Chairman of a billion-dollar business: Here’s how to set the right goals for your team

Customers check in at the JetBlue counter at John F. Kennedy Airport
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Customers check in at the JetBlue counter at John F. Kennedy Airport

Constructing goals for employees is one of the most important tasks for any leader, whether she runs a Fortune 500 company, a small startup, or a non-profit. Done right, goals should reflect an organization's values and reward specific results.

Ultimately, all companies want to grow, be profitable and have great relationships with customers, suppliers, lenders, equity investors and joint venture partners. It is critical to have goals that cascade from these three areas. How the CEO addresses each will be different from how individual departments do it. Everyone, however, should be working toward those primary objectives.

Proper goals stretch your team while encouraging collaboration. Employees or departments competing against one another to stand out can destroy the company, so fostering a "win together" culture is paramount. As the late business management guru Peter Drucker said, "Culture eats strategy for breakfast."

Here are 10 guidelines for setting goals that push you, your team and your company forward:

1. Goals should be challenging

If your team is meeting its goals every year, that should tell you something is not right. Goals should be missed every so often. If your folks are hitting their goals half the time, that's a decent result. But if they are hitting them 100% of the time, their goals are not strategic enough or ambitious enough.

2. Partial success should be rewarded

Shy away from cliff goals, where the team either hits them or is considered a failure. That only encourages people to go after low-hanging fruit. People get smart about bonuses and managing their own pay. Set standards that encourage people to stretch, knowing that reaching 50% or 80% of the goal means their efforts will still be rewarded.

3. Throw in some subjective measures

For instance, in addition to specific goals like a $1/share increase, challenge them on softer things, such as improving the net promoter score from your customers. Encourage teams to collaborate on some goals to foster a sense of interdependence.

4. Don't swamp subordinates

Leaders often come up with long lists of goals resembling an overstuffed to-do list. That approach draws attention and energy away from the most important goals. Keep it to three or four things that are aligned with the big corporate objectives.

5. Be sure to set a time frame

When something needs to get done is as important as what needs to get done. Set deadlines. Leaders who fail to specify the timing for a goal's completion lose an opportunity to increase productivity and ensure proper coordination.

6. Establish interim milestones

A common mistake when managing goals is not setting intermediate touchstones. Without periodic check-ins and public updates, people can lose momentum or, worse, spend months moving in the wrong direction.

7. Be flexible

Clearly, it makes no sense to stick with a goal if the situation changes. Yet this is exactly what some leaders do, fearing that adjusting the goal will reflect badly on their competence. This kind of thinking can end up creating a culture of fear and uncertainty and inhibits creative problem solving.

8. Celebrate, celebrate

Even in the best organizations, you can't call enough attention to the good that is happening. Celebrate small wins along the journey and do it frequently. Celebration reminds people what winning feels like, inspires them, connects subordinates with their leaders and drives performance.

9. Emphasize the growth opportunity

Leaders view goal attainment as one step in employee development. Employees who set and reach goals will be more willing to seek feedback to help them maximize their learning and achieve further objectives.

10. Be transparent

Personal development goals should remain private to avoid politicizing the work environment. But organizational transparency is very important and builds a sense of team and trust. Goals should be shared within the organization so that people know what the CEO is trying to get done as well as what the most recent hire in a department is striving to achieve.

You may wonder if putting all this work into goal setting really leads to better performance. After more than four decades of research, the evidence is unequivocal: it does. Employees operating with well-designed goals focus on the right priorities, increase their effort, tend to be more persistent and are more confident. They even get more enjoyment out of the job.

When that happens, everyone wins.

Joel C. Peterson is the chairman of JetBlue Airways and a professor of business at Stanford University in Palo Alto, CA.