Goal alignment is a strategic process which leads the organizations to achieve objectives & create value for stakeholders. Employees are the company’s most valuable assets & achievement in goals depend upon the performance of the employees working at different levels. Also, continuously changing expectations of the customers & consumers need to be aligned by identifying critical problems and establish criteria to improve the current processes. In this context problem is that the performance goals in many instances are not aligned with business goals.
Performance goals really drive performance when employees carry out activities with full effort supported by efficient processes leading to the good results. Everyone is playing a part in achieving the organizational goals hence it is very important that goals are converted into a balanced set of measures (activity performance indicators, process performance indicators & key performance indicators) with right ratio of results and practices at different management & frequency levels, both qualitatively and quantitatively. I will share some examples where goals are developed and aligned theoretically but in practical, they are not aligned effectively. This results in many problems like lack of teamwork, loss of trust, gaps in planning and ultimately low performance.
Organizational achievements are results of different functions and processes linked to external stakeholders. It is necessary to cover all aspects with a right balance while setting functional goals of teams and individuals to achieve best results. A balance scorecard is used to define and enhance various internal business functions and their external results. This term was invented by Robert S. Kaplan and David P. Norton in the early 1990’s. A balanced score card separates organizational metrics into four perspectives:
i. Financial perspective:
Financial goals give an insight into how well its priorities, projects, and plans are contributing to shareholder value and bottom line. It gives shareholders a direct view of the organization’s health and well-being.
ii. Customer perspective:
It defines the value proposition of an organization and measures how effective the organization is through its goals, objectives, strategies and processes in creating value for its customers. It is required to ensure a correct understanding of customer needs, the expectations of the products and services of the organization and the strength of its customer relationships.
iii. Internal business processes perspective:
Process improvement goals of an organization designed to create and deliver the value proposition of the consumer. To meet the changing customer and consumer needs, processes need to be improved continuously to meet customer needs. Sometimes in order to achieve efficiency we act & make process efficient but it is not effective. So, such goals are required to ensure that our processes are being improved effectively & are creating value.
iv. Learning and growth perspective:
It usually includes an organization’s capabilities and skills and how it is focused and channeled to support the internal processes that are used to create customer value. These goals help in effective use of human resources & to develop high performing organizational culture.
Balanced score card is also used to identify the factors that cause hindrance in a company’s performance and provide feedback. organizations using this strategy, have a better decision-making approach and get better results.
From goals to performance measures
Consider organizational goals as stakeholder wants. We need to convert them to performance measures at different frequency and management levels to ensure progress is giving desired results. It involves collecting, analyzing and visualizing data regarding the performance of an individual, group, organization, process, or activity. This is to ensure the right ratio of leading and lagging performance indicators at different frequency levels.
Leading indicators are usually practice which are harder to measure but easier to influence. They deal with the immediate progress and show the possibility of achieving your goals. Lagging measures are usually results which are easy to measure but hard to influence. They usually record an event that has occurred and checks if the intended result is achieved.
1- Key Performance Indicator (KPI):
KPIs are usually financial and nonfinancial results to measure the performance in reaching business goals.
These are developed using acronym “SMART” (Specific, Measurable, Achievable, Relevant, Time bound).
However organizational metrics do not end with KPIs. Lower- level metrics down to the individual process level are required to support KPIs and provide organizations with In time, deep, meaningful, and actionable insight to conduct and manage their business effectively
2- Process Performance Indicator (PPI)
A PPI is a measure that reflects the critical success factors of a business process defined within an organization, in which its target value reflects the organization’s goals with that business process. PPI is used as a key performance metric focusing exclusively on the on the business process indicators.
3- Activity Performance Indicator (API)
API is a monitoring tool that monitors all the performance activity of the organization including the workforce. It is a very important support to KPIs as it monitors the activity of organization’s performance and points out the weak points so it could take measures to improve them.
Are your organizational goals aligned quantitatively and Qualitatively?
Each company sets goals and objectives to have a positive effect on the organization’s performance and culture. In case of misalignment in practical, organizations may achieve goals on short term but it will have negative effect on the culture and will result in failure in long term like lack of team work, dominance of inappropriate management styles.
Despite of good alignment and balance, in practical goals may not be aligned due to buffer kept by team managers, intentionally or due to bias. If a Manager gets a budget of $100 Mio. for example and distributes $90 Mio. among his team it is no alignment. This approach may result in lack of trust and team work, also the management style of team manager changes from coaching or affiliative to directive or authoritative. This can make your goals fail to drive performance by changing the culture.
It has been observed that goals may have qualitative misalignment too. Some critical result-based objectives are cascaded to the lower levels of team as such instead of goals focusing on individual contribution. If organic growth (volume + price growth) is assigned to a territory sales executive, it is qualitative misalignment as a territory sales executive has no part to play in price decisions and price is market driven strategic decision.
Quality management assessments with a certain frequency are good to ensure these aspects of goal alignment and to ensure that we are promoting team work, trust and high-performance culture.