The power of freedom

Chapter 11. About Goal Setting

If you have a small business, you can skip this chapter. However, if your business is already quite large or aims to become so, I strongly recommend paying attention to the following. The issue I raise in this chapter is a complex one for me. It often becomes quite pressing as the system grows.

Goal setting is one of the most crucial components of success. First, we establish our goals. Many find this process mysterious because it happens behind closed doors. Some people claim, “We don’t need any goal setting! The situation will tell us what to do.” Occasionally, someone asks, “What’s so difficult about goal setting anyway?” I wrote about goal setting in my first book five years ago. If you’re interested, I encourage you to read it.

Previously, I approached this topic from the perspective of resource allocation, but now I want to examine it from the standpoint of departments. A poorly defined goal can harm an organization or a division. You can easily get lost if you’re not following the right star. Confusing Jupiter with the North Star will surely lead you astray. Therefore, choosing the right goal is half the battle, especially for a company.

Goals reflect human psychology. When you’re in a good mood, all problems seem manageable, and you feel capable of achieving a lot. But when you’re feeling down, the world appears bleak, and it seems like everything is lost. People who set goals understand how important it is to have a tool for defining them. It needs to be competitive. Goals should not be set based on emotions. During the goal-setting process, it’s critical to adhere to clear rules and criteria.

When setting goals, we always consider two factors:

1. Financial Factor: This is particularly relevant when discussing performance indicators. We analyze all possible influences related to key parameters, such as the average interest rate. We develop models that account for the market's dependence on these rates and adjust our goals according to current conditions and forecasts.

2. Psychological Factor: The true goal should not be intimidating or cause excessive anxiety. It needs to be practical. All successful companies set goals that are very practical and realistic. The goals are clear, understandable, and appropriate. Success is largely defined by SMART goals, which I believe are more important than SMART tasks. Even if tasks do not always meet SMART criteria, the goal should always be focused on results.

Now, let's talk about larger companies like ours, which have multiple departments. In today's world, departments are parts of an overarching management system. Standardization – bringing the specific into alignment with the general – occurs before we start doing anything right or wrong.

Let me compare it with the human body. All humans have the same amount of organs, with similar sizes, functions, and systems. You might say, "Well, that makes sense; it's a result of evolution!" However, I disagree with the notion that development during evolution occurs chaotically and without purpose. Similarly, all organs in our body work towards a single goal: human survival. This is ensured through complex natural mechanisms.

DNA, the digestive system, metabolism – these are all parts of a strictly synchronized system, with each action coordinated by the brain. Organs do not have the ability to act autonomously. If any organ begins to operate independently of the system, it can often lead to the person's demise. Nature clearly tells us: those who cannot maintain integrity have no right to exist. The emergence of cancer cells and other disorders is evidence that some part of the body has started to act on its own accord.

In entrepreneurial culture, there is a key principle: the organization must strive for a unified goal – its own development. For those who have reached this part of the book, it’s important to realize that traits such as selfishness, the desire for autonomy, culture, and courage serve the higher purpose of organizational development.

Companies have a significant advantage over living organisms – the ability to easily replace any parts and adapt according to demands. Here, the principle of similarity applies – organizations are akin to living organisms but are not identical to them.

When you start analyzing the structure of an organization, it becomes clear that many of its structural elements can be compared to human organs – like the heart, kidneys, and others. An improper arrangement of these "organs" within the overall system of the company can lead to a rapid and unnoticed decline. Many organizations do not last long precisely because their leadership often makes mistakes in the early stages – specifically during the creation of the structure, when departments begin to compete against each other.

Over the years of working in the company, my understanding of effective management methods has undergone significant changes.

Initially, I adhered to a unitary approach. I believed that everything needed to be centralized, controlling every step taken by employees. Heads of each department reported to me personally every month. Each department had its own finances and budgets, and I participated in every meeting, knowing exactly what was planned. I was completely absorbed in management – myself! I managed this way until we grew to about 400–500 people. Looking back, I can't say whether this was the right decision. Sometimes I wonder how things might have been if I had already implemented the management principles I’m going to discuss now. History has no subjunctive mood, and we can’t go back and correct past mistakes. Eventually, I realized that a leader doesn’t need to personally manage every aspect. It’s possible to set up a system that operates effectively without my constant intervention.

After the unitary model, I transitioned to a model of complete autonomy and tried to implement a holacracy system. However, it also appeared to be imperfect. I realized that as the company moved toward holacracy, it became less efficient, leading me to conclude that a two-factor systemic competition was necessary.

Competition within the system should occur at all levels – both within departments and between them, as well as between departments and the centralized structure. Meanwhile, the system must remain decentralized. Let me give you an example with Google. It assesses the importance of web pages based on the number of links from other sites pointing to them. The significance of these pages is determined by what users are willing to pay top dollar for. Google doesn’t adhere to strict rules; it simply found a formula for success.

A garage on the outskirts of Menlo Park, California, where Google was founded. November 2021

For the effective functioning of departmental goals and systems, a dual-factor competition for resources is necessary, while maintaining unity in the application of tools.

I will explain how I achieved this. First, I realized that goal-setting is the foundation of this model. This means that each department must establish clear and understandable goals for everyone. Second, these goals should be cross-functional, promoting interaction and collaboration between different divisions. For example, the same goal can be relevant for both HR and sales and marketing departments, facilitating effective collaboration among them.

The management model comprises several key components:

• Well-defined goals;

• Balancing resource competition with collaborative tool usage;

• Establishing mutual system authorities based on shared values.

