With the beginning of the year comes the phrase that while maybe not striking fear in the heart of a leader, will definitely elicit a wince, or two. It’s time for annual reviews for the previous year, and the setting of individual objectives for the New Year. This event normally ranks right up there with root canal on the fun scale for a leader.

Despite my poking a little fun at how the process mat be perceived, it is a very important process for the successful business. Set the goals too low and you bog the business down because goals are achieved to easily or to early. Set the goals too high and you run the risk of the team not giving a full effort for a goal that is seen as impossible to achieve.

Another aspect of goal setting that is often overlooked is that of materiality. We have all been recipients of the dreaded “corporate” objective. That is the overall corporate Revenue, or Profitability goal. While this may be a suitable goal for a division or business leader, at some point in the hierarchy it does become meaningless.

Goals are only useful if the individual that the goal is set for as the ability to achieve or affect the achievement of that goal. Many will argue that everyone in the corporation has the ability to affect the achievement of the corporate goal. This is where the idea of materiality comes in. The entry level specialists may be able to contribute to the corporate goal achievement, but their “rating” on this objective will be largely dependent on the work and decisions of those managers and leaders above them.

“Corporate” goals bring down the performance of your highest performers and mask and bring up the performance of those on the lower end of the scale. An example would be if the performance of the leader (and team) of a higher performing smaller division, would fail to get a bonus or an appropriate review based on not achieving a corporate “objective” because a larger, poorer performing division brought the overall corporate performance down.

It seems to have long been held that if the entire corporation did not achieve their goals then no one in the corporation could be said to have full achieved their goals. In reality in this situation there are always those that have achieved or exceeded their goals. It is just that their performance has been masked by another group that has not. In this case the higher performers have been lumped in with the lower performers, with little opportunity for financial differentiation between them.

So, as the Novocain from the root canal wears off, and the inevitability of having to set the individual goals for the members of the team looms large, remember; Try not to set the goals too low or too high, and make sure that the individual can in fact achieve, or affect the achievement of the goal. In many instances this will mean No Corporate Goals.