Some thirty years ago, the corporate world was shaken by new insight into business processes that came from quantum mechanics: the concept of chaos theory. Like mathematical systems, organizations came to be viewed as nonlinear and dynamic entities with inherent periods of stability and instability, and of evolution and revolution. “Chaos” ceased to be seen as “disaster,” and became a source of adaptability, creativity and resilience.
However, for many companies, chaos is still more of a harm than a help: Too often, the unpredictable behavior that results from unclear communications, processes or misaligned goals can be a death spiral rather than a catalyst for innovation. Even if a company survives a crisis, it can take years to rebuild: A misalignment in record keeping between Lidl and its newly purchased SAP software led to a cascade of implementation problems, miscommunication, and mutual blame that resulted in a significant Enterprise Resource Planning disaster.
Sources of Chaos
At the highest level, the cause of chaos is disconnection between people, process, and technology due to unclear objectives. But there are multiple day-to-day organizational blunders that can plunge a company into chaos. These include:
1. Unclear objectives, which result in failing to meet customers’ needs
2. Insufficient market research and misunderstanding of target audiences
3. Constant changes to a product or service
4. Inefficient communication between stakeholders, management and team members
5. Insufficient monitoring and testing
6. Lack of clarity on the status of tasks
7. Unclear deadlines and roles within a project
To fix these problems, a business needs to engage in careful planning and research–and, above all, have a solid action plan that’s based on clear objectives. Setting achievable and clear-cut goals should be a fundamental priority. At the same time, the goals themselves need to be interconnected and serve a higher objective, creating a hierarchical structure known as a Goal Tree.
The main advantage of a Goal Tree is its ability to help a business differentiate between its big ultimate Goal or Mission, and the intermediate steps needed in order to achieve it. The Goal can be quite abstract (“increase revenue” or “change the world”) and refer to a long-term milestone at a distant finish line.
Achieving the Goal requires time and effort. For the team to stay focused throughout this process, the Goal needs to be broken down to measurable objectives. These objectives often anticipate specific changes in the target market’s behavior. They should be specific and measurable, but also easy to break down into smaller, individual actions–often known as “sub-objectives”.
To ensure the completeness and internal consistency of the Goal Tree, each sub-objective should specify what needs to be done in order to fulfill the broader “parent objective” it supports–and each parent objective should justify the presence of the sub-objectives that are associated with it.
For instance, when we at KeepSolid felt that our processes had become exceedingly chaotic, we set a Goal of “restoring order.” Then, to achieve that Goal, we broke it down into components, each of which addressed a specific cause of chaos, such as imbalanced management and limited project vision among the team. We were then able to build a dedicated task management system, based on goal tracking, that made our processes much more transparent and efficient.
Management experts have developed numerous goal-setting frameworks to suit every industry, type of the business, and organizational culture. They are typically designed to achieve specific short- or long-term goals in a specific organizational setting. To find the framework that works best for your business, it’s important to have a clear understanding of your ultimate goal and your team’s capacity. The most frequently used goal-setting frameworks include:
- Objectives and Key Results (OKR)
One of the most popular approaches to goal-setting is the OKR model, used by Google and other leading global companies. It is based on defining ambitious and memorable objectives that rely on 2 to 5 measurable Key Results.
The Objectives used in this model are often inspirational and catchy concepts, like “Give our customers a new experience”, while Key Results are formal metrics that measure the company’s progress towards the objective, such as “increased number of customers subscribing to our newest service”.
Prioritizing objectives is the team’s task, which encourages risk-taking and responsibility.
When to use it:
OKRs focus on achieving short- and medium-term goals. They increase objectives’ visibility and encourage team members’ engagement. This model is a good fit for organizations that are growing quickly and have strong team involvement in the goal-setting process.
- Balanced Scorecard (BSC)
The Balanced Scorecard (or BSC) model takes a holistic approach to assessing a company’s performance, by evaluating it from four perspectives:
· Customer satisfaction (customer perspective)
· Internal processes (internal perspective)
· Continuous learning and improvement (innovation and learning perspective)
· Financial outcomes (financial perspective)
BSC is typically implemented in three main stages:
1. Identify strategic objectives for every perspective by clarifying the associated goal chains and interconnecting them in a strategy map.
2. Define Key Performance Indicators (KPIs), i.e. metrics and target values for goals
3. Prepare an Action Plan.
When to use it:
Unlike OKRs, the BSC model stresses accountability to a pre-planned set of activities, and sets out a defined structure for how objectives should be developed foreach perspective. It is designed to help with the strategic planning and implementation of long-term goals, and is especially beneficial for large companies in the energy, automotive, or healthcare sectors.
- North Star Metric
The North Star Metric empowers companies to shift from pursuing only surface-level growth to longer-term customer retention growth.
To find your company’s North Star, it’s first crucial to understand the needs of your customers and the value they derive from your product or service. This value should then be quantified in a single metric that best suits your organization.
Once you find your North Star Metric, it’s important to determine all the variables that can impact this metric: New user signups, time spent using your application, or user retention rates. To find the best leverage points for reaching your North Star Metric, it’s essential to understand the relationship between all of these variables and their alignment with the work of your company’s teams.
When to use it:
Though less precise than BSC, the North Star Metric is one of the most reliable predictors of a company’s long-term success. It ensures clarity, helps communicate progress between teams, and ensures that your product or service is accountable to an outcome. NSM focuses on customer value creation as the universal criterion for a successful business. It is particularly well-suited for service-oriented and innovative businesses, like SaaS, e-commerce, media, or fintech.
Bringing it All Together
Despite the differences between these frameworks, the steps you can take to take to fight chaos in your organization–and boost efficiency across your business–are common for all methodologies:
1. Define your Mission, or your Ultimate Goal
2. Choose the best-suited framework to break down your Mission or Goal into subgoals
3. Across your organization, align your daily activities a the Goal Tree and prepare an action plan
4. Monitor and measure your progress through selected metrics.