Traps inherent in goal setting are all too common. They range from arbitrary and unrealistic goals that demotivate participants to negotiating prowess that trumps performance when awarding payouts.

One way to circumvent these traps is to ensure goals represent sustainable performance that will beat competitors’ results and market expectations. This means a goal-setting process that is neither dysfunctional nor open to gaming the system. We believe a balanced approach to goal setting that uses both top-down and bottom-up perspectives can position a company for success.

Top-down goal setting focuses on what companies should do to meet their obligations to shareholders; bottom-up focuses on what they can do based on their current business model. These two perspectives must then be reconciled to determine what a company will do. It is only in this way that an organization can establish sustainable goals that are achievable and also have adequate stretch. Fundamental to the approach is that goal setting is driven by facts, not by negotiating prowess. While this approach may seem intuitive, surprisingly few companies address goal setting in this way.

To find out more about balanced goal setting and learn how a call center applied the framework to regain its competitive performance, read “Should Do, Can Do, Will Do: Setting Incentive Goals that Yield Results.”