We have all heard the famous Peter Drucker phrase from his 1954 book the Practice of Management – “what gets measured, gets managed”. It is a cliché of management practice, and like all clichés it contains a truth. If you are not measuring what is important to your business, how can you know if you are making progress in the right direction?
Unfortunately, it’s difficult to achieve. It is often replaced by the much simpler “what can be measured, gets measured, and we hope it is what matters!”. Particularly when innovating, it can be very hard to find milestones that tell us we are moving in the right direction. So we find something we can observe and focus on that instead. For a business trying to create new products, services or processes, the only true measure is whether we produce something that our customers want to buy. But that can be far in the future, so the temptation is to measure investment in R&D, new ideas generated, patents and so on. Hoping that these will provide a sense of security that we are moving in the right direction.
Measuring what you can rather than what you should causes a lot of damage, and the same is true of the offspring of “what gets measured, gets managed”; the SMART objective.
SMART is not so smart
SMART goals and objectives were first mentioned in a 1981 paper by George T Doran. SMART stands for:
Since then A is often used to stand for Achievable or Attainable, S sometimes refers to Stretching and R to Relevant.
Over the years it has become a standard way to set goals. You see it in everything from corporate strategy to studying for exams, and from personal goals to departmental goals set by management. And I hate it!
For over thirty years I have watched people try to set SMART goals and fail comprehensively. Fail so badly that they do not even notice that SMART is not working for them.
“be very, very careful what you ask for; you might get it!”
It is the same problem as trying to decide what to measure so you can manage it. In any kind of knowledge work, it is hard to find SMART objectives relevant to the task and stable enough to last long enough for evaluation. If you link delivery of objectives to bonus, performance-related pay or promotion, the problem is even more complicated. It is just as likely to demotivate as to motivate.
Because it is hard, many SMART objectives centre on what can be measured across the evaluation period, not what is important. As one of my bosses said, “be very, very careful what you ask for; you might get it!”.
One company I worked in decided that their R&D team were not producing enough patentable innovations. So they set an annual target with a bonus attached to file a number of patents. Unfortunately, they forgot to specify that the patents should be strategically important. And because the time taken to get a patent granted was much longer than the annual review and reward cycle, they just counted patents filed.
The result was chaos. All the R&D team started wasting time trying to figure out how to patent anything that they were working on instead of focusing on getting innovations to market. The R&D team and the patent team came to blows when the patent team questioned whether the proposed patents were worth the effort. They quickly abandoned the scheme when the executive saw how much energy it diverted from the real task.
Another company decided they could build their reputation by publishing more papers with academics. They set a target and got exactly the same result. People worrying about what they could do that was publishable, rather than what would support the business.
You can’t blame the workforce. If you tell them that something is important, set a target, and then attach praise, promotion and money to that target, it is no surprise if they do what you ask. Even if it is the wrong thing.
Great innovation targets exist, and can drive good behaviours, it is just beyond most of us to come up with the right culture and to ask the right question. 3M famously has the 30% rule. 30% of the turnover of a division must come from products introduced in the last four years. It is focused, stable and targeted at the right level of management. This works in a 3M environment, but other businesses have tried to copy it without success. That kind of innovation focus is in the 3M DNA at all levels. It has taken time to develop and cannot just be switched on as this year’s management initiative.
Mechanistic and unthinking objectives
The general problem is that Specific and Measurable focuses on the things easy to measure. Achievable and Realistic are matters of opinion, often subject to external forces you have no control over. Timely, time-based or time-bound puts deadlines into the discussion that may or may not be helpful.
I have seen teams rushing to complete a study and get a report out by a specific date, even if they have not finished and the report will be of little value. I have seen innovators plough on with the development and delivery of a new product, even though they can see that the market has shifted during the project. I have seen businesses abandon an innovation because they have used the time originally allocated without getting a result. That might be a very good decision if the idea looks doomed. But suppose the results are promising and a bit more effort would produce a definitive yes/no answer? SMART objectives trick us into making mechanistic decisions, rather than thinking.
And in case anyone thinks this is only a problem for long-range innovation, have a look at this book by Alan Berenson “The Number: How the Drive for Quarterly Earnings Corrupted Wall Street and Corporate America”. A cautionary tale of how agreed time-bound commercial targets led to a whole series of corporate scandals including criminal behaviour. Extreme cases you might say, but evidence of the same problem. A mechanistic approach to goal setting and an inability to change those goals when reality hit.
Worthwhile objectives encourage, inspire and teach
So is that it? Should we abandon targets all together? Was Peter Drucker wrong? Not entirely. Measurement of what matters for your business is excellent, but you need to make sure you are measuring what matters, not what is easy to measure. And you need to be ready to change goals when circumstances change.
A very experienced innovation leader gave me the best set of objectives:
“Every year I will give you the same objectives. First, do your job. Second, do this other thing that is not your job, but which is important. Third, do something that surprises and delights me.”
Those were objectives to encourage and inspire, and which made for worthwhile performance reviews.