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Do you have an idea of where you want your company to be? How do you set business goals?
Setting goals is one of the essential rules of building a business—and for good reason. According to Jack Stack and Bo Burlingham’s book The Great Game of Business, setting company-wide goals encourages employees to stay active and interested in your company’s purpose.
Keep reading to learn how to set business goals that will motivate your employees.
Set Company-Wide Goals
To create engagement, you need employees who are active and interested at work, Stack and Burlingham say. Learn how to set business goals, and you’ll give employees something concrete to work toward. For example, employees who are told that everyone has to make 100 sales this week will be more willing and able to take action and make those sales than employees who were abstractly told to increase sales.
(Shortform note: Concrete goals are motivational because they’re easier to break into actionable steps. For example, “make 100 sales this week” is a good goal because it has an exact endpoint. If Sarah sold 70 books already, she knows she needs to sell 30 more. With this in mind, she can evaluate her marketing and resource options—such as paying to boost a post on social media—and implement the most effective and cost-effective ones. In contrast, “increase sales” is too vague. There are many potential ways to increase sales, but without knowing exactly how many sales to make, Sarah wouldn’t be sure how much time and resources she should spend on marketing.)
In addition, setting goals increases employees’ interest in the work by showing them how they can influence the company’s success or failure, Stack and Burlingham explain. Seeing how their actions move the company toward reaching its goals shows employees that their jobs are meaningful and therefore more interesting.
(Shortform note: Stack and Burlingham note that employees see meaningful work as more interesting. This interest may arise because feeling meaningful and influential strengthens the employees’ sense of purpose—it makes them feel like they’re living according to their overarching values and goals. There are nine main types of purpose, and feeling meaningful and influential is especially engaging for people who value achievement. However, these feelings may not be as effective for employees who value other types of purpose more, such as freedom or tradition. Consider how your company can foster every type of purpose so all employees can be better engaged.)
Set Baseline and Ambitious Goals
When learning how to set business goals, Stack and Burlingham recommend identifying the minimum level of success that will allow the company to survive. Meeting this level is the company’s first priority since it’ll fail otherwise, so it should be your first goal. The level of activity you need to hit can change depending on the company’s circumstances. For example, when a car company is young, it might focus on making a certain number of sales, as it needs revenue to survive. Once established, the company may focus on building dealerships in a certain number of states instead, as the company must grow to succeed in the long term.
(Shortform note: As well as ensuring survival, modest baseline goals can provide all-important employee motivation. Employees may believe that reaching ambitious goals is impossible, which ruins their motivation and makes them give up. In contrast, smaller goals are more achievable, so employees are more motivated to complete them. For example, if Sarah’s stretch goal is to sell 100 books but she’s only sold 60, she might believe that selling 40 more books is impossible and give up. As a result, she doesn’t sell any more books. However, if she has an additional baseline goal of selling 75 books, that provides a much less overwhelming target she’ll feel motivated to shoot for. This motivation may not be enough for Sarah to reach the 100-book goal, but she’ll at least sell more books than if she gave up.)
Identifying the minimum level is important as a baseline, the authors believe, but it’s just the first step: A baseline goal ensures the company will survive but not whether it will thrive or succeed in the long term. They recommend using the company’s sales and profits projections to create more ambitious goals for company profit and growth, as these projections are usually accurate and feasible enough to be good starting points.
(Shortform note: Sales and profits projections use data from past years, competitors, and overall industry trends to predict how the company will fare in the coming year. These projections show what will happen if the company maintains its current level of success and effort. This forms a sort of middle-ground or comfort zone when setting goals, as meeting this goal is better than just surviving, but it doesn’t necessarily force the company to improve. Once you have this middle ground, though, you can use it as a gauge to set stretch goals—goals you might achieve if everyone involved in the company gets out of their comfort zones and increases their effort.)
Consult Other Departments When Setting Goals
Stack and Burlingham stress that consulting other departments when goal-setting is essential. While sales and marketing can provide an abstract estimate of potential sales and profits, the other departments are vital for concretizing these projections and determining if they’re really feasible and accurate. For example, sales and marketing may project $3 million in profit for the year and want to set this as a goal, but the manufacturing department knows that requires them to make 500 cars. With this concrete goal in mind, the department can consider costs and labor to determine if making 500 cars is feasible if doing so will actually result in $3 million in profit, and if the goal is reasonable
(Shortform note: Stack and Burlingham’s advice is similar to how OKR goal-setting systems function. According to John Doerr in Measure What Matters, OKR stands for Objectives and Key Results. Objectives are larger, overarching goals—such as the estimates provided by sales and marketing—while key results are the smaller, concrete steps required to meet those objectives—such as the information provided by the manufacturing department. Doerr recommends letting employees set most of their own key results since they usually understand their tasks and goals better than a manager would. It’s also more efficient for individuals to set their own goals instead of waiting for one person or group to set goals for everyone.)
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- The best and most efficient way to create a successful business
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