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When speaking to someone in an advisory capacity, the subject of managing for successful results always comes up. One of the best ways to manage for successful results is through proper goal setting within a formal incentive system.

Goal setting: Where do the goals come from?
If you are the CEO of the organization, your goals will be set by the board of directors. If you are a mid-level manager of the organization, they will be set by your direct report. If you are the owner of the business, they will be set by you, but hopefully after you have gone through a strategic planning process. A typical strategic planning process usually results in a number of goals/action steps that will get you and/or the organization from point A to point B.

Goals can be both quantitative and qualitative. In my case, as CEO, my goals were set each year by the board of directors and contained both quantitative and qualitative goals. Quantitative goals usually involve attaining a profit target, reaching a certain sales target, exceeding investment targets, etc. Qualitative goals typically include getting more involved in the community, training one of your star employees, furthering your education, and so on.

When goals are set, there should be a bit of a joint discussion in which you have some input as to the probability of achieving each goal and each goal’s relative significance to the organization. Once set, they should be reviewed quarterly between you and your direct report to ensure that appropriate progress is being made in completing each goal in the stated time frame.

This is how the process worked when I was CEO of the Hershey Trust. Each year the board would approve a set of goals for me (and the company). In my case there were seven. They contained both quantitative and qualitative goals. These were typically written by me, but discussed, modified and approved by the board. To ensure that I would meet all of my goals, I shared my goals with my officer group (my direct reports). When I sat down with each of my officers at the beginning of the year to create and discuss their individual goals, they had to be able to identify which of my seven goals theirs were supporting. In other words, I wanted to be sure my officer group was working in support of my goals to help me attain my goals and therefore the goals of the board. If any of their proposed goals could not be identified as being in support of one of my goals, I threw it out as being irrelevant to the organization.

In my next post I will discuss how to integrate these goals into an effective incentive/reward system.