Element 1: Ambitious, Annual Cross-Silo Goals

The aim of these broadest goals is to break down structural silos and get teams working together across functions to solve big challenges by creating metrics that focus on the end result that your company desires to achieve. Separate from the very long-range goals that form Element 4, these goals can be accomplished within an annual performance cycle. They might be halving the time to market for new products or doubling revenue from certain customers by selling multiple offerings. Including only a limited number of goals makes sure that they really stand out and employees don’t get overwhelmed. To identify such goals, it’s often easiest to start with the customer: What is the overall experience and outcome the customer wants? If a goal doesn’t directly involve a customer, try identifying a strategic outcome—for example, diversifying your supply chain. As you build your scorecards, determine which groups influence the desired outcome and embed that goal in each of their scorecards.

Once the alarm bells had sounded at TechCo, its leaders decided to pilot a new scorecard approach to tackle the lack of collaboration across silos. They created a four-element scorecard for functional executives, regional managers, and employees in three departments—sales, implementations, and client service. For each role, the goals were linked to a common objective. In this case, they set a bold goal: increase new customer satisfaction ratings by 25 percent in twelve months. This was the only goal in Element 1 of the scorecard for every role, and Element 1 was the most heavily weighted element (40 percent) on everyone’s scorecard. Each role had a customer satisfaction metric to measure progress against this strategic goal: for individual contributors, it related to new accounts they directly worked on, for regional managers it encompassed all new accounts in their region, and for the top execs it was for all new US accounts.

Because none of the three functions could improve overall customer satisfaction alone, the shared goal forced the sales, implementation, and client service teams to consider how their own actions affected the next steps in the overall process. The shared goal motivated them to look beyond their specific remit (such as closing the sale) to work with other teams to find ways to improve the client experience.

After the new scorecards were implemented, the leaders of the sales and implementation teams took three actions. First, they jointly redesigned the order intake forms to document client requirements more granularly. Second, they formalized the client sign-off process so that everyone was aligned on what was to be delivered. Third, the leaders of the implementation and customer service teams agreed to get their people involved earlier in the sales process to uncover and resolve any potential gaps or misunderstandings about capabilities and ensure the client would be satisfied with the final product.

Some might argue that embracing a narrow, more targeted goal that is clearly linked to individual performance is preferable. Why complicate things by creating more nuanced and explicitly collaborative goals? The answer is, because not every dollar is equally valuable. As explained in Chapter 1, a project that is strategically important for the client, solves a highly complex problem, and brings in multiple business lines is likely to be more valuable than a single-line sale. Furthermore, as described in Chapter 2, collaboration gives people a chance to learn and grow on the job, use their strengths, and find greater purpose and meaning in their work. Bottom line: even if individuals hit their personal targets, the organization most likely has missed out on both greater future potential with that client and the kinds of organization-building benefits that come from collaborating.

As one example of organization building, let’s dive into the engagement piece for a minute. Overarching goals are powerful for a number of reasons. First, they’re ambitious, which is inherently motivating. Research in goal-setting theory indicates that people who are given specific and challenging goals perform better than those who are encouraged, vaguely, to “do your best.”⁸ Second, by their nature, they demand collaboration. Participants in one study who were set collaborative goals stuck at their task 64 percent longer than their solitary peers. Ultimately, those participants also reported higher engagement levels and less fatigue, and they achieved a higher success rate.⁹

Element 2: Team-Based Goals

Organizations do not only need to break down silos across functions; they also have to get people collaborating within functions: sharing best practices, learning from each other, and working to achieve its collective target. Measuring team-level results and holding people accountable for them signals the organization’s expectation that everyone works to raise the performance of their whole working group, which could be a functional department, a key account team, a product development team, and so on.

Let’s go back to the implementation teams at TechCo. Previously, individuals and project teams had no department-level goals that focused people on improving the quality and speed of all initial customer setups; instead, each project team was measured on only the customers it implemented. There was little motivation to share best practices or learn from others’ mistakes, which meant that projects were frequently delayed while people “reinvented the wheel” each time.

In the new scorecard, each individual on the implementation team received the same metrics related to success across all projects within the region: the system needed to be fully functioning when it went live, and they needed to implement 95 percent of projects on time. Similarly, individuals in sales and client service had their own functional metrics (team-level sales and service-team responsiveness).