The key idea is to incorporate authority naturally into the workflow, avoiding arbitrary delegation. People often mistakenly try to define authority in advance instead of creating the right systems where authority is embedded in specific tasks.

Everyone is used to first determining and clarifying everything. For instance, a person working in the marketing department needs to monitor the cost of leads, while someone in sales needs to focus on the cost of deals. The marketing specialist may notice that the company is spending a lot without generating results. It seems that everything is fine for a typical company: there’s a need for sales and marketing. However, when these functions are combined, there’s no income because the company is overpaying for leads and still not achieving the desired outcome.

If authority is transferred from the sales department to the marketing department, at some point, the marketer might suggest changing the incentive structure so that sales staff provide weekly conversion reports. A system should be created where each part feels empowered to change its authority. This is a very complex task. Most organizations fail at this because people often prefer to remain silent and make no changes.

If we look at evolutionary processes, we can see that they happen the same way. Individuals compete with one another – this is both intraspecific and interspecific competition. The situation in organizations mirrors this reality. It's essential to understand that, unlike animals, humans have the ability to cooperate effectively. In nature, however, the struggle for survival, known as natural selection, prevails.

Animals are generally not inclined to cooperate. While there are notable examples of mutual assistance among certain species, competition is the dominant behavior. Unfortunately, humans also often find themselves in conflict with one another. We are not always predisposed to collaborate – a fact that is evident in economic contexts and other processes around the world. Within organizations, a balance must be struck between cooperation and competition.

I emphasize this aspect of authority because many organizations struggle with it. Even with proper synchronization of departments and consideration of all aspects and models, mistakes often occur – one of which relates to motivational tools. Frequently, the goals and motivations of the revenue-generating department do not align with those of the organization.

This synchronization is essentially the foundational level of management. When I conduct audits, a standard question I ask managers is: "What do you get paid for? What value do you bring to the organization?" I start with this to understand how an employee perceives their role and contribution to the company.

Many leaders forget that it’s important to discuss company values with employees and how they can align with them. This brings to mind another favorite saying of mine: "We spend half our lives searching for answers to questions we never ask ourselves."

In the future, goal-setting will be a global process for the entire company, and there will be significant competition at the basic structural level for the opportunity to implement important initiatives.

Ultimately, each department becomes a kind of kingdom within the organization. It is crucial that as these departments grow, the organization itself becomes stronger. I see it this way: everyone should develop together; if one department starts to grow unevenly – like a sick liver – it signals a problem.

An important point is that when something goes wrong in a department's operations, management is often reluctant to acknowledge its mistakes. It’s vital to have a clear system for understanding what is good and what is bad. When a company is "ailing" and suffering losses, that is obvious to everyone. But try to discern what is happening within the departments of such an organization. Typically, everything appears fine on the surface: each person performs their job at a high level, yet one single department may be completely unaware of the organization's goals and is performing poorly. In this situation, it is critically important to have a system that allows for an objective evaluation of all aspects of operations. This requires establishing criteria and determining at what level evaluations should occur: at the employee level, department level, or specific team level. I used to think that evaluations were pointless – that I could walk into a department, talk to employees for ten minutes, and grasp whether things were going well or poorly. However, as the company grew, I realized the necessity of creating an evaluation system. Now, I visit departments once a year.

If you try to control everything, you'll find out that you have far less time for management than you could have, because the company continues to grow and your time is not unlimited. The ability to effectively prepare replacements for oversight and evaluation duties is critical. Every founder goes through incredibly challenging stages of their company development. Typically, leaders possess exceptional talents and rare innate qualities. It's important to understand and prepare for the fact that not everyone will be able to work with the same level of efficiency in the future. This difference needs to be taken into account. Therefore, always allow for the possibility that a task you completed in one day may take someone else a week. This is part of the management process, and you earn your income from it, while employees earn theirs – it's all part of the system.

The lack of evaluation, oversight, and sufficient resources leads departments to engage in low-value activities. This correlation has been consistently observed in practice.

The entire system always operates like a business, while we often behave like a government. Striving for this balance is essential. The more freedom you give each department within the system, the more energy you will receive from the "bottom up."

Now, let me describe some mechanisms for effective synchronization using examples from various departments.

1. Encourage maximum interaction among employees. It is crucial that all staff members, not just leaders, embrace the company culture. Engage with your team regularly. Even when pressed for time, avoid limiting communication solely to management discussions.

Many leaders make the mistake of interacting only with their direct reports. I always say, "I want to talk to your people!" During my assessments I seek to understand each person’s role, responsibilities and motivations. Once, I spoke with an employee who told me, "We were warned before the meeting that we shouldn’t say too much, that we could even be fired on the spot." It turned out that the department head was intimidating the staff. After that conversation, I understood why people always seemed quiet during our first meetings. Then I start working with them, telling a joke to ease the tension. After about 25 minutes, they start to open up, and by the 35th minute, communication flows naturally. By the end of the conversation, we’re almost friends. After the meeting, I always send them a message: "Great job! That was an excellent idea!"

2. Identify the goals of each department. I constantly discuss the objectives with every department, always asking the leader: "What’s important to you? Tell me about the motivational management in your department. Show me how it aligns with our goals. Where do you see potential risks?" If someone responds with, "Everything is fine," I start to worry. I say, "No, tell me specifically: where do you see risks? How have you adapted models? Where have you taken risks for the sake of the company?" They need to be prepared for challenges and understand that making mistakes is part of the process.