Performance management can effectively boost employees' work motivation and greatly contribute to the development of a company. This article, referencing Alibaba's performance management practices, analyzes the factors that need to be considered for effective performance management. Let’s explore the author's insights.
Whether it’s OKR or KPI, setting performance goals is crucial.
In any company, every employee needs performance goals. Performance goals provide motivation and direction.
However, setting performance goals is a highly important and challenging task. Many companies understand the significance of goals but struggle to establish good ones.
Alibaba places great emphasis on performance management and has developed its unique management methods for setting performance goals. In this article, we’ll discuss Alibaba’s experience and methods in goal setting.
I. Three Common Problems When Setting Goals
Many companies face various challenges when setting performance goals, such as goals not being clear, having too many goals without focus, and difficulty in establishing measurable standards.
Unclear GoalsMany companies struggle to set clear and specific goals, which results in employees not understanding their responsibilities or direction and simply following their supervisors' instructions blindly.
This is detrimental to both the company and the employees.
We recommend that companies follow the SMART principle to set clear goals.
These goals should be Specific, Measurable, Achievable, Relevant, and Time-bound.
Only by doing this can companies truly implement effective performance evaluations, motivate employees to realize their potential, and promote long-term business growth.
Too Many Goals, No FocusIn some companies, too many goals are set for employees. For example, one of our clients set 15 evaluation metrics for each employee, each with a weight of around 5%.
Imagine if this were you—would you be able to focus on what's important during performance execution?
Having too many goals creates significant pressure, leaving employees overwhelmed and unsure where to start. It may lead them to speculate on what their leaders truly want, causing unnecessary internal friction.
Setting fewer but more meaningful goals is more conducive to employees completing their tasks efficiently.
Difficulty in Setting Measurable StandardsMany companies find it challenging to establish measurable standards when setting performance goals. This leads to employees having no clear idea of what the performance standards are or the direction of their goals. They may end up just watching their bosses for cues. Is this what companies really want?
When establishing performance evaluation standards, the measurement range should be clearly defined. These standards should include baseline values, ideal values, and challenge values.
This ensures that performance evaluation is based on clear criteria, allowing employees to better understand their goals and reducing internal friction caused by favoritism or personal connections.
II. Where Do Goals Come From?
Performance goals should be based on a company’s mission and vision. The mission and vision represent the company’s abstract ideas that guide it toward its value objectives.
By deeply understanding the company's mission and vision, a rational performance goal system can be created and used to formulate employees' personal goals.
Goals Stem from the Mission and VisionThe company's mission is its fundamental reason for existence, and performance goals should be closely aligned with this mission.
For example, Alibaba's founder, Jack Ma, proposed that the mission of Alibaba is "to make it easy to do business anywhere." When setting performance goals, consideration should be given to how to help employees achieve this mission while fostering employee-company alignment.
The company's vision represents its strategic direction and long-term goals, and performance goals should be the concrete steps and roadmap to achieve this vision.
For example, Alibaba’s "globalization, digitization, platformization" strategy is the company’s long-term vision. Performance goals should align with this vision.
The Alipay Case StudyIn 2012, Alipay set a goal: to reach 200 million active users, with each user using the app three times per month.
This goal was clear and easy to understand, allowing the entire company to work towards it.
Where did this goal come from?
The goal stemmed from Alipay’s 2011 strategic objective: to build 20 wireless payment cities within five years. This strategic goal aimed to provide more users with convenient financial payment services.
Where did this strategic goal come from?
It originated from Alipay’s vision. Alipay’s vision is to become the world's largest third-party payment platform. To achieve this vision, corresponding strategic goals were set to guide the company’s annual business plans.
And where does the vision come from?
Alipay’s vision is built on its mission: "to continuously bring small yet beautiful changes to the world, allowing people to enjoy equal and convenient financial services, continuously improving lives and making the world a better place."
The vision, strategy, and business plans are all designed to serve this mission.
Therefore, a good goal is derived from the mission and vision. Only this way can goals be clear and help motivate employees across the company with confidence and energy.
III. Three Elements of a Good Goal System
A good performance goal system should consider three key elements: alignment, clarity, and balance.
Alignment: Top-Down and Cross-FunctionalA good performance goal should cascade from the leadership down to the grassroots level, ensuring coherence and mutual support throughout the organization.
Additionally, during goal setting, companies should consider the influence of clients and the market. There should be regular goal alignment between different levels and functions.
What is cross-functional alignment?
It involves sharing individual goals within the team to create transparency and mutual supervision.
This approach has three benefits:
First, it fosters a challenging environment where employees adjust their goal difficulty level after seeing others' ambitious targets.
Second, it keeps employees constantly aware of their objectives, helping them plan time and work tasks effectively.
Third, it encourages collaboration and resource sharing across departments, enhancing team and collective interests.
Clarity and MeasurabilityA good goal must be clear, specific, and measurable.
For example, after Alibaba achieved breakeven in 2002, it set ambitious goals for 2003-2005: daily revenue of 1 million yuan, daily profit of 1 million yuan, and daily tax contributions of 1 million yuan.
These goals were clear, measurable, and allowed employees to focus their efforts.
Balanced ApproachA good goal should not only focus on quick completion but should also account for quality, time, and cost.
For example, in recruitment, goal effectiveness can be measured by:
Quantity: Recruiting 30 people, with a focus on goal achievement rates.
Quality: Employee satisfaction from the hiring departments and conversion rates.
Speed: Recruitment completion times and average recruitment duration.
Cost: Recruitment event expenses and per capita recruitment cost.
IV. Five Key Elements for Communicating Goals with Employees
When setting performance goals, deep communication with employees is essential to ensure mutual understanding, agreement, and successful implementation.
Here are five key elements for effective goal communication with employees:
What is the Goal?
Companies should clearly explain the goal to employees, specifying targets like sales figures, channels, and client numbers.Why This Goal?
Companies should clarify the reasons and background for the goal, helping employees understand the logic behind the target.How to Achieve the Goal?
Companies should provide strategies and pathways to achieve the goal, ensuring employees know how to work towards it.Achieving Consensus
Companies need to engage in deep discussions with employees, sharing perspectives and coordinating needs to reach a consensus.Boosting Expectation and Motivation
Companies should publicly announce performance standards and rewards, encouraging employees to go beyond expectations and feel motivated.
Setting performance goals is a crucial task within any company.
Today, we discussed Alibaba’s performance management approach, the three common challenges when setting goals, where goals come from, the three key elements of a good goal system, and the five key elements for communicating goals with employees.
We hope this helps companies set better goals and improve performance management, laying a solid foundation for growth and development.
