How is your performance currently measured? If, like me, you have a mix of different objectives, each contributing to a different part of the organisation’s wider strategy, with several tangible deliverables helping you achieve them, you’re in good company. It’s not very exciting, but that’s the reality for most.
A better question might be how will your performance be measured in future?
There are lots of reasons to think things will be different and we’ve started to think about what the future holds through a few different lenses. I’ll come to this later, but first I’ll look at what most of us do presently.
Most organisations use a derivative of the Management by Objectives (MBO) framework. MBO is defined as “a management model that aims to improve performance of an organisation by clearly defining objectives that are agreed to by both management and employees.” 1
In short, organisational objectives are cascaded down the hierarchy with managers and employees agreeing a set of goals and actions that support the delivery of the top-level goals. The relationship between lower-level objectives and the higher-level success is key. This means getting objectives right is massively important.
What does the research tell us?
Our recent research on business relationships, which surveyed 100 people from over 60 global food and grocery businesses, suggests that all is not well on the objectives front and that there’s an opportunity and a desire to do some things differently.
Only 30% agree their business has done a good job at breaking down functional silos. Objectives play a key role here, with 51% agreeing that their objectives tend to encourage them to work towards separate goals. This can contribute to an environment of animosity, impacting effectiveness and productivity.
45% identified shared, measurable objectives as having the greatest potential to improve the quality of internal relationships, while almost a quarter believe a better understanding of business objectives would be beneficial. This suggests that some are unclear on how their objectives fit into the bigger picture.
Source: Making your business relationships pay: What gets in the way? Supply Chain Analysis, IGD 2018
What does the future hold?
I’ve touched on internal objectives in the present, but success in the future is likely to require businesses, and the wider industry, to address bigger challenges – packaging, sustainability, resilience in the face of political uncertainty, extreme weather and an ability to rapidly respond to changing consumer needs, to name a few.
To address these challenges effectively, partnerships and deeper relationships will be needed. This means working more externally. It takes time and commitment to gain trust, and cycles of success to embed it.
One way the process could be expedited is through shared objectives, with partner businesses and their employees equally invested and committed to delivering them.
Working in this way requires a level of alignment and a win-win mindset. Think about how different it would be if you and your business partners had one or more objectives, measured in a consistent way by all, that you were all responsible for delivering.
This idea may seem like a big leap, but bigger, broader challenges call for bigger, broader objectives! It would almost certainly drive a more collaborative mindset, helping partners achieve more together than they can alone.
The horizon over which objectives are measured may also change. Clearly, some objectives will be grounded in the here and now, but some challenges will take longer to address. I can envisage a modular approach to setting objectives and deliverables, with each review period contributing to a larger multi-year initiative. This may make it easier for employees to see the bigger picture, helping them understand longer-term organisational goals.
Looking further ahead
Technology will have a role to play. It will make performance easier to track and measure, but projecting further forward, it could also trigger some interesting questions.
For instance, if the expected proliferation of AI occurs, how will performance of AI, and in particular, machine learning applications be measured? To whom will objectives be assigned? The developers of the machine learning application, or the application itself?
After all, a machine learning application is one capable of learning and refining its performance over time. At what point does its performance become its responsibility? If and when that does happen, how will it be rewarded? What motivates a machine learning system? Perhaps more processing power…
So, to summarise, objectives will evolve to meet the needs of an industry in change. This doesn’t mean simply erasing what’s currently there and replacing it. We’ll need to think more deeply about the objectives framework, taking a longer-term view of business performance, how best to affect it and the tools available to help.
It’s certainly feasible that you’ll have objectives which are shared, not only with internal colleagues but also external colleagues. You may even find yourself setting objectives and overseeing the performance of an algorithm. And who knows, an algorithm may even set some of yours…
We’ll address the subject of how businesses measure success in our Supply Chains for Growth report, part of the IGD Futures series, focusing on the future of food and grocery industry. It will be published next month in time for the Supply Chain Summit. Take a look at the event programme.
1 The Practice of Management, Peter Drucker