Good strategy must focus on tradeoffs, not just goals
1/5/2025 ☼ strategy ☼ goals ☼ tradeoffs ☼ uncertainty
This is #4 in a series on seven tensions that lead to common misunderstandings about strategy.
Good strategy must focus on tradeoffs, not just goals.
Conventional goal-setting is self-defeating. I’ve observed the same pattern consistently across startups, established businesses, government agencies, NGOs, and not-for-profits I’ve worked with. The organisation invests in extensive goal-setting processes … but their teams and leaders end up working at cross purposes to each other, even when they have the best intentions.
This happens because conventional goal-setting focuses only on setting shared goals, and glides right over the difficult but essential step in which organisational units discuss and agree on what tradeoffs (desirable outcomes which can be sacrificed) each unit must make to achieve their shared goals.
Conventional goal-setting creates false agreement about goals, which makes the organisation unnecessarily inefficient and ineffective. Focusing on tradeoffs is the only way I know of to fix this problem.1
False agreement about goals is profoundly costly
When I worked at Google 20 years ago, one of my side jobs was to align Objectives and Key Results (OKRs) across the whole Product Team. Despite spending entire quarters on OKR development and alignment, the results were predictably bad: By year’s end, different product teams found that they’d been working at cross purposes. Sometimes, within teams, teammates conflicted with each other.
Agreeing on shared goals but not on shared tradeoffs creates a devastating but hidden cost. Teams can’t act autonomously and effectively. Projects unexpectedly collide. Work needs to be undone and redone. Plans must be corrected mid-stream. Targets are missed because initiatives conflict.
The organisation needlessly underperforms, and this erodes trust.
Blame conventional goal-setting, which focuses only on goals
The conventional (= instinctive, default) approach to goal-setting focuses on getting to agreement about desired outcomes. OKR processes are one flavour of conventional goal-setting.
Organizations spend a lot of time writing and discussing mission statements and goal statements, then agreeing on how to articulate them in a way that everyone agrees on. The process omits serious discussions about what acceptable and unacceptable sacrifices are required to achieve these shared goals.
The result? Huge investments of time and effort in aligning internally on outcomes, followed by stakeholders inevitably choosing actions that make sense for their areas … but conflict with actions taken elsewhere in the organization.
Solve the problem with tradeoffs, which reveal what goals hide
Consider the case of “PrintCo,” a business selling precision printing hardware. Despite agreeing to increase revenues and profitability, the Chief Sales Officer (Sandra) and Chief Product Officer (Petra) end up pursuing contradictory strategies.
Sandra focuses on selling established PrintCo products with clearly understood value propositions for a set of well-validated prospective clients. The tradeoff she is willing to make: Allocating minimal sales resources to do pre-sales on new products PrintCo is planning to launch.
Petra, on the other hand, concentrates on launching a new printer line using environmentally friendly ink technology. Her tradeoff: Allocating minimal product team resource to software updates that improve existing installed PrintCo products.
The result? Sandra’s team built a strong pipeline but closed few deals because competitors released superior software updates (because PrintCo’s product team was fully occupied with launching the new printer and did not focus on upgrading their installed customer base). Petra’s team launched the new printer but it found few buyers without sales support (because PrintCo’s sales team was working hard on trying to sell the existing line of printers).
Both strategies were sensible ways for Sandra and Petra to achieve their shared goals of trying to increase PrintCo’s overall revenue and profitability — but only when the sales and product teams are considered as teams in isolation. In PrintCo’s overall context, Sandra and Petra’s failure to talk about and align their acceptable tradeoffs doomed both their initiatives.
Resource constraints make tradeoffs inevitable
The inescapable reality is that organisational resources (like time, effort, attention, money, and reputation) are always limited. When resources are limited, we can’t do everything we want to do — we must therefore choose to do some things and not others.
Taking action with limited resources means making tradeoffs: Being ready to sacrifice some desirable outcomes to achieve outcomes that are even more valuable and desirable.
The key here is that tradeoffs must be desirable outcomes in themselves; this is what makes talking about and deciding on tradeoffs both difficult and essential.
Making tradeoffs is the only way to focus on doing a small number of things well instead of trying to do everything and doing it badly. In a world of limited resources, it’s a fatal error to not discuss tradeoffs when setting goals.
Different tradeoff patterns lead to different actions
The pattern of tradeoffs you are (or aren’t) willing to make determines which actions you choose to achieve your goals. People with different tradeoffs take different actions even when pursuing identical goals.
This isn’t a problem when acting alone — but it becomes disastrous in organizations where one team’s actions affect other teams’ work and success. Without collective agreement on tradeoffs, organizational components will work at cross-purposes despite aligning on shared goals.
Coordinated autonomous action demands agreement on tradeoffs
Organizations using conventional goal-setting agree on shared goals but not on acceptable sacrifices.
This means that stakeholders with autonomy naturally choose different tradeoffs while pursuing identical goals. This happens because organizational units have different resources, face different constraints and, crucially, often embody different values. Driven by different tradeoffs, units take contradictory actions, even with the best intentions.
Talking about tradeoffs reveals hidden differences in situations and values
All goals are desirable and thus relatively easy to for units to agree on; their information value is relatively low. But when a unit leader talks explicitly about their tradeoffs, the information value is extremely high:
- Talking about tradeoffs reveals the stakeholder’s resource situation more completely than just talking about goals. A Chief Product Officer who has a lot of budget but no reliable engineers will accept different tradeoffs from one who has lots of engineers and no free budget.
- Talking about tradeoffs reveals the stakeholder’s values more clearly than just talking about goals. A Chief Innovation Officer who is committed to deep basic research that can only pay off in the long term will accept different tradeoffs from one who is focused mainly on launching a successful new product within their first year in the position.
Different tradeoff patterns emerge from different values and different resources/constraints. Talking about tradeoffs reveals this usually hidden information quickly and effectively to other units, giving each unit enough information to be able to work interdependently with other units without unintentionally colliding.
This is because units that know what outcomes can (or cannot) be sacrificed are able to operate independently while maintaining alignment with each other.
The result is units and organisations that are more efficient and more interdependently effective — without needing micromanagement.
The path forward
Confronting tradeoffs is challenging but essential. Avoiding them doesn’t eliminate tradeoffs — it merely pushes conflict into your execution phase when problems are most damaging.
Effective strategy demands more than goal agreement. It requires explicit consensus on what each unit in the organisation will sacrifice. Only then can the organisation align actions while preserving unit autonomy.
When did your leadership team last discuss not just organisation-level shared goals, but also what their units must sacrifice to get there?
Get in touch if you’d like to chat about a structured workshop designed to help leadership teams discuss and agree on strategic tradeoffs.
I’ve been working on tools for learning how to turn discomfort into something productive. idk is the first of these tools.
And I’ve spent the last 15 years investigating how organisations can design themselves to be good at working in uncertainty by clearly distinguishing it from risk.
Strategy researchers across a wide range of management traditions write about the importance of tradeoffs in making good strategy — Michael Porter, Roger Martin, Henry Mintzberg, and Richard Rumelt are some of the more prominent. But the practice of strategy (even in business schools) rarely takes seriously the practical question: “What concrete steps can you take to make conversations about tradeoffs operationally useful in an organisation?” I have an answer for that.↩︎