3 Ways to Set Effective Performance Goals

November 24, 2020

Contributor: Mary Baker

Effective performance management depends on good goals. Set the right tone for the year ahead with goals that drive business results and enable employees to be successful.

HR often struggles with effective goal setting, but ineffective goals make each part of the performance management process — ongoing check-ins, assessment and calibration, and reviews — more difficult. The result is poor employee performance, lower engagement and missed business goals.

“To ensure business performance consistently outpaces expectations, HR leaders need to get the goal-setting process right at the beginning of the year, rather than waiting to address the previous 12 months of performance at the end of the year,” says Brent Cassell, Vice President, Advisory, Gartner.

Goal-setting lags how work gets done

Current goal-setting practices often fail to align with the way work gets done. In fact, Gartner research finds three barriers to effective goal setting:

  • Diverse work makes strategic alignment harder. The workplace is changing fast. More employees work remotely and the gig economy is growing, at the same time that work is becoming more specialized. A recent Gartner survey found that 68% of leaders agree that only staff with a highly specialized mix of competencies and experience can successfully perform the work they need. As a result, an increasing number of employees feel disconnected from their organization’s goals. In 2019, 47% of employees reported understanding the broader goals of their organization and how their daily work connects to company success, down from 54% in 2012.
  • Individual goal setting overlooks team-based work. Work today is more team-based than ever. According to Gartner’s 2019 Gartner Performance Management Benchmarking Survey, 82% of employees work closely with their colleagues and 73% check in or work with other colleagues. And yet just 3% of organizations involve peers in the goal-setting process, and only 20% involve teams.
  • Annual goal setting doesn’t keep up. Nearly 40% of employees feel that their current roles are evolving rapidly and that they need to learn new skills and new ways of working with people to support changing business priorities. Despite the pace and extent of these changes, goal setting remains an annual activity for most organizations and fails to take into account the dynamism of most corporate strategies. As business needs and outcomes evolve, so must goal-setting processes.  

3 best practices for goal setting

Talent is the single biggest cost and differentiator when it comes to business success, and organizations don’t have the luxury of failure when it comes to employee performance. Leverage the following three best practices to ensure goal setting is aligned with the way work is done today and that employee goals are impactful and drive business outcomes.

1. Help managers provide context for goal setting

To help their teams set aligned goals, provide managers with information about business strategy and how it relates to employees’ diverse roles. Managers must then give direction that translates that information into specific tasks and actions. Providing information and direction together enables employees to see the link between their work and overall company strategy.

HR plays a critical role in helping managers understand business strategy and translate it to their teams. Getting manager contextualization right can have a big impact on employee performance. Organizations with managers who are most effective at contextualization can boost the percentage of high performers from 44% to 60%. 

2. Make goal setting more collaborative

Given the increasingly collaborative nature of work, transform goal setting from a solo activity to a team activity. This requires several shifts. For one, have individuals share goals with their team and ensure that everyone understands how their goals relate — and that they are jointly accountable for achieving the results outlined in their business plan.

Also, implement team goal-calibration sessions, rather than just requesting peer feedback at the end of the year during the formal performance review process. This enables teams to discuss what they will need from each other and to calibrate expectations rather than performance.

3. Empower employees to update goals regularly

Build flexibility into the goal-setting process so employees can evolve their goals as their roles and the business changes. Have employees review their goals with their manager quarterly, at minimum, as well as at the start of the year. Help managers and employees identify triggers for adjusting goals, including changes in company or business-unit financial performance, staff turnover or technology advances.

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