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You may have heard of a BHAG, which stands for Big Hairy Audacious Goal. It is the idea that for an organization to excel at what it does, it needs to work toward a big long-term goal that takes a decade or more to achieve. This is not just a stretch goal, but an audacious goal. It is supposed to motivate the workforce to get behind management’s vision for the future, to stimulate forward momentum, and kick the organization into high gear. The BHAG idea was proposed in a 1994 book by Jim Collins & Jerry Porras, Built to Last: Successful Habits of Visionary Companies. The authors noted that “a true BHAG is clear and compelling, serves as unifying focal point of effort, and acts as a clear catalyst for team spirit. It has a clear finish line, so the organization can know when it has achieved the goal; people like to shoot for finish lines.” BHAG examples include President Kennedy’s 1962 goal, “before this decade is out, …landing a man on the moon and returning him safely to earth” or GE’s goal “become #1 or #2 in every market we serve and revolutionize this company to have the speed and agility of a small enterprise.”
So, does an organization need a big goal, like a BHAG? Well, maybe not. The BHAG approach assumes that goal setting will generate a positive change, yet goal setting is far from benign. A new C-suite team with a new set of goals can be only one misstep away from dysfunction and havoc. The BHAG approach is inherently risky; the bigger and more audacious the goal, the more likely it is to be one of those “we’re betting the farm” moments. It’s not just the risk that things can go wrong during implementation, but a big goal can take an organization in the wrong direction from which it may have trouble recovering. An organization in which management has taken a significant wrong turn, is an organization that is reluctant to trust management again.
Another problem with goal setting is that it can have unintended side effects. A 2009 study published in the Academy of Management Perspectives noted that the side effects of goal setting include things like “a narrow focus that neglects nongoal areas, distorted risk preferences, a rise in unethical behavior, inhibited learning, corrosion of organizational culture, and reduced intrinsic motivation.”
A story illustrates what can happen. In 2015, Volkswagen’s big goal was to take over leadership in the global auto industry and its vehicle sales were strong. At the height of this apparent success (despite the self-serving goal), a scandal emerged by chance. A small lab at the University of West Virginia started testing engine emissions to understand how VW diesels were able to achieve their high mileage ratings. The new tests were conducted on the open road, as opposed to the test bed where the vehicles had been certified in conformance with standards. It turned out that because of deceptive software within their engine monitoring system, VW diesels were producing emissions on the road that far exceeded standards in the USA. The lab’s findings created a major scandal at VW, and a great brand was significantly tarnished, driven in part by management’s desire to reach an overarching goal.
It seems that the more single-minded an organization becomes in focusing on a narrow financial or economic objective (such as maximization of profit or shareholder value) at the expense of everything else, the more likely it is that dysfunction will emerge. This may well be a property derived from the nature of organizations as complex adaptive systems.
The situation can become a national crisis if an entire sector is focusing narrowly, and is being rewarded for unethical practices. For example, the financial debacle of 2006-2008 and beyond in the USA was precipitated by investment banks that were focused on generating financial profits from complex investment vehicles in the housing market, without the vehicles being sufficiently supported by underlying assets on their books — thus increasing market risks and environmental instability over time, eventually leading to the crisis. The rise of instability in organizational systems may explain why the risk of exit for public companies traded in the US now stands at 32 percent over 5 years, compared with the 5 percent risk that they would have faced 50 years ago. For individual public companies, these exits are mostly unintended and are likely associated with managerial failure.
The BHAG approach is driven from the top down. Management sets a long-term goal, then directs the staff to achieve it. This new approach relies upon the leadership team to set the right course. What if they are wrong, what if they are driven by unethical motives or perverse incentives, or what if the environment changes radically during implementation? With a BHAG, the organization is committed for a decade or more to an overriding goal that may not serve it well. Success requires almost perfect knowledge and anticipation of the future. It may work sometimes, but it is not very reliable.
