Your Goals? Forget Them.

Posted by: John Tozzi on May 06, 2009

Should you trash your goals?

This piece from the Boston Globe (via 37 Signals) outlines the risk of relying too much on goals. GM set a goal to regain 29% of the US market, and pursued it relentlessly:

In clawing toward its number, GM offered deep discounts and no-interest car loans. The energy and time that might have been applied to the longer-term problem of designing better cars went instead toward selling more of its generally unloved vehicles. As a result, GM was less prepared for the future, and made less money on the cars it did sell. In other words, the world’s largest car company - a title it lost to Toyota last year - fell victim to a goal.

It reminded me of this Harvard Business Review piece that explores the difference between MBA-mind and entrepreneurial-mind. Is there a fundamental difference between how (generally speaking) entrepreneurs and MBAs think?

The answer, [Darden entrepreneurship professor Saras] Sarasvathy concludes, is an emphatic yes—and the differences boil down to the “causal” reasoning used by MBAs versus the “effectual” reasoning used by entrepreneurs. Causal reasoning, she explains, “begins with a pre-determined goal and a given set of means, and seeks to identify the optimal—fastest, cheapest, most efficient, etc.—alternative to achieve that goal.” This is the world of exhaustive business plans, microscopic ROI calculations, and portfolio diversification.

Effectual reasoning, on the other hand, “does not begin with a specific goal. Instead, it begins with a given set of means and allows goals to emerge contingently over time from the varied imagination and diverse aspirations of the founders and the people they interact with.” This is the world of bootstrapping, rapid prototyping, and guerilla marketing.

In a sense, it’s a question of “How do we get to where we need to be?” vs. “What can we do with what we have?”

I don’t want to oversimplify this (headline notwithstanding) by saying goals are good or bad. But goals so ingrained in business culture — Six Sigma processes start by setting goals, employers always want “goal-oriented” job candidates, your business plan is filled with benchmarks — that I do think it’s useful to question them.

In the narrowest sense, I think, goals fit industrial-era, assembly line systems, but entrepreneurs aren’t taking their cues from the likes of GM. Look at the companies that are thriving in the marketplace today. How much is Google driven by goals? (Engineers there get 20% of their time to work on whatever projects they want.)

We’ve all been in situations where there’s heavy pressure to meet a goal — sales targets, deadlines, certifications. Contrast that to situations where you’re given flexibility to think creatively about a problem. In which situation does your company do the best work?

Reader Comments

Tim Bosworth

May 7, 2009 06:56 AM

I agree with everything except the conclusion that you should trash your goals. You need something to shoot at. Ready-fire-aim, I believe is accurate for these times. Besides, goals show investors where you're intending to go. You always have to have your antennas on, though.

Victor Cheng

May 8, 2009 02:17 AM

If you don't have a goal, how do you know if you're succeeding?

The problem with the GM example isn't that they set a goal, it's that they set the WRONG goal.

Maybe if GM had set (and achieved) a goal of 10 million new customers thrilled to death about GM cars and willing to pay prices with good margins had been their goal, they might have done things differently.

Google's goal of allowing 20% of employee time to work on pet projects supports their underlying goal of inventing new applications that make Google stronger.

It's a play off of 3M's long standing similar policy of allowing their engineers to work on pet projects. The 3M policy was designed to support the goal of 33% of company-wide sales coming from products invented less the 5 years ago.

I DO think have a "what can we do with what we go" approach is useful, especially in the early stages of a new business or for a company going through a major transition (e.g., the industry went through some radical, sudden change).

But if the underlying foundation and premise of the business has been determined to be viable, then I think not having explicit goals creates more problems than it solves.

I can't even begin to imagine a sales force that is managed without sales goals... and sales reps being paid well regardless of whether or not they hit their goals.

Victor Cheng
www.askvictor.com

Diana S.

May 31, 2009 01:19 AM

Everyone has 20/20 hindsight now that GM is having such huge troubles...
When it came to choosing my new car in 2000, I looked at all the new ones out there, and saw the stats in consumer reports. The Toyotas and Hondas had few major problems, but many of the American cars had major problems for several years in a row, or were brand new lines (= no data on problems). I really needed a car that would last for a long time.

I heard a comment on public radio that Japanese automakers had fewer cars to choose from and few dealers. They were established, old car lines, so production was cheaper. American car companies offered many different cars with many dealerships to support with marketing, commercials, etc. Many different production lines.

When faced with too many decisions, consumers choose nothing. If offered three different jams, the jars sold well. When offered six, people froze up over the choice between different berries, and didn't buy them. Strange!

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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