When it comes to strategy
Setting strategic goals in accordance with the SMART principle has become a golden management standard. But SMART goals have their “dark side”, and leaders should take it into account.
“Great resignation” is a global notion that hit America and some other economies after COVID-19. A record number of employees voluntarily quit their jobs for various reasons, but mostly because they disagreed with some of their employers’ policies. But sometimes a local “great resignation” takes place — when a CEO and a team leave the company simultaneously, which is always very painful for the business. And I have seen a couple of times that it happened because the board members insisted on sticking to long-term SMART goals, whatever happens.
The dark side of the SMART goals
Commitment to long-term goals is worshipped as the highest virtue in the business world. Investors, stock analysts, and shareholders make crucial decisions based on them. LTI, long-term incentives are often framed against these goals. A CEO whose company achieves them is a hero.
But there are three “buts”:
1. Every goal is a choice, and choice implies limitation. If you opt for one way, you immediately cut out all the others. It works well when you choose a wine for dinner. But when it comes to strategy, it may reduce your flexibility. And flexibility matters (read more).
2. A goal often means moral commitment, often reinforced by long-term incentives. As soon as a goal is set, it becomes difficult to abandon it even when it seems reasonable. Sometimes it makes the governance process participant stick to the objective even when it becomes questionable.
3. A goal should be measurable, and it often goes without a doubt. But nothing is measurable regarding the future. We can’t predict; we only can guess or hope. So, if a goal isn’t reached, it means next to nothing.
There are no facts about the future
In the cases I mentioned in the beginning, shareholders and board members insisted that the company should keep its long-term goals. And they refused to re-evaluate the LTIs even when the market conditions changed dramatically. As a result, frustrated teams preferred to quit.
There are no facts about the future — only assumptions. So, first, our anticipations may be wrong. And second, the environment may change for a variety of reasons, sometimes making the goals unreachable.
Board members need all their wisdom to use goals properly, being, on the one hand, persistent when it is necessary, and behave flexibly when it can bring better long-term results.
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