by Adam Hartung | Dec 31, 2014 | General, In the Rapids, Transparency
Results, results, results. We frequently hear that we should focus on results.
More often than not, focusing on results is a waste of time. Because it is looking in the rear view mirror, rather than the windshield.
Someone asked me today what I thought of Janet Yellen as head of the Federal Reserve. I found this hard to answer. Even though Chairperson Yellen has been in the job since February, her job as lead policy setter has almost no short term ramifications. It takes quarters – not months – to see the results of those policy decisions. Even after a year in office, it is very difficult to render an opinion on her performance as Fed leader. The fantastic 5% growth in the U.S. economy last quarter has much more to do with what happened before she took office – in fact years of policy setting before she took office – than what has happened since she became the top Fed governor.
We often forget what the word “results” means. It is the outcome of previous decisions. Results tell us something about decisions that happened in the past. Sometimes, far into the past. We all can remember companies where looking backward all looked well, right up until the company fell off a cliff. Circuit City. Brachs Candy. Sun Microsystems.
Further, “results” are impacted dramatically by things outside the control of management, such as:
- Changes in interest rates (or no changes when they remain low)
- Changes in oil prices (which have been dramatically lower the last 6 months)
- Changes in investor expectations and the overall stock market (which has been on a record-setting bull run)
- Inflation expectations (which remain at historical lows)
- Expectations about labor rates (which remain low, despite trends toward higher minimum wages)
- Technology advances (including rapid mobile growth in apps, beacons, payments, etc.)
We too often forget that last quarter’s (or even last year’s) results are due to decisions made months before. Gloating, or apologizing, about those results has little meaning. Results, no matter how recent, are meaningless when looking forward. Decisions made long ago caused those results. “Results” are actually unimportant when investing for the future.
What really matters are the decisions being made today which can cause future results to be wildly different – better or worse. What we need to focus upon are these current decisions and their ability to create future results:
- What are the goals being set for next year – or better yet for 2020?
- What are the trends upon which goals are being set? How are future goals aligned to major trends?
- What are the future expected scenarios, and how are goals being set to align with those scenarios?
- Who will be the likely future competitors, and how are goals being set make sure we the organization is prepared to compete with the right companies?
Far too often management will say “we just had great results. We plan to continue executing on our plans, and investors should expect similar future results.” But that makes no sense. The world is a fast changing place. Past results are absolutely not any indicator of future performance.
For 2015, and beyond, investors (and employees, suppliers and communities sponsoring companies) should resolve to hold management far more accountable for its future goals, and the process used to set those goals. Amazon.com maintains a valuation far higher than its historical indicates it should primarily because it is excellent at communicating key trends it watches, future scenarios it expects and how the company plans to compete as it creates those future scenarios.
In the 1981 Burt Reynolds’ movie “Cannonball Run” a character begins a trans-country auto race by ripping the rear view mirror from his car and throwing it out the window. “What’s behind me is not important” he proudly states. This should be the 2015 resolution of investors, and all leaders. Past results are not important. What matters are plans for the future, and future goals. Only by focusing on those can we succeed in creating growth and better results in the future.
by Adam Hartung | Jan 15, 2010 | Disruptions, eBooks, In the Swamp, Innovation, Leadership, Lock-in
Many people think the best way to grow is by setting big goals – even Big Audacious Hairy Goals (BHAGs). But increasingly we're learning that goal setting is not correlated with success. At AmericanPublicRadio.org there's a partial text, and MP3 download, of a recent interview between General Motors leaders and a University of Arizona Professor titled "It's not always good to create goals."
The story relates how about a decade a go, with market share hovering at 25%, GM set the goal of moving back to 29%. It became a huge, multi-year campaign. Lapel pins with "29" were made and all kinds of motivational programs were put in place. The GM organization had its goal, and it was highly aligned to the goal. But it didn't happen. Despite the goal, and all the energy and talent put into focusing on the goal, GM continued to struggle, lose share – and eventually file bankruptcy. The goal made no difference.
Worse, the interview goes on to discuss how goals often lead to decidedly undesirable, sometimes unethical – even illegal – behavior. Instances are cited where goal obsession led company employees to falsify documents, even ship bricks in place of products to meet sales targets. No executive wants this, but goals and goal obsession – especially when there is a lot of reinforcement socially and monetarily on the goal – can become a serious problem.
Results are exactly that. Results. They are an outcome. They are the way we track our behaviors and activities – our decisions. When we focus on goals – usually some sort of result – we lose track of what is important. We have to focus on what we do. And for most organizations a big goal merely leads people to try working harder, faster,better, cheaper. But when the Success Formula is mis-aligned with the market – even when the whole organization is aligned on maximizing the Success Formula results will still struggle – even falter. Goals don't help you fix a Success Formula returning poor results. Just look at GM.
In fact, it can make matters worse. In "White Bears and Other Unwanted Thoughts" (available on Amazon.com) the authors point out that when you try to turn a negative (a problem) into a positive (a challenge, or goal), you often achieve a rebound effect making people obsess about the problem. Tell somebody not to think about a white bear – and it's all they think about. When your company has a problem and you try to tell employees "hey, don't think about the problem. Go do your job. Work harder, increase your focus, and all will work out. Sure share is down, but don't think about lost share, instead think about the goal of higher market share" frequently the employees will start to become obsessive about the problem. It will reinforce doing more of the same – perhaps manicly. Instead of becoming innovative and doing something new, obsessive devotion to trying to make the old methods produce better results becomes the norm. Goals don't produce innovation – they produce repetition.
So what should you do when facing a problem? Disruptions. GM didn't need a big goal. GM needed to Disrupt its broken Success Formula. GM needed to attack a Lock-in (or two). GM leaders needed to admit the market had shifted, and that competitors were changing the game. GM needed to recognize, admit and encourage employees to engage in attacking old assumptions – and recognize that market share would continue eroding if they didn't do things differently. Setting a big goal reinforced the old Lock-ins and even an aligned organization – working it's metaphorical tail off – couldn't make the outdated Success Formula produce positive results.
Only a Disruption would have helped save GM. After attacking some Lock-ins, like the desire to move all customers to bigger and more expensive cars, or the desire to focus on long production runs, GM should have set up White Space teams to discover new Success Formulas. Instead of putting all its management energy and money into growing volume at Chevrolet, Cadillac, Buick and GM nameplates, General Motors leadership should have revitalized the innovative Saturn and Saab to do new things – to develop new approaches that would be more competitive. Instead of pushing Hummer to have 3 identical cars in 3 sizes, GM leadership should have unleashed Hummer to explore the market for truly unique, limited production vehicles. GM should have allowed Pontiac to really take advantage of the design breakthroughs happening at the Australian design studio – to change the nameplate into a performance car segment leader. By attacking Lock-ins, Disrupting, and using White Space GM really could have turned around. Instead, by creating a BHAG GM reinforced its focus on its Hedgehog concept – and drove the company into bankruptcy.
You can see a 40 second video about the value and importance of Disruptions on YouTube here.
A 75 second video on White Space effectiveness on YouTube here.
Read free ebook on "The Fall of GM: What Went Wrong and How To Avoid Its Mistakes"
