Sunday, June 13, 2010

Profit is not a goal

Recently, as I was presenting the results of a software project review to an executive director of my client, a large consulting company, I noticed a large corporate goals poster on the wall of his office.  It said “Goal in 2010: $10 Billion in Revenues” in large print at the top, and under it was a list of generally sensible values encouraging enthusiasm, outperformance, and so on. 

This is something that I’ve seen a lot of in my corporate experience:  confusing goals with profits or revenues.  This “goal” sounds like the brainchild of a high-level corporate executive, president, or CEO – who undoubtedly will benefit a thousandfold more from reaching $10B in revenue than anyone actually doing the work.   Do you think that any employee of this company really cares about reaching $10B in revenue?  I doubt it. 

This is why reaching $10B in revenue is not really a goal:  it’s a measure, a metric of how well the company is doing its job.  As a consulting company, the real goal – I would hope – is to better the lives of their clients in a specific way.   Revenues and profits are a side-effect of doing this well.   The problem with goals like “$X in revenue” is that you can lose sight of the real goal, the reason why the consulting company was started in the first place:  to help others.  

If a company is not careful, poor goal-setting can erode the corporate culture.   The best goals bring everyone together around a common pursuit.   Who will want to work at a place where the “goal” is to put a lot of money in the pockets of executives and shareholders? 



  • How We Measure Success (AVC, June 13, 2010).  Fred Wilson of the well-known venture capital investment firm Union Square Ventures writes about confusing profits with goals: 
    “if hundreds of millions of people all around the world are learning and improving their lives with [a portfolio company’s] knowledge exchanges, i will be thrilled”  
  • The Mission Statement as Your North Star.  An article by Ari Weinzweig of Zingerman’s in Ann Arbor, MI.   Zingerman’s is a world-class deli that is renowned for the quality of its food and its service – both of which I can attest to personally, as I was a frequent customer in the 80’s during my time at the University of Michigan.  (My favorites were the Georgia Rueben and their whitefish salad sandwich.)    Ari takes the reader through the process of figuring out their mission statement, which ends with “To enrich as many lives as we possibly can.”       
  • Goals Work Best When Tied to a Company’s Success (  People talk about aligning corporate, departmental and employee goals, but not many actually do it. There are companies, however, that have concrete methods to manage and measure the performance that makes lofty goals a reality.
    “A company needs clear, elevating goals that people at all levels of the organization can understand and relate to”

1 comment:

  1. Good point. While managers cannot help but drive the ship by key performance indicators, the magic of team motivation is not created by sticking everyone's face in the dashboard.

    I guess pointing out what hitting that metric will do for everyone at the company (and there better be some result for everyone) is more important than the metric, as you point out.