Goal incongruence creates low productivity

As consultants, we are often asked to review the operations of an organisation rather than having an internal review, simply because we are an external set of eyes.

A common element we see is goal incongruence. The impact of goal incongruence is non-trivial. At best, organisations with high levels of goal incongruence are not as productive as they should be. At worst they are in terminal decline.

The incongruence is caused by three broad categories:

1. Mission/Vision poetry
2. “Wannabee” goals
3. Multiple goals

Mission/Vision Poetry

Whenever we hear a Mission or Vision statement that has an identifiable metre, we suspect that we are in trouble finding a meaningful goal. It tells us that there has been so much word-smithing done that people have forgotten what the organisation is there for (Mission) and how they will know when they have been successful (Vision).

I don’t know why, but whenever there has been more thinking done about each word and less about what they all mean together, the end result is more like a piece of poetry than a goal for the organisation.

One customer had the vision “We will be the leading provider of customer-focused credit solutions”. When it was spoken it had a definite metre, with emphasis on the words in bold. The trouble was no-one could identify what “leading” meant, who exactly the “customers” were and what specifically a credit solution was even if we could identify the customer.

The vision was repeated often at all meetings and adorned walls and reports and yet no-one knew what it meant, or more correctly, each of the management team had a different view of what it meant.

The goal of the organisation was immediately incongruent. It flowed through to the behaviour of the management team, each applying their view of what the vision meant. The most obviously evident was the interpretation of the word customer.

The department looking after strategy and the department designing the credit processes thought the customer was internal. That is, the organisational divisions looking after customers such as wholesale, consumer and small business. The operations department thought the customer was external. That is, the individual who would call them to talk about matters pertaining to credit. Combined with the less obvious divergence on what to be leading meant and what a credit solution was, the result was dysfunction and low productivity.

Wannabee Goals

A frequent observation is when the clear stated goal does not translate to different behaviours and actions by the leadership team.

Actual examples include:
Goal: $X profit by year XXXX; Behaviour: Sales focus, not profit
Goal: xxxx tourism visitors by year XXXX; Behaviour: Budget allocation and reporting focus, not activity completion to increase visitor arrivals
Goal: xxxx Hotel bed nights by year XXXX; Behaviour: Costs, Costs, Costs
Goal: Customer retention; Behaviour: Focus on bad debt expense to the exclusion of customer retention
Goal: Reduce costs by X% implementing new processes;  : Focus on proposal acceptance by the board, not implementationBehaviour
Goal: Create a professional team; Behaviour: No training, dysfunctional performance management
Goal: First time resolution (call centre); Behaviour: Focus on average call handling time to the extent of call centre personnel telling customers, “I can’t speak to you for any longer.”

Common to all of these examples is a worthy goal requiring a lot of work, prioritisation of use of resources and some critical thinking about how to actually achieve the goal. Further, a change in behaviour is required.

Behaviour change required a change in informal and formal performance management, KPIs, the stories told by the leaders and perhaps organisational structure. In all cases the change in behaviour was tackled in a manner which was insufficient to engender anything but transient change.

Also, the leaders in all of the organisations were unable to see that their individual behaviours had not changed in order to achieve the goal.

They wanted to be the type of organisation that achieved their stated goal, but did not work systemically to achieve it. The consequences were wasted effort and organisational inertia.

Multiple goals

The most common category of incongruence between stated goal and behaviour comes from having multiple goals.

Multiple goals create uncertainty about primacy. Primacy of goals is necessary to avoid incongruence.

Imagine multiple goals of Profit, Lost Time Injury Frequency Ratio (LTIFR) and Bad Debt Expense Ratio (BDER). Think of it as, “We want to make money without hurting anyone and without selling to too many people who cannot or will not pay.” Which of the following sets of numbers is acceptable?

Results #3 is the best result for profit. However, we had more lost time injuries than we targeted and Bad Debt Expense was way over target.

Is that better or worse than Results #2 which was on target for profit but twenty seven percent less than Results #3? We had fewer lost time injuries than we anticipated but bad debt expense was still way over.

Is Results #1 a better set of numbers? Whilst we did not reach our profit target we beat our anticipated level of lost time injuries and bad debt expense was way under.

Which result is the one we would be happiest with?

If we knew that profit is our prime goal, Results #3 is best, if LTIFR is our prime goal, Result #2 is best, if BDER is our prime goal, Results #1 is best.

Without an identified prime goal and target ranges set for it and the subordinate goals (business objectives), different leaders will manage their teams to impact whichever goal they think is more important.

In our example, one leader in sales could take a view that a piece of business is worth writing to achieve a calculated profit figure and the leader in credit takes a view that it is not worth writing because of its bad debt risk.

The operations manger may have the view that we have to curtail our business with a particular customer because of the risks associated with unloading delivery vehicles, but the marketing manager thinks we need to keep the customer at all costs because of the impact on profit.

Usually, these dilemmas are resolved when the problem they are associated with surfaces. However, resolving issues after they surface is unproductive and most issues do not surface. Competing goals create an organisation with very high inertia.