To keep team managers focused on sharing best practices and other collaborative actions with their peers in other regions, the metrics for team managers relate to the success of company-wide implementations. The functional executives’ scorecard includes a metric for worldwide outcomes; it motivates them to collaborate with their global team—that is, their peers who lead the other regions.

The managers and executives also have people-related metrics tied to employee engagement and attrition: collaboration hinges on people’s willingness to be creative and take some risks, and even the best KPIs (key performance indicators) can’t engineer this kind of mindset in a burnt-out, disengaged employee. This intrateam element was given a 30 percent weighting, the second highest, which further reinforced the importance of the collective goals that required collaboration.

Deborah, TechCo’s head of implementation, told us, “Because the whole implementation team had this shared goal, engineers [across the department’s teams] started helping each other more. They set up a community on our intranet so that they could share ideas about how to solve specific implementation problems, and they started standardizing best practices that made the process faster. During Covid, when we had lots of staff shortages, they set up an SOS system so that they could quickly swap resources between customers; in the old system team leads would have hoarded their people for their own projects.”

These collective goals encouraged a sense of shared purposed among the teams in each department. “Rather than each engineer having a goal to implement their specific client install project on time, we are actually measured on our overall, collective performance across all the client installations,” Deborah told us. “We are all focused on the mission of the team.” Team goals encouraged information sharing and, conversely, discouraged individuals from hoarding information and resources in an attempt to outperform a peer.

There’s also a little-understood diversity, equity, and inclusion (DEI) angle to collective metrics: team-based metrics can play to the strengths of disadvantaged groups. Research on the different approaches to collaboration across socioeconomic groups found that “groups from lower social-class backgrounds took more conversational turns while working together than groups from middle-class backgrounds, and had more active and balanced discussions.”¹⁰ As we’ve noted, balanced conversations are a crucial ingredient to high-performing teams because they allow diverse views to surface. “Including team-based evaluation metrics will … ensure that employees from lower-class backgrounds, who are more likely to display these [team-based] skills, have an opportunity to earn high marks and rise through the ranks in organizations, ultimately leveling the playing field.”¹¹

Above all, leaders need to role-model the right behaviors and nurture a culture in which people believe in “doing the right thing” for the organization, even if they aren’t directly incentivized to do it. In that spirit, think carefully about what you celebrate. If your success stories focus on the individual performer—the alpha-type personalities who go all out to beat their targets—you imply to the organization that individual success is valued above collaboration. In Chapter 8, we will discuss effective ways of communicating change, and the importance of using storytelling to reinforce collaboration as a key theme.

Element 3: Individual Goals

Well-designed, individual metrics not only promote personal accountability; they also should directly connect to the team-based and organization-wide goals and metrics. Then each person will understand how their specific actions contribute to higher-level success.

Let’s look at TechCo’s client service team. Every individual client service professional has goals related to their specific “day job” of handling inquiries for the specific customers they were assigned—for example, reducing the backlog of unresolved inquiries by 25 percent. All the individual goals added up to the overall team goal but ensured each individual was focused on delivering their part. The weighting, just 15 percent of their overall scorecard, ensured that they kept the focus on collaborating to achieve higher-level goals but was large enough to instill a strong sense of individual accountability.

Under the old system, individual help specialists had been measured on their efficiency: how long each client inquiry took and how many inquiries each specialist completed in a day. Those measures drove high productivity but not customer satisfaction. Service specialists weren’t incentivized to improve the quality of TechCo’s services or to help resolve the root cause of an issue, such as TechCo’s failure to modify the software in a way that provided high-quality data based on each customer’s complex and nuanced requirements. Had they done so, they would have been able to mitigate the problem’s impact on other clients and reduce the overall number of customer inquiries submitted to the service team.

TechCo’s new system motivated client service professionals—the people who have real-time, sometimes visceral perspectives on customers’ experiences—to be proactive in identifying ways to solve those problems. These efforts represent the granular, individual-level actions that help TechCo achieve the overarching Element 1 goal of increasing new customer satisfaction. The scorecard for one client service individual who was assigned to a task force aimed at resolving new customers’ data-quality problems included the metric, “As part of task force, propose solutions to reduce inquiries on two data-quality issues.”

