Goal setting with cascaded goals and associated metrics make up the holy grail of strategy execution. You can’t execute unless you cascade a set of actions that are connected with performance measures that drive results. The next step most organizations take is to connect those outcomes to incentive compensation and performance review plans, because you need to incentivize what matters. In our work, we espouse such methodology as a closed-loop way to move from strategy to operations and individual performance.
Goal Setting and Innovation
However, what happens when we are too rigorous in this effort? I believe it can have the detrimental effect of stifling innovation. Why? Because individual contributors end up only focusing on what drives compensation and retaining one’s job. Everything else, such as coming up with better ways to work together, jumping on a product innovation team, or moving on customer ideas, is not a focus. Not only is it not a focus, it could get you fired because such effort is not valued, as per the performance evaluation form and the compensation system.
Therefore the culture of innovation is squashed because those people who want to move on big ideas ( ignoring the compensation conflict) have an uphill battle on their hands. They end up spending all of their energy trying to convince their colleagues to do something new and different, instead of executing on an idea. While this is happening, competitors are gaining ground.
So what is the solution? Consider setting an innovation goal to encourage staff to work on innovation ideas. Or change your performance review form to include a section on innovation. Another idea is to follow Google’s model. Google is well known for encouraging everyone to spend 10% of their time on generating and executing on innovative ideas. What are you doing to foster innovation? Is your system hurting or helping your organization be innovative?