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Objectives and Target Setting

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This section outlines the role of objectives and target setting, in particular we discuss the processes for enabling goals and ambition to be achieved in the absence of formalized target setting processes.

A new perspective

Rather than depending on management to set direction, in Teal organizations, teams and individuals are intrinsically driven to fulfill the purpose of the organization. They do not need extrinsic motivators in the form of objectives and budgets to get them to do their work. They set their own objectives and targets, when they feel it is necessary.

Teal organizations evolve through sensing and responding to the environment. The process of listening to evolutionary purpose is used to decide on the next steps for a team or for the whole organization.

Every historical stage has given birth to a distinct perspective on job titles and job descriptions, and to very different practices:

Red Organizations

Red organizations are characterized by opportunistic and often reactive behaviors. Rather than being a formal process, objectives and target setting is an inherent aspect of protecting and/or expanding one's power base.

Amber Organizations

In Amber organizations objectives are set by senior management. The only input from lower levels is technical or operational information, either as part of their jobs or by special request from above. The roll-out of the plans to achieve these objectives are in the form of directives to lower levels, with targets as part of the directives. Employees have little direct contact with top management, and are expected to follow orders, even if their experience / knowledge of local conditions suggest different actions.

Orange Organizations

Orange organizations formalize the process of strategic planning, setting vision, mission, values and objectives as part of a formal planning process and through the lens of the organization as a machine. This starts at the Board and Executive level followed up with business units, teams or departments. These lower levels are expected to develop their own strategic plans aligned with the corporate vision, mission and objectives.

Targets are hence set at the various levels to achieve the objectives as part of a move from the ‘command and control’ of Amber to one of ‘predict and control’. Top management formulates the overall direction and strategy and this is cascaded through the organization as targets, goals and objectives. Managers and staff are given freedom to use their creativity to achieve these objectives and may be offered incentives to do so. When aligned well, middle management, and to some extent lower levels, have the freedom to determine how they will achieve their objectives. When not thoughtfully aligned this approach can lead to gaming of targets, with teams sometimes working against each other to achieve their own goals.

Green Organizations

A metaphor that is sometimes used to describe consensus-focused Green organization is that of “family.” Green is uneasy with power and hierarchy and shifts authority and decision-making from managers to staff members. In practice successful Green organizations do have hierarchical structures. Managers often operate as servant leaders who are there to support and develop their employees. Objectives and targets are often set by consensus at the team level to support a predefined vision and mission.

Teal Organizations

Using the metaphor of a living system,Teal organizations organize around a clear sense of purpose This is not a purpose (mission) set by top management, but one that is allowed to evolve and is shared by all members of the organization.

Aligned with the organization's purpose, planning is based on "sense and respond", with an emphasis on an agile approach to finding workable solutions. This adaptive process is similar to lean start-up and [software development] principles. Decision-making is carried out within a framework of organization-wide values and balanced through an advice process. Strategy emerges organically from the interaction of employees with the Teal organizational environment. Self-managing employees may set objectives for themselves, or a team may decide on an objective, e.g. faster turnaround time, but there are no sales, efficiency or other targets. The process of seeking advice from colleagues and specialists before committing to a project or change ensures that all aspects, including financial responsibility, is taken into consideration. Part of the value system is that no single member or group of members may put the organization at risk with ill-considered or selfish actions or projects.

In practice

The problem with objectives

In the Orange-Achievement paradigm, objectives and targets are the key drivers for success. They are the glue that holds the organization together, and give meaning to its existence. In the Teal-Evolutionary paradigm, purpose  and values drive the organization. The objective is to bring to life the purpose of the organization. There are no formal systems or top-down processes in place for setting objectives and targets. All the functions of management (planning, organizing, direction-setting, investments, budgeting, etc) are done by the people doing the work. In general, Teal-Evolutionary organizations tend not to set objectives or targets.

From a Teal-Evolutionary perspective, objectives and targets are problematic:

  • They rest on the assumption that we can predict the future,
  • They skew behavior from intrinsic to extrinsic motivation,
  • They tend to narrow the ability to sense new possibilities,
  • They focus attention on the targets, rather than fulfilling the organization’s purpose,
  • In the Orange-achievement world they always imply growth, something which is not always an inherent element of Teal organizations' purpose.

Sense and respond – a new way to determine objectives, goals and strategy

Instead of trying to predict and control (the implicit goal behind objectives and targets), Teal organizations sense and respond. You could say that all target setting is instead initiated locally where it is "sensed and responded" to, then cascades or emerges through the organization as a living system as needed.

One example is the Buurtzorg Boardinghouse. Nurses noticed or sensed that primary care-givers of their patients needed a break from the ongoing demands of providing care. In response, they instituted a bed and breakfast-type solution where patients could receive care, providing care-givers a respite. There were no goals or objectives for Buurtzorg to become a bed and breakfast, but nurses sensed a need and their response of respite care took them down this path benefiting patients and care-givers in the process.