This metric would motivate the person to not only participate in the task force but also seek inputs from their client service peers about the underlying issues. The task force also included people from the other two departments. The leader of this task force was a regional manager who guided the project team day to day, and a functional executive sponsored it, a role that entailed coaching the regional manager and helping the task force obtain resources. Both were measured on reducing inquiries related to that specific issue.

Giving everyone in a team a personal target related to the team goals is important to discourage members from free riding or fearing that others won’t do their share.

Element 4: Collaborative Building Blocks

The first three elements of the scorecard focus on goals that can be largely achieved during a single annual performance cycle. To focus employees on longer-term, multidisciplinary initiatives that will take more than a year to carry out, a fourth section, with its own weighting, is needed. Examples of goals that fall into this category include developing white papers that showcase a company’s cutting-edge ideas in order to build its reputation; completing significant pro bono projects that draw on an array of the company’s skillsets, showcase its capabilities, and give members of the project team a chance to stretch their skills; and making significant, measurable progress on diversity and inclusions at all levels of the company.

McKinsey’s research shows that women leaders, compared with men at their same level, are about twice as likely to spend substantial time on these kinds of activities that fall outside their formal job.¹³ By measuring and recognizing Element 4 results, companies can better reflect these results in compensation and career advancement decisions, which in turn makes the performance management system more equitable for everyone who contributes to collaborative building blocks. Building trusting interpersonal relationships among the people who take part in these activities will also help fuel collaboration in future endeavors.

TechCo set a three-year goal to enter a completely new customer segment. The CEO tasked the three departments with creating a compelling proposition that they could effectively sell, implement, and service to these customers. The three functional executives worked together to select a team of regional managers and individual contributors across the three departments; they were chosen not only for their diverse expertise but also because their development review in the prior year noted that they would benefit from working on more complex projects that involved other departments. Their scorecards included metrics that could be achieved in the first year: completing a series of roundtable discussions with senior executives of firms that were prospective customers to glean an understanding of their unaddressed needs, the market segment’s competitive dynamics, buying patterns, and so on.

To ensure that the task force didn’t just go through the motions, the metrics included the seniority of the roundtable participants (to make sure they would have sufficient knowledge of the market segment) and their post-event feedback about the value of the roundtable. To make sure regional managers assigned to the project and the functional executives followed through on what the teams learned during roundtables, the former’s metrics included securing three prospective customers to help codevelop the new product, and the latter’s involved piloting the beta product with at least two customers.

A note of caution: collaboration is good, but more collaboration isn’t always better. People need to decide which collaborative activities are going to have the biggest return on investment. People should justify each of these building blocks in terms of how it will move the organization toward achieving a strategic goal and how carrying out these activities will help build collaborative capacity such as skills, cross-unit knowledge, and trust. Each building block should have customized quantifiable metrics—in terms of not only what will be delivered but also the organizational impact it will have. See Table 6-1 for examples.

. . .

To conclude this section, let’s reiterate that you need to measure each goal you set (obvious, but often overlooked). You have systems in place to capture many of the quantitative outcomes your organization focuses on, such as revenue, throughput, and customer satisfaction. But it gets tricky: evaluating performance against a set of metrics hinges on having data that people trust. If there is a whiff of unreliability or inaccuracy in the data, then people will lose trust in the metric and confidence in the process. If you can’t measure it reliably, you need to ditch the goal.

Another crucial point: the world is changing fast, and your goals need to keep up. What happens if you set a rigid annual target on January 1, and your employees realize by the end of February that some misfortune (such as losing their main customer because it got acquired, or the company missing a crucial regulatory filing that sets development back half a year) means they’ll miss their yearly objective? Chances are good that morale and motivation will dip significantly for the remaining ten months. What a missed opportunity to turn it around! Regularly review and recalibrate goals, as Gap started doing on a monthly basis, to make sure your scorecard is relevant, motivating, and performance enhancing.

Finally, keep in mind that you’re not trying to hit upon the “perfect goal,” because it’s not out there. Every goal can result in counterproductive actions or gaming of the system. But the upside of some goals (driving collaboration) will compensate for the downside of others (driving individual behaviors), which is why leaders need to construct a comprehensive and integrated set of goals that steer individual and team behaviors in the right overall direction.

The Performance Recap (What and How)

Your review should include the performance against each of the types of goals we have discussed: big goals, team goals, individual goals, and building blocks. The organization needs to give managers guidance on how to weight these streams. We can’t prescribe an “ideal” weighting, since this is very much context dependent. But your weighting should suggest how the company answers a key question: What do your people need to focus on to accomplish your strategic goals, given the marketplace in which you operate?