Consider the alternative approach embodied in Management by Positive Organizational Effectiveness, which has been discussed in previous episodes of this podcast (and described in my book, Become Truly Great). This new approach discards the goal model because of its inability to distinguish between appropriate and inappropriate goals. Instead, it specifies that the goal of every organization is the same, that is, to be effective within its environment. While this is a fixed goal, it is defined in terms of serving an ever-changing environment which can be full of surprises. It is also an appropriate goal because it gives an organization a useful and meaningful purpose, one that will not only serve to delight its customers, but guarantee that the organization will survive and thrive. This is less risky than creating a BHAG because it does not rely on perfect knowledge from the C-suite. Instead, it allows decentralized teams who are close to the action to decide what it will take to serve their clients and customers best today.
Organizations that consider their goals to be the maximization of profit, shareholder value, or other such goals driven primarily by financial or economic gain are not using Management by Positive Organizational Effectiveness. They are still living in an age of ‘efficiencyism,’ where dysfunction is an emergent phenomenon (due to potential instability within an organization’s complex adaptive system). In the new approach, the effectiveness of the organization as a whole is determined from its portfolio of offerings. Demand-side behaviors of customers and other actors (observed in the field) are used to gage the effectiveness in each results chain, thus verifying that the supply-side of the organization is offering what the demand side environment willingly takes up, adopts, and uses.
Management by Positive Organizational Effectiveness (M+OE) has several new features. It counsels the incorporation of positive values within the organization from the start, to attract & amplify success, instill virtuousness, and be protective on the journey toward greatness. While Frederick Winslow Taylor’s “scientific management”, described in a book by the same name in 1911 enabled manual worker productivity by increased task efficiency, the new approach manages benefit exchanges at the interface of supply & demand to ensure that outputs are readily converted to outcomes as expected. It also programs the organization for knowledge worker productivity because tasks are specified once an offering’s results chain and expected external outcome (EEO) have been determined. M+OE encourages an organization, once it discovers effectiveness, to occupy a niche within its environment, and to serve it so well that competition is irrelevant.
An organization is encouraged to co-create value over time with stakeholders in its niche in order to continuously adapt to environmental change and to serve the needs of the environment more fully. In this way, a pipeline of new offerings can emerge to replace mature products and services that become outdated, or to expand offerings in promising new areas. Observations of demand-side behavior are instructive as feedback to hone the preferred attributes of an organization’s offerings over time. Effectiveness is an instantaneous measure that can be observed in the field every day (or measured periodically, as appropriate).
An organization is effective to the extent that it achieves its expected external outcomes. This is a more useful and meaningful way to think about effectiveness. When we refer to an outcome, we do not mean a final result such as is assumed in the goal model. Rather, an outcome is an effect caused by an antecedent event. While outputs are produced by the organization in the form of its offerings, it is demand-side actors that must decide if an organization’s offerings are attractive enough to compel them to exhibit the behaviors of uptake, adoption or use. When such behaviors do occur, they can be observed in the real world, and provide the “objective referent” that has been missing in models of organizational effectiveness thus far.
A BHAG is not needed under the new approach, since the goal of every organization is the same. You may recall that the US Army, back in 2001, changed its ad campaign and slogan, from the old slogan (“Be all you can be”) to the new slogan “Army of One.” In the new ad campaign, each soldier was to think of himself or herself as an army of one. We could envisage a similar approach. Since the goal of every organization is to be effective within its environment, every front-line employee is empowered to wake up each day and reinterpret what it means to “serve your environment” anew. It is clear, however, that “serve your environment and be rewarded in return” is not about extracting as much profit as possible from every customer. It’s about serving every customer and being sure that they receive the value that they are expecting. Potentially, this could create a very flat organization. Do you really need a highly-incentivized C-suite and a well-paid Board? Perhaps not. The approach gives clarity of purpose to every level of the organization. In fact, it could make sense to take a portion of the compensation that is being paid to the C-suite and the Board, and redistribute it to front-line teams.
Today we have considered whether an organization needs to set a big goal to achieve high performance. Conventional practice is mired in the goal model, and it may appear that a big goal can kick things up a notch. Beware of the hidden dangers that have been mentioned. The alternative approach embodied in Management by Positive Organizational Effectiveness offers a more predictable and satisfactory way to kick up performance, removing the burden of the C-suite to always be right, and empowering front-line staff to do what they do best.
Charles G. Chandler, Ph.D.