Irrational, Yet Effective, Goals

By Scot Herrick | Job Performance

Apr 15

Each of us knows some particular goal that gains more importance than any other goal. It could be personal or business, but the goal overrides all other goals in importance, sometimes to the point of irrationality.

The purpose? To make things simplified to a single goal and to drive focus. Usually the “simplified” goal was a subtle way of driving the entire business (a Wildly Important Goal, if you will).

I had a CEO who was fixated on “days sales outstanding,” a financial term that looked at accounts receivable to the amount of sales in days. So if your “DSO” number was 60, it meant that there were 60-days of sales sitting in your accounts receivable account for your business.

This particular CEO considered it an important enough goal — a symbol, if you will — that if your business segment didn’t meet the DSO goal, he could remove your entire bonus.

Entire bonus.

Not the bonuses of the employees working in the business segment, mind you. No, the entire bonus for “executive” vice presidents who ran each business segment. Serious booty.

During the first year he was CEO, his executive vice presidents didn’t believe him. To be fair, how big of a difference is it to be at 61-days sales outstanding when the goal was 60?

The difference was the entire bonus for the executive vice president who didn’t think it made that much of a difference.

After that, there was a different mindset about “Days Sales Outstanding” to upper management. It was a number that was going to get attained.

What’s important about Days Sales Outstanding?

Well, if customers were not paying their bills within the agreed upon time, what’s the most likely thing happening with the customer?

They aren’t happy with your product or service. So they don’t pay.

If you were an executive vice president of a business line where your entire executive bonus wouldn’t be paid if you didn’t make your Days Sales Outstanding number, wouldn’t you want to figure out what in your operation isn’t working for customers?

Yup. The CEO’s way of forcing upper management to look at their operations and do the work necessary to keep customers serviced was the Days Sales Outstanding number.

Every company, even most managers, focus on one or two things to drive performance, regardless of the number of goals on a spreadsheet. Which ones are yours?