updated November 15, 2013]: Since David first published this blog post back in March 2007 everyone's thinking on goal alignment has continued to evolve. Organization-centric goal management has emerged as the best practice that more and more companies are adopting.
Recently, Bersin by Deloitte identified that:
"Companies that set performance goals quarterly generate 31% greater returns from their performance process than those who do it annually, and those who do it monthly get even better results."
So goal alignment and management has to be something that is dynamic. And it has to be part of the ongoing dialogue between managers and employees about expectations and performance.
This continuous monitoring, setting and resetting of goals just isn't practical with a people-centric model. In today's business environment, you just don't have time to gradually work down successive levels of management to set goals in this linear fashion.
With organization-centric goal alignment employees can see their work matters
Another interesting benefit of organization-centric goal alignment is that it actually helps increase employee engagement. Research by Gallup and others in the employee engagement sphere tell us that employees need a clear context for their work. They need to see how they're contributing to the organization's success, because they want to know that their work matters.
With organization-centric goal alignment, employees clearly understand how each of their goals is supporting a high-level organizational goal. They're not just working to make their manager successful; they're working to make the organization successful.
With that said, here's where David's original article starts.
A look back - people-centric alignment
During the recent economic downturn, organizations rapidly shifted from growth-mode into preservation-mode. Understandably, business leaders quickly focused on identifying mission-critical tactics to meet near-term financial targets. To make this manageable, some organizations invoked the practice of linking individual employees' goals to their managers' goals, or people-centric alignment.
While the thinking around making higher-level objectives was solid, the results rarely were. Here's the typical process for people-centric goal alignment:
- Goals are set first by the CEO of the company.
- The leaders/managers who report to the CEO then establish performance goals that are linked to the CEO's plan.
- The process repeats itself (cascades) through the entire management hierarchy, until each individual contributor defines goals that are linked to his manager's goals.
Confused? No kidding. It isn't hard to see why many organizations found it hard to make this model work. It is complex and time consuming, and relies too heavily on personal plans.
And with a people-centric model, one change such as a promotion or termination creates a ripple effect that creates a need to revisit a whole raft of goal plans.
The new goal alignment model
The new goal alignment model is organization-centric; it parallels the existing business planning and budgeting processes of organizations and reduces administrative burden.
The organization-centric model works like this:
- Objectives are defined first for the organization.
- If desired, departmental or divisional goals can be set to support organizational goals. The number of levels of these depends on the organization's size and hierarchy.
- Employee goals are then linked directly to the high-level organizational objectives they are designed to support.
This process makes it easier to track and communicate progress and results back to the employees, as financial accounting measurement systems are established around an organization (e.g., business unit or department). In this model, success is geared towards the organization, not individuals who may be at risk of leaving or changing roles within the company.
With the goal alignment model we can be more agile
Ultimately, this model enables organizations to adjust quickly to changing business priorities. People and teams can work on common goals, and the process can keep pace with new business realities.
Also, there's greater visibility at all levels of the organizations as to how exactly the overall workforce will achieve corporate objectives.
In sum, while there are merits to the people-centric approach, the organization-centric/goal alignment model offers a more flexible, measurable and realistic approach to organizational and employee goal management.