I was once reviewing the organizational goals for a client.  One goal assigned to every salesperson had to do with taking prospective customers out to lunch.  Each sales person was supposed to host five lunches per month.  The client found that five lunches generally yielded one new customer.  I asked why they didn’t just set the goal at one new customer per month.  After all, their objective wasn’t to buy people lunch, it was to get new customers.  My client explained that the lunch goal ensured that the sales people were keeping busy and focused on generating new customers.

I proposed the following scenario.  Imagine two sales people.  In the course of a year, the first sales person took out twelve people all of whom became customers.  The second sales person took out sixty people but generated no new customers.  Based on their goals, the person who generated no customers would be rewarded.  Even if the second person generated twelve new customers why would you reward him or her more for spending five times as much to achieve the same result as the other sales person?

Activity-based goals reward inefficiency.

The client pushed back.  He said, “But what if the first person got all twelve customers in the first month of the year and then just sat back for the rest of the year doing nothing.  Why would we reward that?”  That’s activity-based thinking.  If you want twelve new customers per sales person, it shouldn’t matter how and when they get those customers.  In fact, doesn’t it make more sense to reward the person who generated the most customers with the least cost in the most efficient way?  Are you rewarding effort or results?

The client pushed back again, “But if that person kept working all year, he or she could get more than twelve customers.” That’s the second problem with activity-based goals.  They hide what you really want.  If you want twelve customers per year, that should be the goal.  If you want more than twelve customers per year, that should be the goal.  People need clarity.  Saying “go out to lunch and generate as many customers as you can” doesn’t help people know when they’ve been successful (other than by tallying their lunches).

The client pushed back one more time, “So, what if we just include a goal for the number of new customers along with the goal for five lunches per month”.  I asked why they cared so much about how the sales person got the new customers.  Setting both goals forces the sales person to go out to lunch even if he or she has a better and more efficient way of generating customers.

I asked what would happen if the first person didn’t take anyone out to lunch yet still generated twelve new customers.  In this case, the person would have made no progress toward the lunch goal yet they would have achieved the actual result that the company wanted.  Perhaps this person’s method of generating customers is less expensive and time consuming than going out to lunch.  Why would a company want to penalize that person for that?

Activity-based goals disempower your workforce and limit their options and creativity.

Most of the leadership goals that I see are activity-based. Activity-based goals reward inefficiency, reduce creativity and empowerment, and generate less impact on the organization. Frame goals around the specific changes that you’d like to see to your business.  Then reward the people who are able to make those changes happen in the most efficient and effective manner.

Avail Advisors can help your leaders define and manage outcome-based goals.  Check us out at http://www.availadvisors.com/services/creating-outcome-based-goals-and-accountability/.