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Today’s episode is a rerun of episode 015, first published May 13, 2016.
In 1997, Apple began an ad campaign called “think different”, which featured billboards with large pictures of notably famous people like Albert Einstein, Thomas Edison, Amelia Earhart and others alongside the Apple logo and an ad slogan that said, “think different”. In essence, Apple wanted to associate itself with greatness. The implication was that by purchasing an Apple product the customer was beginning to think different and was entering a path that could lead to greatness. The ad campaign proved to be an enormous success for Apple.
When it comes to organizational effectiveness, few organizations think different. The most common way to think about effectiveness is by using the goal model. There are few organizations that do not use it in some way. In this model, an organization is effective to the extent that it achieves its goals and objectives. Management by objectives, advocated by Peter Drucker, subscribes to this idea. Today’s computer-based scorecards, dashboards, and indicator monitoring systems that many organizations have adopted take this idea to the next level. It’s the goal model on steroids, but the goal model does not reliably improve effectiveness.
Why? Even advocates of the goal model admit that not all goals are created equal, and it is hard to argue that all goals are meaningful with respect to effectiveness. Many times, goal setters are simply admonished to set clear goals, with the emphasis on clarity. Another framework for goal setting calls for SMART goals (Specific, Measurable, Attainable, Relevant, and Timely). But it is not sufficient to set goals based on so-called S.M.A.R.T. criteria, as these criteria do not ensure effectiveness.
Let’s talk about why we set organizational goals in the first place. In the common view, goals offer people within an organization clarity of purpose. The idea is that with a “big hairy, audacious goal”, or some variation thereof, even if it’s not fully achieved, it will still drive the organization toward significant achievements. It’s sort of like playing a video game, where you try to beat your old score, or the score of a competing team, by trying to do better this time. It’s about tapping into our seemingly inbuilt drive for competitiveness. But tapping into the competitiveness of its employees may not improve the effectiveness of the organization. Using the goal model, an organization can easily fall prey to the tyranny of ‘efficiencyism’ (which I discussed in Episode 010) by focusing on the wrong goals.
There is, I believe, a more meaningful way to think about effectiveness and goal setting. The Outcome-focused Model, or OFM, described in episode 009 of this podcast series utilizes ideas from Results-Based Management. Under the OFM, goals are first apportioned into four categories, based on their level within a results hierarchy. The four levels are Inputs, Outputs, Outcomes, and Impacts. The first two (Inputs and Outputs) are on the supply side and are within the control of the organization itself. Organizations convert inputs into activities that produce outputs. Outputs become offerings to the external environment (in the form of product and services, or projects and programs). The remaining two (Outcomes and Impacts) are on the demand side and are outside of the control of the organization. Why does this matter? It is because, under the OFM, an organization is effective to the extent that it achieves its expected external outcomes. The OFM does not motivate an organization’s employees to be competitive, but rather tries to motivate demand-side actors to adopt and use its offerings. This is a more useful and meaningful way to think about effectiveness.
When we refer to an outcome in the OFM, we do not mean a final result such as is assumed in the goal model. Rather, an outcome within the OFM 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 whether or not an organization’s offerings are attractive enough to compel them to exhibit behaviors of uptake, adoption or use. When such behaviors do occur, they can be observed in the real world, and supply the “objective referent” that has been missing in models of organizational effectiveness thus far.
The OFM explains why the goal model (which will accept virtually any goal) often does not improve organizational performance. Under the OFM, it is only outcome-level goals that are meaningful for effectiveness. In other words, its standards for selecting meaningful goals are quite restrictive. If we assume that goals selected for use in the goal model are distributed equally among the four categories mentioned earlier (Inputs, Outputs, Outcomes, and Impacts), the wrong kind of goals would be selected 75% of the time. The goal model would work just like the OFM if it restricted itself to outcome-level goals (defining outcomes as relevant demand-side behaviors).
Will you “think different” in order to make your organization effective? You don’t have to buy Apple products to create a great organization, but adoption of the outcome-focused model and its restrictive view of goal setting would certainly help.
The OFM still provides an organization with a sense of purpose. In fact, it does a better job than the goal model. Under the OFM, the goal of every organization is the same, that is to be effective within its environment. Despite this fact, various organizations have chosen different local environments to focus on, and have different product and service offerings, so it doesn’t make sense to compare effectiveness between organizations. It does make sense, however, to compare an organization’s present effectiveness to its past effectiveness.
Effectiveness operates through causal chains that are formulated for each product and service offering (or project and program offering). The overall effectiveness of the organization is derived by considering the effectiveness of the entire portfolio of causal chains. What is the effectiveness scale? The scale for effectiveness goes from essentially zero up to infinity. Like excellence, there is no upper limit to effectiveness. Because of this, it is more important to verify that effectiveness is occurring within relevant causal chains than it is to actually measure it. All measurements of effectiveness are relative with respect to historic performance.
The OFM offers a self-correcting model for management action, because if a demand-side behavior is being monitored with respect to each product and service offering, decreases in effectiveness will become quickly evident. Immediate actions can be taken to find out why, and to address the problem. That’s not so easy with the goal model.
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 under the OFM. Since the goal of every organization is to be effective within its environment, every 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. Why do you need a highly-incentivized C-suite and a well-paid Board? The OFM gives clarity of purpose to every level of the organization. In fact, you could take much of the compensation that is being paid to the C-suite and the Board, and redistribute it to front-line staff.
In this episode, I have tried to contrast the goal model with the outcome-focused model (or OFM) and have described what it would be like to “think different” with respect to organizational effectiveness. In the goal model, the goals are set by management, and may or may not have anything to do with organizational effectiveness. In the outcome-focused model (OFM), on the other hand, goals are limited to a focus on expected external outcomes, which provides a clear view of what effectiveness is all about. In essence, it’s about getting expected demand-side responses through the causal chain for each product or service. The model also has predictive value, because unlike the goal model, the OFM is very clear about how effectiveness is increased and how it is decreased. Increased effectiveness under the OFM is win-win for both the organization and its environment. Of course, even drug cartels can be effective, so it is important that positive values such as honesty, transparency, and fair play be upheld within an organization in order to be sure that it is creating a future based on a strong foundation. It is safe to say that Enron (which went bankrupt in 2001 amidst scandal) did not follow this model.
I hope today’s episode provided a clear contrast between the goal model and the outcome-focused model. If you are already using the OFM, tell us about it by commenting on this episode (015) at our website (www.AgeofOE.com). I may showcase your efforts on an upcoming episode.
Charles G. Chandler, Ph.D.
[email protected]
In this episode, I describe how goal setting can do more harm than good. In many organizations, goal setting is being widely used as over-the-counter medicine that “is good for what ails you” when in reality it is prescription strength medicine that needs to be administered carefully, and only after full awareness of its potential side effects. The recent Wells Fargo scandal seems to be a case of goals gone wild.
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