And why companies should flatten hierarchies to accelerate decision-making
Curb Your Enthusiasm has no shooting scripts — only outlines. No dialogues mean actors improvise on the set with the outlines acting as guides. And that’s what makes the HBO show, now in its eleventh season, unique and successful — without a top-down script.
Businesses also have their version of TV scripts: cascading goals. At the start of each year, senior executives get together and decide the company’s objectives for the following year. They pass the objectives down to the next rung, who then set their goals, and so on. The cascading continues until it hits the bottom of the corporate ladder: front-line employees. It could take months, but in the end, everyone’s got their scripts.
However, that century-old practice of goal-setting produces shows that tank at the box-office of reality. Cascading couldn’t keep up with the changing pace of business, modern work environments, and employee expectations. Lack of transparency, playing it safe while setting goals, and work becoming rote box-checking exercises — to name a few of the problems. One Mesh customer told us that while they were cascading down the goals, the quarter was already over. No wonder Harvard Business Review urged managers to avoid cascading goals.
Goals drive strategy execution. In 1990, two goal-setting pioneers, professors Edwin A. Locke and Gary P. Latham, published a groundbreaking book summarizing decades of their research. They found that there’s an inseparable link between goal setting and workplace performance. Locke and Latham recommended leaders set ambitious targets with metrics, make them transparent, and give continuous feedback. Cascading is the exact opposite of what Locke and Latham suggest.
Lack of transparency
A Harvard study says that “only 7% of employees fully understand their company’s business strategies and what’s expected of them in order to help achieve company goals.”
In the cascading model, employees can’t see the company’s top-level goals. That prevents them from aligning their individual goals to those of the company. The result: reduced engagement, mediocre performance, and limited cross-team collaboration.
That’s one reason why companies such as Amazon, Google, GE, and Samsung are adopting OKRs. Having goals transparency built in gives OKRs an edge over other goal-setting frameworks. Learn more about OKRs here.
Not flexible enough
In today’s globalized world, businesses have become more complex and fast-paced. Disruption is happening everywhere, uprooting incumbents and upending entire industries. Companies need to be more dynamic and match their goals with the evolving realities of the day, which cascading doesn’t allow.
Goal cascading happens once a year and takes months to trickle down the corporate food chain. It’s tough, and in some cases almost impossible, to change the company’s direction and course-correct individual goals on the fly.
SMART doesn’t stretch
“I’d rather have the objective be to go to Mars, and if we fall short, we’ll get to the moon,” Google co-founder Larry Page often says. Stretch goals allow companies to go beyond incremental progress and come up with revolutionary products. They motivate employees to stretch outside their comfort zones, take on risks, and deliver exceptional performance. Locke and Latham agree: “90% percent of the time, challenging goals led to higher performance than easy ones.”
One of the most popular frameworks that managers use to set goals during cascading is SMART: specific, measurable, achievable, relevant, and time-bound. If employees hit those “measurable” and “time-bound” goals, they get the incentives such as compensation and promotion. The problem with SMART is that it encourages employees to sandbag by setting easy to achieve targets and nipping stretch goals in the bud. A survey by Donald Sull of MIT Sloan concluded that two-thirds of managers would advise a new colleague to play it safe. Goal cascading, when used alongside the SMART framework, deprives companies of creativity and innovation.
Reduced engagement
The whole purpose of having goals is to improve employee performance. So it makes sense to involve them in the entire process. Doing that also makes them feel valued and motivated. Securing employee buy-in translates to increased engagement thanks to the IKEA effect, more ambitious goals, and better performance.
But goal cascading doesn’t allow employee involvement in goal-setting beyond the narrow objectives set by their managers. When top-line executives don’t have input from on-ground employees, many great ideas die before seeing the light of the day. Employees find it demotivating not to have a say in how they can better contribute to organizational goals, reducing their engagement and performance.
Lack of autonomy
In the forces, Commander’s Intent allows lower-ranked soldiers to solve problems in real-time using creativity. In the business context, that “intent” translates into a company’s objectives and the ability to solve problems with creativity into autonomy. Setting their own goals not only boosts employee performance but also frees them to explore new creative ways.
With cascading goals, there’s no such thing called Commander’s Intent. All the employees can do is to toil in a spiritless manner to hit their goals.
Limited collaboration
Collaboration among employees and teams is vital to employee engagement, innovative breakthroughs, and driving the company’s performance. Goal cascading’s lack of transparency means employees have little or no idea what other teams are working on. It creates a siloed work environment that discourages the exchange of ideas and teams coming together to solve a business problem. When there’s limited collaboration, employees may hit their targets, but there’s little innovative output.
“Having goals improves performance. Spending hours cascading goals up and down the company, however, does not… We have a market-based approach, where over time, our goals all converge because the top OKRs (goals and metrics) are known, and everyone else’s OKRs are visible.” says Laszlo Bock, former head of People Operations at Google, in his book “Work Rules.”
Today, cascading goal-setting is like internal combustion engines: Inventors of both were born in the nineteenth century. The world has changed a lot since then, leaving them both beyond improvement. Just as electric vehicles replace internal combustion engines, companies need to shift from cascading goals to transparent, bottom-up, and meritocratic models. We recommend switching to OKRs.
Beyond cascading SMART goals is the land of motivated employees, breakthrough innovation, and better business results. And now is time to move.
Mesh helps companies empower their teams and boost performance with OKRs and continuous feedback. Interested in knowing how Mesh can help you upgrade your goal-setting from cascading goals to OKRs? Speak to us today.
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