Posted by: John Tozzi on May 6, 2009
Should you trash your goals?
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?