January is when owners and managers of businesses often finalize their operating goals for the remainder of the year. Emotions, such as the well-known “irrational exuberance,” can interfere with establishing goals that are grounded in reality.

The Center for Applied Rationality (CFAR) offers research and guidance meant to help people make decisions that are driven by reason rather than feelings. One of the mental exercises suggested by CFAR for formulating credible goals is referred to by the oxymoron “pre-hindsight.”

Suppose that during January 2014 the general manager of a commercial horse farm, Sara, sets a goal of increasing farm revenues for the year by 10%. The pre-hindsight technique initially requires her to project late into 2014 and to imagine that the goal has not been attained.

Sara then must articulate how surprised she is over this disappointing outcome; the less surprised she is about the hypothetical failure, the more likely it is that the goal will not be accomplished. A low level of surprise means that she harbors strong reservations to begin with about one or more underlying assumptions or potential weaknesses in the action plan.

Sara says she is not very surprised. She subsequently explains the reasons why, such as the money she has allocated for sales and marketing is insufficient to attract enough clients whose yearlings need to be readied for auction; or her outlook for economic conditions in the bloodstock market is too sanguine. Once Sara’s concerns are identified, she, for example, might budget more funds for advertising and personal selling or cut prices–or her overly ambitious goals may need to be adjusted.

Goals should be recorded so they can be revisited, absent memory bias, and checked for realism. Quantitative goals are best in that progress in achieving them can be measured. Recorded measurable goals are more likely to get done.

Copyright © 2014 Blood-Horse Publications. Used with permission.

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