Many organisations confuse their goal with their vision, mission or purpose. When I help my clients define their goal, I specifically ask for an answer of at least how much by no later than when? It’s not a target, but rather a bearing with two coordinates. If you can make more, sooner, then why not?
[Listen to audio version, read by David Hodes]
In a game, like basketball, you have to score at least more than your rival team by no later than the full-time whistle. Without the whistle, Michael Jordan might have been correct to claim: ‘I’ve never lost a game, I just ran out of time’.
Goal setting is an essential part of any organisation’s life and is no trivial matter. For without setting one, how are you supposed to know where you are headed, or how you are supposed to get there? This begs the question as to who has the right to set the goal? Is it the board? The workers? The customers?
In August of 2019, 181 CEOs from the Business Roundtable in the USA signed a document that committed them to lead their companies for the benefit of all stakeholders—customers, employees, suppliers, communities and shareholders. Released with the statement was this announcement from Jamie Dimon, CEO and Chairman of JP Morgan Chase & Co:
‘The American dream is alive, but fraying. Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term. These modernised principles reflect the business community’s unwavering commitment to continue to push for an economy that serves all Americans.’
Alex Gorsky, Chairman of the Board and CEO of Johnson and Johnson and Chair of the Business Roundtable Corporate Governance Committee, had this to add:
‘This new statement better reflects the way corporations can and should operate today. It affirms the essential role corporations can play in improving our society when CEOs are truly committed to meeting the needs of all stakeholders.’
At the risk of alienating my free market confreres, I think the statement is a lot of tosh. In the first place, it is the shareholders’ right to set the goal of the company. After all, it is their money—be they private investors, consortia, joint ventures, pension funds or anything else. When times get tough, it’s the shareholders who sit at the back of the queue wearing the risk, not the customers, the employees or the community in which they operate.
The board, as the executive of the organisation, has the role of providing strategies, plans, tactics and operations within an ethical governance framework that abides by the law and meets the risk and reward appetite of the shareholders. Having delighted customers, fulfilled employees and welcoming communities are necessary conditions of outsized success, but they are not to be confused with the goal.
Thus, my advocacy, when formulating a goal statement, is to always include the moral dimensions as necessary conditions of the goal, incorporate the principles of my Just Work Manifesto, and ensure that we do not sacrifice long-term future prosperity to short-term expediency.
The Logical Thinking Process (LTP) defines two classes of logic: necessary condition and sufficient cause. In brief, the class of logic used defines how the entities connect. An entity is a single logical statement.
In the examples above, the one on the left is a necessary-condition statement. It is read from the entity at the tip of the arrow to the one on the bottom: In order to meet my KPIs, I must have zero lost-time injuries. This does not mean that having zero lost-time injuries is sufficient to meet my KPIs, but it does make clear that if I have a lost-time injury, then I will not meet my KPIs.
The diagram on the right is a sufficient-cause diagram, read from the entity at the base of the arrow to the one at the tip. The ellipse covering all three connectors is a logical ‘and’ statement. Thus, if we have zero lost-time injuries and we do not exceed the budgeted costs, and we produce our agreed-on volume, then I meet my KPIs. To gain sufficiency such that I meet my KPIs, I must meet all three conditions.
As a side note, I use the square boxes and straight lines for necessary condition diagrams (the Goal Tree and Evaporating Cloud) and the curved boxes and lines for the sufficient cause diagrams (the Current and Future Reality trees). There is something stark and bare-boned about necessary conditions, whereas sufficient cause has, so to speak, more flesh on those bones. I recommend you make the layout of the diagrams as pleasing to the eye as possible. It is demanding enough of our cognitive capacity to wrestle with the logic of the entities and how they link together, without placing additional demand to get past a poorly laid-out diagram.
The Goal Tree is an example of a necessary-condition diagram, sometimes referred to in the literature as a prerequisite tree or an intermediate objectives (IO) map. Our first job as systems thinkers is to define the boundary of the system. In our case, we will look at the enterprise level, be it a strategic business unit of a large corporate or a for-profit SME. At this level, there is accountability for both the profit and loss, as well as the balance sheet.
If you are in a goal-oriented business, then you likely have ambitions for growth. Serious conversations are occurring at this time in the history of our civilisation, questioning the underlying assumptions of unlimited growth on a planet with finite resources. Bearing this in mind, can a business, for example, achieve a sustainable presence in its marketplace without any growth? My reflections on these questions leave me with the thought that birth, growth, decline and death are a fundamental part of nature, so I cannot see how to excise growth from the cycle. Innovation gives birth to new businesses, they grow to fulfil the potential of their underlying idea, and unless there is a renewal, ultimately, they die.
For this exercise, we will define the boundary of our system as being at the level of the strategic business unit—that is, where there are profit and loss and balance-sheet accountability. Based on the arguments above, a good enough goal statement could be:
The word ‘competitive’ refers to the notion that if you want to attract investors, your returns should at least be competitive with the next best investment your shareholders might make. The ‘now’ part of the statement means safeguarding today’s results, whereas the future addresses the business vision of its leadership.
While every business is unique, you would not be able to achieve the goal without addressing the three universal critical success factors of technology, people and process. We call them critical success factors, as they represent the end state you would like to see in place when you are accomplishing success after success in delivering the goal.
In the ordering of the critical success factors, I have stated that first, we must ‘profoundly transform with technology’. Why? Only when we have technology revolutions, do we see a step-change in prosperity—whether it is the wheel, the steam engine, electricity, the transistor, the internet or our latest transformation into the digital economy. Turning new technologies into profitable growth cannot be accomplished without developing people or engineering new processes. To make it sustainable over the long haul, it becomes critical to develop the amazing in people and ensure that the engineered processes are seamless.
Below the level of the critical success factors are the necessary conditions, which could contain the following:
One of the aspects of the Goal Tree is that when used as a high-level systems roadmap, although built from the top down, it is executed from the bottom up. Thus, the starting point to achieving the goal of growing competitive shareholder returns now and in the future is to inspire systemic innovation. When you elaborate on the detail within each box, you can turn the tree 90-degrees clockwise and see it as a sequenced plan.
The purpose of this article is not to go into the details of the specifics of each of these entities or the reason I have connected the logic in the way I have. I aim to give you the opportunity to see how the LTP symbology works in a necessary-condition Goal Tree by applying it to a very general case. You can learn more about this case from my book More Than Just Work.
In the meantime, I invite you to test my logic by applying the logic checks from the Logical Thinking Process. After all, what use is a theory if it can’t be articulated, tested and communicated? And while a colleague once defined theory as ‘the dinner jacket you remove when your car gets a puncture’, Deming noted that ‘rational behaviour requires theory. Reactive behaviour requires only reflex action’.
The Goal Tree is a powerful means of providing you with a theory of how you might achieve your goal. And a way to introduce it into the organisation on a single large page so everyone is crystal clear on not only what it is, but also what’s needed to get there.
This article is part of a series on the Logical Thinking Process.
Part 1: Intro to the Logical Thinking Process
Part 2: Setting your goal
Part 3: Mapping your current reality
Part 4: Deciding with the evaporating cloud
Part 5: Realising the future
The change from standard thinking to Theory of Constraints (TOC) is both profound and exhilarating. To make it both fun and memorable, we use a business simulation we call The Right Stuff Workshop.
We’d love to run it with you. To learn more:
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