When you prepare for what’s next, do you find yourself taking last year’s results and adding 10%?  Do you set goals by looking at another organization’s trajectory and overlaying your dreams on top of it?  Or maybe you just "know that it’s where things need to go" but there really isn’t much rigor to the development of your goals?

Another of the very helpful questions in Dr. Ram Charan’s Know-How: The 8 Skills That Separate People Who Perform from Those Who Don’t is:

"Do you know how to develop goals by balancing what the business can become with what it can realistically achieve, not merely looking in the rear-view mirror and making incremental adjustments to what’s been done before?"

Complicated?  Maybe.  But here’s the key.  Most organizations only understand goal-setting as a forward look based on an extrapolation of past trajectory.  While it’s true that many organizations formulate goals without a connection to a strategy to achieve the goals (i.e., "We’re going to grow to 3,000 in attendance"), this is a different issue.  Most simply calculate the rear-view mirror + 10% = this year’s goal.

Charan’s challenge is to "balance what your organization can become with what it can realistically can achieve."  Good description of the idea that your preferred future is just that…a preferred future…where you hope to be one day.  It answers the where question.  What Charan is talking about is the idea that all along the way there are intermediate goals.  They’re not where you hope to be one day.  They represent points along the trajectory that lead to where you’d like to go.  And stretch goals aside, the points along the trajectory are what you can realistically achieve.  That’s a very important distinction.  It implies that you’ve thought about it.  It means that you’ve developed a strategy to actually get there.  For instance, if you think of the preferred future as Mission 2020 then you’re actually looking at this year’s goals as BaseCamp 2008.  And you know that in order to be at the preferred future by 2020, you’ve got to get to BaseCamp 2008 first.  So you get very detailed and realistic about how you’re going to get to BaseCamp by the end of 2008.

So once you determine that you need to set realistic goals, how do you do it?  I love Charan’s example of GE’s Jeff Imelt:

  • First, he was looking down the runway to see what opportunities lay ahead for GE.
  • Second, he took into account the organization’s capabilities–now and in the future–to achieve the goals.
  • Third, he understood the relationship between the goals and assured they could be achieved simultaneously.
  • Finally, he kept his long-term goals in balance with short-term goals.
Learning to Set the Right Goals