Setting strategic goals is a ritual that often adds little value yet causes real headaches.
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A guru would give talks at a temple, at nine each morning. A cat began turning up at the talks, meowing and distracting the audience.
The guru hired a servant to catch the cat before the talks began and tie it up in a back room.
A few years later, the cat died. Wanting to keep his job, the servant found another cat and tied it up every morning.
In time, both the servant and the guru died. But since tying up a cat at nine had become a tradition, the temple hired a new servant and brought in another cat.
Centuries have gone by, and experts are still scratching their heads about how that odd “temple cat-tying” morning ritual came about.
We maintain many rituals and traditions without knowing why we have them or when they began. Setting an ambitious strategic goal is one of those.
However, unlike some pleasant rituals and habits, setting such goals sometimes comes with pitfalls.
Don’t buy this jigsaw!
I don’t like visiting DIY stores—because when I do, I want to buy half the store.
It may seem strange that someone who spends most of their days sitting at a desk or conducting strategic retreats still enjoys working with their hands. But when I walk in, I’m mesmerized by the metallic gleam of the tools—jigsaws, drills, and hammers.
When my hand reaches for yet another planer, I remind myself: “Use only tools you know exactly why you need!”
This is what I tell my clients when they ask me whether they should use SWOT analysis, PEST analysis, or any other classic strategy tool. “If you know how to use it and why you need it – go ahead!” I say. “But if you don’t, using it will cause more harm than good.”
Usually, they agree with me. But when I tell them they might not even need a strategic goal, they look at me as if I’d just declared the Earth is flat.
“But strategy starts with the goal!” they exclaim. “You set a goal, and strategy is how you reach it!”
Who said that?
When I ask, they struggle to answer.
Life without goals
Imagine two similar companies—XYZ and ZYX. Both are small regional businesses, but their leaders are ambitious. They want their companies in the global top 500 and their faces on the cover of Forbes.
XYZ has a big strategic goal—its “North Star”—to 5x the business in three years.
ZYX has no strategic goal. However, it studies its customers and explores new opportunities.
The XYZ team has many ideas, but most get shredded because they don’t offer quick wins. The company bets on straightforward yet effective tactics such as aggressive marketing, promotional discounts, and geographic expansion.
The ZYX team believes in innovation. They don’t toss out ideas that seem questionable at first; instead, they test them and run lots of experiments. They know non-obvious ideas often have a lot of untapped potential. They don’t want to grow fast at all costs; instead, they prefer steady growth.
XYZ is growing quickly, but customer satisfaction falls short. ZYX’s customers love its products, and this helps the business expand.
In XYZ, they worship rapid growth, and any deviation from the projected hockey stick trajectory feels like a disaster. Whenever the business falls short of its quarterly targets, leadership resorts to erratic moves such as even more aggressive marketing to close the gap.
AtZYX, they don’t panic if the business doesn’t grow quickly each quarter. Because they don’t set unrealistic goals, they don’t get depressed when they miss them. They know that the path of innovation is nonlinear and unpredictable.
In XYZ, top executives and middle managers use shady tactics to hit their growth KPIs.
In ZYX, leaders just don’t need that.
I’ve worked with both types of businesses as a strategy consultant, board member, and adviser. If I had to pick where to invest today, I’d choose the second—no hesitation.
What’s wrong with goals?
Many companies set their “North Star.” This website gives a few examples:
· Netflix: Total hours viewed
· Uber: Weekly active rides
· Airbnb: Nights booked
· Intercom: Number of customer interactions
· Dropbox: Teams using Dropbox
· Slack: Number of paid teams
I believe at least some of them benefit from these goals. But there are a few pitfalls to watch for.
1. These goals narrow your horizons—and that’s not necessarily a good thing. They push the core product forward but don’t nudge the team to look around for new opportunities.
2. When a team has to choose between an obvious quick win and a non-obvious bet with a longer (and possibly more strategic) payoff, it defaults to the quick win.
3. These goals only work while you keep hitting them—year after year. Miss once, and morale tanks.
4. The more ambitious the North Star, the stronger the temptation to cut corners to hit it.
When we set a big strategic goal, our confidence in achieving it often rests on two assumptions:
(1) that the world will keep serving up easy assists and help us get there, or
(2) that we’ll bend the world to our ambitions.
Both are wishful thinking.
Falling short is normal; revisiting the goal is inevitable.
So, if a big, hairy, audacious goal gets you and your team jumping out of bed and sprinting to make the world better—go for it. It’ll keep you fired up—right up until the first missed-target hangover hits.
But if a big goal doesn’t tickle the imagination, feel free to skip it. Pick a general direction, and in the day-to-day, set short-term targets. That works too.
If you want to learn more about the pitfalls of strategic goals, read Chapter 6 of my book, Red and Yellow Strategies: Flip Your Strategic Thinking and Overcome Short-termism—it’s titled “The Dark Side of Strategic Goals.” And if you need help with strategy, get in touch, and we’ll discuss how I can help.