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Romek Jansen, 12 Nov '15

Goal Management Methods - A 5-minute Crash Course on 5 Classics

There are many ways to set goals and to manage goals. We selected 5 popular ones for a closer look; MBO, OGSM, SMART, KPI and OKR.

People with clear “goals” consistently outperform people who just “do their very best”. “Doing your best” turns out to be a pretty meaningless promise in itself. Without an external reference point, the results achieved by people who do “their best” and people who “just do” are indistinguishable.

Why is goal setting so important? Goals give direction. Goals energize. Goals motivate. Goals keep you going when the going gets tough. But what makes all the difference is that goals take away ambiguity about what is required.

There are many ways to set goals and to manage goals. We selected 5 popular ones for a closer look. You are certainly familiar with the terms and acronyms, and you probably know where they stand for, but would you be able to confidently cite their pro’s and con’s?

Here is crash-course on 5 goal management methods.

1. MBO

MBO stands for Management By Objectives. The management model aims to improve the performance of an organization by having manager and employee defining and agreeing on objectives together, prior to project outset. Subordinate performance is determined by comparing the agreed upon objectives to achieved results. It’s the manager’s job to ensure that subordinates’ objectives are linked to the organization’s objectives.

After Peter Drucker popularized the model via his 1954 book The Practice of Management, its acceptance grew rapidly. And for good reason. An extensive 30-year research program revealed that companies who fully embraced the MBO principles showed a productivity increase 10 times higher than that of MBO sceptics.

Biggest pro 

Participative goal setting of both manager and employee increases commitment, understanding and creates a sense of responsibility under subordinates.

Biggest con

If not properly managed, the pursuit of achieving an objective may cause self-centered employees to skimp on quality, possibly making MBO counterproductive.

2. OGSM

OGSM stands for Objectives Goals Strategies Measures. It is a strategic planning process that provides clear goals and identifies the strategic choices to achieve them.

In the OGSM model, the objective itself is the most important element and should be the basis around which to define Goals, Strategies and Measures. Objectives should be big, long-term and should be a compelling glimpse into the future that lies ahead.

OGSM has its origin in post war Japan, and is part of a group of management ideologies that gained traction in the 50s and 60s rebuilding a war-torn country. Lack of resources was the obvious operational bottleneck those days. “Availability of Resources” is the starting point for OGSM decision-making. The result is a strategy one-pager, easily shared and understood by the teams.

Biggest pro

It encourages realistic, long term goal setting and connects goals to tasks.

Biggest con

It has lost in popularity. The focus on available resources to inform long-term planning is not always suitable for today’s volatile competitive environments that require fast-changing business models.

3. SMART

The SMART acronym is used to describe the elements of a solid goal description. SMART goals are Specific, Measurable, Achievable, Relevant and Time-bound. It has become a popular term for managers who quickly want to define and/or check goal definitions.

In our experience, managers who refer to the SMART acronym, do this to emphasize the importance of clear goal definition, often without knowing which terms the SMART letters actually represent. “The letter A means Accepted? Agreed? Attainable? Whatever, just make it crystal clear what needs to happen, Okay?”. The smart thing about SMART is that everybody understands the basic idea behind it.

Peter Drucker already refers to SMART-like principles in his book The Practice of Management, where he introduced the MBO. But the first-known use of the exact term in its current shape occurs in the November 1981 issue of Management Review by George T. Doran. Doran did not present SMART goals as the holy grail of management and the one single thing to achieve business success. He also mentioned there are situations where it is best to be less strict in applying the SMART principles.

“In certain situations it is not realistic to attempt quantification, particularly in staff middle-management positions. Practicing managers and corporations can lose the benefit of a more abstract objective in order to gain quantification. It is the combination of the objective and its action plan that is really important.[1]

Biggest pro

It is an easy to remember riddle which functions as a quick guideline to structure goals and to remain focused on what to do.

Biggest con

The precise and rigid nature of the SMART goal definition does not encourage people to innovate, overperform or aim for long term “big hairy goals”, which requires continuous adjustment along the way.

4. KPI

The goal management tooling most widely used is the KPI – the Key Performance Indicator. A KPI is a set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their strategic and operational goals.[2]

A virtually endless amount of KPIs is available online. Based on your industry, product, marketing strategy, campaign objectives etc. you can select and implement the KPI which indicates the achieved and projected results’, which are key to your business success. However, in our experience, many implemented KPIs are not Key to the business at all; they are performance indicating nice-to-knows based on data that happens to be available.

To avoid KPIs not being Key to the business, and just being “PIs” causing noise, successful companies using KPIs limit the amount of KPIs to max. 5 per business unit.

Unlike the MBO and the SMART goal, the KPI does not have an official “founding father”. It is an orphan, adopted by a loving group of admirers.

Biggest pro

The ”What gets measured gets done” mantra of the KPI made it a widely adopted, well-researched and often written about topic.

Biggest con

“What gets measured gets done…. And what doesn’t get measured does not”. Using KPIs can cause employees to not do anything that does not get measured.

5. OKR

A relatively new kid on the block, but quickly gaining momentum, is the OKR – Objectives and Key Results. Also OKR is a method of defining and tracking objectives and their outcomes. It makes employees aware about how they can contribute to company success. This company success however, does by no means have to be “Realistic” or even “Available at acceptable costs”.

The interesting difference with MBO, SMART and KPI is that in OKR a 100% goal achievement is neither realistic nor desirable. In OKR, 70% goal fulfilment is customary, which makes “failure” the standard OKR outcome. The intention is to push people and to drive innovative thinking. Reaching a goal 100% almost certainly meant that the goal was not ambitious enough.

The OKR principle was invented at Intel, but it started to grow in popularity and gained acceptance after John Doerr presented it to the Google frontmen in 1999. Google started using it when the company was less than one year old and used it ever since, and we all know where that has led to.

Biggest pro

The focus on aspirational goals sparks aspirational thinking, potentially causing revolutions and disrupted markets.

Biggest con

Making failure the standard outcome is still a bridge too far for most companies, making it a fascinating but not yet widely adopted concept.

Conclusions

There are more similarities than differences between the 5 goal management methods.

They basically all agree on the WHAT; set clear goals, install metrics and measurements, perform goal integrations on all levels, promote transparency etc.

Where they differ is on the HOW; how to agree on goals, how to describe goals and how aspirational goals should be.

Which method you pick depends on your market and company culture. Are you a Silicon Valley tech company in a fast changing market, having easy access to an abundance of budget? OKRs, yes please. Are you representing an NGO in a developing country, then “availability of resources” might be a rational starting point and a reason to pick OGSM.

Whichever method you pick, a better goal definition will definitely yield better results.

References

[1] Doran, G. T. (198 1). There’s a S.M.A.R.T. way to write management’s goals and objectives. Management Review, Volume 70, Issue Il(AMA FORUM), pp. 35- 36.

[2] http://www.investopedia.com/terms/k/kpi.asp#ixzz3q4KbQNov