One way to successfully carry out strategic tasks in the workplace is through goal setting. This can be achieved by determining an objective, measuring and discussing progress, and sharing goals within the company, according to Donald Sull, senior lecturer at the MIT Sloan School of Management, and Charles Sull, a partner at Charles Thames Strategy Partners LLC.
The pair wrote the article, “With Goals, FAST Beats SMART,” for the MIT Sloan Management Review. They note that 95 percent of organizations have employees who set goals for themselves and their colleagues.
Sull and Sull argue that the typical way of setting goals is not particularly effective. Managers often use the SMART model for goal setting: specific, measurable, achievable, realistic, and time-bound.
“The traditional approach to goals — the annual cycle, privately set and reviewed goals, and a strong linkage to incentives — can actually undermine the alignment, coordination, and agility that’s needed for a company to execute its strategy,” the authors write.
One problem is that employees may set “conservative targets” to achieve their goals. Another issue is that privately-set goals prevent employees from knowing what their colleagues are working on. While employees may achieve individual goals, the lack of support and coordination from team members could prevent the organization from fulfilling its strategy.
Sull and Sull examined the goal-setting strategies of companies such as Google, Intel, and Anheuser-Busch InBev as well as academic literature and proprietary data. They determined that four core principals work best in goal setting and use the acronym FAST to describe it: “Goals should be embedded in frequent discussions; ambitious in scope; measured by specific metrics and milestones, and transparent for everyone in the organization to see.”
For example, Brazilian beer-maker Companhia Cervejaria Brahma evolved into the biggest beer maker in the world, AB InBev, after making transparency a top priority. CEO Marcel Telles removed walls and cubicles and publicly posted managers’ goals and progress. Google also posts employees’ goals for everyone to see.
Transparency spurs employees to boost performance through peer pressure, demonstrating what can be achieved, and connecting them with colleagues or others in the industry who can help with achieving them.
“When employees can see top-level goals, they can align their individual and team objectives with the company’s overall direction,” Sull and Sull explain. “Clarity on how their work contributes to the success of the organization as a whole, moreover, is one of the top drivers of employee engagement.”
The “S” in FAST stands for specific actions and metrics to achieve a goal, target or objective: “Objectives are short descriptions of what you want to achieve. Each objective should include a handful of key results — typically quantitative metrics or milestones that specify the steps required to achieve the goal and measure progress.”
Going through this process helps employees think through details, which enhances their performance.
Goal setting should be discussed by managers and team members frequently (the “F” in FAST) throughout the year in order to “evaluate progress, discuss unexpected challenges, and make real-time adjustments.” Some companies reset goals on a quarterly basis, while others meet weekly with team members. This enables employees to have an open dialogue with their colleagues in order to more efficiently achieve their objectives.
Businesses such as Microsoft, IBM, and Accenture have ongoing discussions with employees about their goals, which keeps them in the forefront of the workers’ lists of priorities.
The “A” in FAST is for ambitious goal setting. “Ambitious goals minimize the risk that employees will sandbag by committing to overly conservative goals they are sure to achieve,” the authors note. “The typical image of sandbagging is a sales representative setting a goal of $1 million when he is confident he could sell twice that amount.”
When a bonus is linked to achieving an objective, employees may choose goals that are easy to achieve rather than going out on a limb to hit their targets. “We have used multiple measures to estimate organizational ambition, and all point in the same direction — the typical company should focus on setting more ambitious goals,” Sull and Sull write.
However, the pair warns that there needs to be a balance between ambition and achievability.
Some companies, such as Google, ask employees to set goals that they won’t achieve 100 percent. In fact, Google expects its teams to achieve just 60 to 70 percent of their objectives—a move designed to get employees to think big. Google also does not link financial compensation with goal attainment.
“A recent meta-analysis found that in motivating people to complete complex tasks that involved creativity, intrinsic motivation was nearly six times more effective than external incentives in motivating people to complete complex tasks that required creativity,”Sull and Sull note.
They add that “one size does not fit all” when it comes to “injecting ambition.” AB InBev, for example, gives out bonuses for achieving specific targets, and the company is doing very well.
In sum, the authors recommend managers drive strategy execution by being FAST instead of following the traditional SMART model.