But this is more than just the numerical performance against each of the goals. Because you want to embed smart collaboration behaviors into your organization, your review process needs to be far more nuanced than a traditional formulaic aggregation of quantitative targets. You also need to consider whether how people delivered those results is aligned with the organization’s values. One of those values should be working collaboratively. It is the manager’s responsibility to understand whether the individual delivered on their goals in a collaborative way.

So where do you get the inputs about how people are achieving their objectives? Your job as a leader is to keep an ear to the ground, and to probe when you hear tidbits that might be concerning. “Pulse checks” and similar tools, described earlier, are also a potential source of insight into how people have behaved with their teams. For example, a pulse check may indicate that a manager is micromanaging a team, and as a result, the team’s members don’t feel empowered. The supervisor should discuss this feedback as it comes in, provide coaching, and then look for trends in subsequent pulse checks.

As crucial as they are, these insights can be subject to bias and idiosyncrasy. Some managers may be harsh or generous raters; others may put greater weight on elements that they personally find more valuable. This undermines trust in the process, which, in turn, undermines the incentive to collaborate. Given these risks, HR can play a vital role by norming these ratings across raters throughout the company.

How do you sum up all these pieces in a way that will be received as constructive and motivating? If possible, avoid relying on a numerical score—such as a 1-to-5 rating—to convey to the employee what you’ve learned. People would rather hear, “You’re meeting, not exceeding, expectations,” than, “You’re a 3 on a 5-point scale.” In our work across industries, everyone from senior executives to recent graduates tells us that being reduced to a single number is demeaning and demoralizing. Even worse is the old-fashioned device of forced-curve benchmarking against peers. Extensive research shows that this system is collaboration-destroying because it is a zero-sum game: you can’t expect coworkers who are pitted against each other in such a fashion to work together collaboratively. Rather than accentuating a person’s performance relative to peers, focus both their monthly and year-end development discussions on their performance trajectory: Are they growing, working effectively across silos, and increasing their impact—not just individually but also as a contributor to the broader organization?

The Compensation Element

The annual discussion is your chance to use compensation as a strong shaper of a collaborative culture. Because the recap of their performance against targets (what they achieved) should be relatively uncontroversial, your efforts should be directed at explaining your assessment of their behaviors (the how part of their overall rating).

As obvious as it sounds, what you pay people has to be directly linked to what and how they delivered against their goals. We have worked with a range of organizations to review their compensation outcomes. Many have a compensation policy that includes up to twenty factors they claim to value. When we run a statistical model, however, we find that they are really paying for performance on just two or three metrics. More often than not, the ones that they actually pay for are the highly individualistic goals, such as hitting personal sales targets. This is why rigorously applying weightings to each goal is key.

Adjusting compensation for how people deliver their numbers, however, requires some managerial discretion. At one financial institution, for example, 80 percent of an employee’s bonus was driven by achievement against the quantitative metrics. The other 20 percent was based on the manager’s assessment of how well the employee lived the organization’s values, including collaboration.

More than just communicating what a person gets paid, a crucial part of this discussion is explaining how the subjective how element was assessed and exactly what behaviors informed the assessment. Two people can deliver the same output in very different ways: one might be constructive, inclusive, and collaborative, whereas the other might do it in a “me-first” and sharp-elbowed manner. In the short term, the second person may hit their targets, but the collateral damage can be real. How often have you been in an organization where you ask, “How can a person like that get ahead?” Frequently, it’s because the organization only values the what and not the how. Leave room in your compensation model for managerial discretion to reward the people who deliver in line with the organization’s values and to penalize people who don’t. These aren’t easy conversations, so make sure those values are well understood and managers are trained to deliver tough messages.

For most people, money isn’t everything, so also incorporate creative rewards. No matter how rich or successful people are, they crave recognition for their good work. The NASA@Work program, for example, encourages innovators across the federal government to generate ideas and solve important problems. Winners are rewarded not with money but with other incentives, including recognition—a personalized astronaut autograph, a visit to the employee’s department by NASA top brass, or external recognition on NASA’s Twitter account. Take this a step further by recognizing team-level outcomes to promote collective working. The more that leaders can embed symbolic rewards for great collaboration, the more that the system fosters a collaborative culture.