(This is the fourth of a five-part series for Small Business Trends on accountability in the new world, the increasing need for fundamental accountability in small business as the business landscape breaks apart into cyber vs. physical. Part 1 was War of the Worlds, Part 2 was Both Sides Now, and part 3 was Metrics and Management. I’d like to thank you all for some great additions in the comments, too.)
I’ve been around long enough to experience the introduction of accountability through planning, metrics, and management in actual real-live business situations many times. That’s led me to develop the theory of the crystal ball and chain problem. It’s very common. It gets in the way. And you can avoid it.
It’s Very Common
True story: back in the middle 1980s I was consulting for Apple Latin America. When general manager Hector Saldana asked me to do the business plan for the fourth year in a row, he added a condition: “you have to stay around to help us implement.”
Gulp. Accountability, oh no.
But I did. And it required getting a dozen middle managers to set up specific concrete and measurable goals so we could review, track, and manage.
The early response included some negative reactions. We talked. It became clear that some worried it was about getting them down on paper with specifics that could be used against them later. Tracking as planning for firing later if they failed to meet the goals.
We had a gamesmanship problem. It comes up a lot with sales quotas that trigger bonuses. Sales wants a low quota so they can beat it. Management wants a higher quota so they have to work harder. That kind of thinking made it harder to create a clean and healthy planning process. That’s the crystal ball and chain.
It Gets in the Way
A good clean planning process, the foundation of accountability, requires realistic achievable goals. But when people start gaming the goals, the system is much harder to deal with, and much less likely to produce benefits in accountability and management.
It’s not just the middle managers; it goes both ways. I’ve seen people try to sandbag their goals — keep them unrealistically low so they can beat them — and I’ve seen owners and managers trying to inflate their goals — make them way too high so people would have to work extremely hard, and still not reach them.
And You Can Avoid It
Avoiding the crystal ball and chain problem takes two steps: first, talk about it openly; second, manage it right.
For the talking step, you — owners and managers — promise everybody that it’s about cooperation, coordination, and teamwork. Make it clear that you want realistic goals throughout.
Use this example: the original annual plan, developed mostly in the Fall, called for a big seminar program in May. As it turns out, May is a bad date because a key audience group is already committed to something else. With good planning process, the monthly plan review meeting in March turns up the problem with May, so the project is moved to July. Everybody wins. Nobody is saying that the manager is charge gets dressed down in June for having failed to implement as planned for May. The process turns future guesses into reminders and alerts to make better management with the ongoing plan.
For the second step, managing it right, make sure you do. Schedule in advance a regular monthly review meeting and stick to the schedule. Keep it short and specific. Review results of the recent past and look ahead to specific milestones and events in the near future. Watch for changed assumptions. Make it from the top down a matter of cooperation and coordination, rather than crystal ball and chain.
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About the Author: Tim Berry is president and founder of Palo Alto Software, founder of bplans.com, and co-founder of Borland International. He is also the author of books and software on business planning including Business Plan Pro and The Plan-as-You-Go Business Plan; and a Stanford MBA. His main blog is Planning Startups Stories. He’s on twitter as timberry.
Hi Tim, I find that the more time I spend thinking about what company and staff goals should be, the more “intelligent” they are and the more they deliver to the bottom line. And usually they are more realistic for those charged with meeting them, too.
Whenever I did a shallow, surface job on goal setting, the goals would tend to be more unrealistic. And we’d often end up ignoring them, because they were meaningless.
Bottom line: it pays to spend time and give things the attention they deserve, when setting goals.
Have you studied Edwin A. Locke’s goal setting theory? I have read several of his books and listened to his courses. http://aamam.notlong.com
Setting up systems to accurately report facts/metrics avoids opinionated discussions that go nowhere. Even before setting up goals, I have found it a useful exercise to look at how the incentives are aligned for all parties involved.
With a team I led earlier, we had to once find a cheaper alternative after a software product vendor hiked the license fee. Once we announced a % of the amount saved as a reward bonus for the team, and openly communicated the amounts involved, the reactions changed! The same team that thought open source alternatives were not as feature rich, and resisted the move earlier as the management’s cost cutting gimmick, gladly evaluated several alternative products and found a near match that they liked.
As usual, very good information on the planning process from the master of business planning.
Setting realistic goals makes everyone happier in the long run. The employer and the staff feel more satisfied and motivated when goals are met and even exceeded.