We cannot plan for a world that is continuously changing, and where we have no control over the changes. So Teal-Evolutionary organizations work on the basis of sense and respond, rather than predict and control.

Investment process

The closest that Teal-Evolutionary organizations come to setting objectives is the investment process. Most organizations have an annual investment process, where each team prepares its investment plans for the next year. These plans are added up, and, if they exceed available/accessible resources, the teams have to review and adjust their plans. Whether the investments are part of the annual plan, or ad-hoc, situational investments, teams are responsible for raising the external funding themselves, or negotiate internally with other teams for funding or resources.

Some Teal-Evolutionary organizations do have organization-wide objectives, or perhaps guidelines. For example, Buurtzorg, the Netherlands-based health care organization, has a target for billable hours of 60 - 65%  for their mature teams.

Team determined targets

People and teams can choose to set objectives or targets for themselves as measures that tell them how well they are doing at meeting the organization's purpose. Machine operators may set quality or performance targets for themselves. Teams may set objectives in order to get a new project up and running, or they may have set themselves targets for turnaround times. This is simply part of self-management, as opposed to objectives and targets imposed from above (outside the team or individual). Measurements are chosen that help the team better sense key changes and respond to them.

Distributed responsibility and shared accountability

Teal-Evolutionary organizations do not set sales targets. However, everyone, including the sales people, are fully aware and informed of what it takes to keep the organization going. Since sales people are part of the operational teams, they know how much work is required to keep the team going.


Frequently asked questions

If no sales targets are set, how will the company know how much to sell to achieve both break even and profitability?

Financial information is available to all, and everybody is trained to read and understand financial information. They are also trained how to relate the information to their activities. Since every member is responsible for the health of the whole organization, they know exactly what outputs are required to keep the organization financially healthy.

Whether the teams have specific persons in sales roles, or are responsible for sales as part of their ongoing duties, everybody has a clear idea of what is happening in the marketplace, what customers' needs are and what other offerings there are.

The beauty of the self-organizing nature of Teal organizations is that they can sense and adapt to market changes in real-time. Orange-Achievement organizations have to wait for feedback from sales teams and market research, then go through a laborious target setting and decision making process and then implement changes.

Concrete examples

Here are some practical examples from organizations that have adopted Teal objectives and target setting practices.

Buurtzorg

Health Care — Netherlands — 9,000 people — non-profit

Teams set their own objectives.

In Buurtzorg, teams are required to make yearly plans for initiatives they want to take in the areas of client care and quality, training, organization, and other issues.  All mature teams have a target for billable hours of 60 -65 percent.

FAVI

Metal manufacturing — France — 500 employees — For profit

Sales teams have no sales targets.

At Favi, sales account roles are part of the product team, for example the Audi team. No one gives them sales targets. Their motivation is to serve their clients well and, in the face of Chinese competition, to maintain and when possible increase the number of jobs the factory can provide. To account managers, feeding their team with work is a motivation far stronger than any sales target from a Head of Sales could ever provide. At Favi, sales orders are always discussed in terms of employment, not in monetary terms; so there is no "we got a million order" but rather "we got an order for 10 people's work". This is in line with the organization's purpose, which is to create jobs in an area where jobs are scarce.

Incidentally, workers at Favi do not get production targets either. They are well aware of the impact China has on their market, given the feedback they receive from their sales account managers. Operators set themselves target times to machine their pieces, and they monitor their performance against that target.

Morning Star

Food processing — United States — 400-2,400 employees — For profit

In Morning Star, colleagues give each other an undertaking to deliver certain volumes, since each section is dependent on the output of the preceding section to deliver its output.

As a Morning Star colleague, you write a personal mission statement (“Personal Commercial Mission” in Morning Star’s language) and spell out all of the roles you commit to in a document called Colleague Letter of Understanding (or simply CLOU). Roles at Morning Star are defined very specifically, so you might well hold 20 or 30 different roles (one might be receiver of tomatoes at the unloading station, another might be trainer of seasonal whole peel sorters). For each role, you specify what it does, what authority you believe you should have (act, recommend, decide, or a combination thereof), what indicators will help you understand if you are doing a good job, and what improvements you hope to make on those indicators.

Why this level of formality and granularity? In a continuous process like Morning Star’s, each person in the chain receives tomatoes or paste in some form from someone upstream and delivers them in another form to someone downstream. Therefore, colleagues at Morning Star chose to discuss the CLOUs, once written or updated, not in a team setting (which most self-managing organizations do), but in a series of one-on-one discussions with the handful of colleagues up and down-stream that people interact with most. People discuss and negotiate what’s written in each other’s CLOU documents very seriously— they want to make sure that people upstream commit to supplying them with the right input, so that they can in turn deliver to people downstream what they committed to.

Colleagues at Morning Star set themselves targets for their part of the process, to stimulate continuous improvement. They measure indicators, compare them to the self-set targets, analyze root causes, and experiment with new ideas. These targets are mostly set at a local level, for one machine or one process step, where the outcomes can be predicted with some certainty.

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