objectives management: the debate top down or bottom up?
How should objectives management be approached? We set up a debate between two of our consultants to see what the pros and cons are between top down and bottom up approaches.
In favour of a Top-Down Approach
Extreme top-down management associated with an autocratic style of rule found in regimes such as Tsarist Russia can be considered a trade-off between brutal efficiency and autonomy. However, more power at the top of the pyramid does not necessarily mean none at the bottom. Handing out objectives does not automatically mean 20th century dystopia, micro-management, stifling of creativity or employee apathy. At its fundamental level, top-down simply indicates a provision of direction from above.
Direction in a business isn’t restricted to coming from on high. However, when businesses reach a certain size and complexity, top down objective setting becomes vital both for employees and for the functioning of the organisation. There are 3 key advantages to the “top down” approach:
- Alignment & Efficiency – Individual business units can function with a degree of self-sufficiency, but top down co-ordination and communication allows for a holistic approach ensuring resources are distributed effectively, and people are not pulling in different directions.
- Personal value – Setting objectives from above builds a specific relationship between personal roles and corporate strategy. It enables employees to see the impact they have on the whole-organisation promoting cohesion, a sense of purpose, and self worth.
- Accountability – Top down objective setting requires cascading objectives down an organisation alongside an accountability matrix. Individuals become responsible for specific targets creating a demand for improved measurements and reporting. The end result is a much clearer picture of the performance of employees and departments over time.
Option 1: Big Brother’s Ministry of Truth. Acknowledge that you’re top down, and force people to conform (good for accountability, less-so for alignment, personal value isn’t given a thought).
Option 2: The Stakhanovite Approach. Having emerged during 1930s Russia, the idea behind the Stakhanovite movement was to promote over-achievement in the work place, holding “model workers” up as heroes. This approach is unashamedly top down, and involves setting over ambitious objectives, which if achieved, results in hero like status for the fortunate employee.
Option 3: The culture of habit. Dictate a series of objectives, but by engineering a culture where they feel natural. Focus on objectives that address a “keystone” habit driving change from above in the knowledge that these changes will facilitate other objective targets to be met. A great example of this is the story of the Aluminium Company of America (Alcoa), who by focusing on worker safety increased their annual net income by 5 times. More on that story can be found in Charles Duhigg’s book; The Power of Habit: Why we do what we do in life and business.
In favour of a Bottom Up Approach
Objectives are usually set top down. Put a man on the moon. Capture the flagship. Finish your homework before tea!
Objective setting from bottom up means empowering individuals or teams to set their own objectives. Alignment with overall aims is done at most by a final sign-off.
Three good reasons for setting objectives bottom up are to build buy-in, to use local information and to reinforce the relationship with overarching organisation aims. These reasons can be aligned to Dan Pink’s three factors supporting empowering work (Autonomy, Mastery and Purpose).
- Buy-in – people have greater psychological commitment to objectives they set themselves (Autonomy)
- Local information – people who know the situation on the ground understand customer needs and possible solutions better. (Mastery)
- Reinforcing the relationship – people will often need to set their own objectives – not only in the annual performance review, but also in day-to-day work. Getting people to reflect on their own objectives, and how these relate to overall organisational objectives builds the skills to do this effectively. (Purpose)
Pink’s argument is that as work becomes increasingly creative, service and knowledge-based, organisations will only succeed if they engage their staff in their work – which is beyond the ability of the directive command and control approach.
Here are two examples of objective setting from bottom up. The first is relatively conventional. In back-office operations – for example insurance companies, banks or government departments – it makes sense for team leaders to set their own objectives for productivity, quality and timeliness. Each week, plans are proposed the Tuesday before, aggregated on the Wednesday, reviewed on the Thursday and signed off on the Friday in order to run the week ahead. This is good, basic operations management. Each team leader’s plans of course have to be aggregated and checked for delivery against overall organisational targets. The operations manager’s role is to ask people what they propose to achieve, offer support to achieve the aims, and challenge if the aims are not ambitious enough. And the whole group must learn, learn, learn from the outcomes achieved.
The second example is a radical approach to objectives management. Holacracy is an approach to building organisations on the basis of ‘what needs to be done.’ It assumes that the people in the organisation have a good idea of the tensions that need to be addressed – within the business and in its external relations with customers and suppliers. If they have a process to surface the tensions and act upon them, the organisation will naturally tend to become responsive, focusing its effort where the collectively perceived need is greatest: Agile and Responsive are the buzz words. Managers are ‘no longer needed’. In holacracy, objectives are set by tactical meetings which agree projects and actions. Exciting and innovative the approach is generally used by smaller organisations and start-ups, the most recent (and largest) being the Zappos shoe company, owned by Amazon, whose 1500-person organisation adopted the holacracy approach in 2013.