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Managing Expectations

As I watched the inauguration of President Obama last week, I was struck with the contrast between the euphoria of the crowd and his measured and cautionary remarks.  Others have noticed this, too, and it took me some time to get around to writing this.

President Obama probably has, after FDR, the toughest set of circumstances facing him versus any other President.  Nevertheless, he has a 69% approval rating.  Given the difficult choices he'll have to make, he's bound to disappoint a good number of these people.

If you read his speech, you'll notice it to be relatively somber for a President coming in on such a wave of support.  And I think that's wise.  One of the biggest challenges for any leader is to manage expectations.

During good times, it's very easy to get overly optimistic.  And, during bad times, teams can get overly pessimistic.  A good leader can find the right balance to keep the team challenged and keep the company on a 'high-achievement' posture.

It's easy to understand the problems that can happen to when a management team gets overly optimistic.  This is very common among entrepreneurs as they tend to be optimists by nature.  Entrepreneurs visualize how to solve big problems and can't be deterred by the problems and issues.  Those 'why nots' are why other people haven't tried yet.  But, overly optimistic projections lead to disappointed investors and a lack of confidence in a team's ability to execute, even if they have actually done a great job.

However, sandbagging and setting low targets doesn't work either.  Whether through caution or pessimism, overly low expectations tends to lead to low achievement.  High jumpers don't clear the bar by feet, even if the bar is set low.  People tend to beat their targets, but it's hard to get a company to obliterate their targets.  And, the company's spending level tends to be set with an eye toward expected achievement.  If a company sets a $10M revenue goal, they'll spend commensurate with that.  However, if they could achieve $25M with the right plan, they won't have a chance of doing that with a spending plan that contemplated $10M in revenues.

The right balance that an executive should set is to 'under promise and over deliver'.  Targets should be set high enough to be challenging for the team, but not so high that they can't be met even with superhuman effort.  That's one reason why a CEO needs experience.  Without seeing this goal setting done well and poorly, a CEO won't have the ability to set the right goals for the organization.  And, if the expectations aren't set and managed well, the company is doomed to under deliver.

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