Running a business without any goal is a futile endeavor. But how do you set goals for your company? What are the so-called SMART goals? Which approach should you avoid at any cost and why is it a good idea to share the goals with your employees?
Company goals are an inevitable part of your business strategy
If you don´t know where you´re headed, you will probably never get there – that is why a well-defined set of targets should be an essential part of your business strategy. It provides direction, motivation, and a way to measure success. What´s more, it ensures that everybody in the company knows their part and the management gains tools for a more efficient organization.
What does a solid business goal look like? It should not simply state that you want to increase profit or optimize costs. Your targets should be designed in a SMART way.
What are the SMART criteria?
SMART is an acronym for the rules of designing your company goals. They should be:
Let´s see what it actually means.
Specific company goals
Your company goals should be defined explicitly. The more precise, the better. It will help you avoid unnecessary misunderstandings and create a definite idea of what is to be achieved.
Measurable company goals
You should be able to measure the progress. That´s why it is best to use a numerical scale (e.g. percentage) that provides information about the completion level of your goals. Say you want to increase the brand awareness level and you set your goal vaguely. You end up not being able to evaluate the progress because the way you defined your target is not measurable.
Accepted company goals
Your goals must be understood and accepted by all employees.
Realistic company goals
Setting business goals that are not rational is counterproductive. The company target must correspond with the actual situation, your budget, capacity, and skills – make sure you have all the resources you need to fulfill it.
Time-framed company goals
Each target should have a set deadline, otherwise, you might find yourself in a situation where your goals turn out to be immeasurable or constantly postponed.
SMART goals: how NOT to do it
Take a look at our examples of what your goals shouldn´t look like:
- Cut down costs
- Boost Facebook communication
- International expansion
- Improve employee qualification
SMART goals: how to do it
Now let´s have a look at the same goals, this time defined according to the SMART method:
- In 2020 cut down production costs by 10%
- By the end of 2021, boost Facebook engagement by 20%
- Open at least 1 branch in the UK by July 2024
- Have an hour-long training session with employees first Friday of each month
Can companies have more than one business goal?
What is the optimal number for company goals? Sometimes, it might be preferable to define just one main company goal and work towards it, especially when you´re at the beginning of your business journey. However, in most cases, you will find it most suitable to define approximately 4 primary targets and a couple of secondary ones.
- Primary or main business objectives are the most important goals you want to reach.
- Partial objectives tend to be more specific and outline the way to fulfill your company´s primary goals. If your main target is “gaining 2000 fans for your Facebook page by the end of January”, a partial objective might be “adding at least one post per day” or “boost post reach by 20%”.
Long-term vs. short-term business goals
Each company has both its long- and short-term goals. Short-term goals are those scheduled to be fulfilled within a year and carried out by the middle management level. If your objective is to be realized over a scope of time longer than one year, it is considered a long-term objective and executed by top management. Some experts even talk about medium-term objectives which are set for one- to five-year period.
The classification is therefore following:
- Short-term business objectives: less than one year
- Medium-term business objectives: one to five years
- Long-term business objectives: over five years
The primary goals tend to be long-term, whereas the partial goals usually fall within the short-term category.
The business goals must not be contradictory
If you are setting more than one business objective, they must be consistent. You should not decide to reduce the cost of material and at the same time increase the quality of products. This would possibly not only work against your competition but against your own business as well. This problem is encountered usually in companies where departments don´t work together when setting goals.
Choose one person from your organization that would take charge of coordinating and supervising the goals of all your departments so that they complement each other.
What are the alternative goals of the company?
You might have heard about the alternative business objectives. What are they? Alternative business goals are an economic theory term based on the assumption that the main business objective does not necessarily need to be focused on gaining the maximum possible profit, but also on:
- Achieving a satisfactory profit
- Gaining a certain market share
- Long-term survival
- Business growth and expansion
Practical tip: strategic business goals according to Balanced Scorecard (BSC)
The Balanced Scorecard is a method that helps you decide on your company´s strategic goals. Most businesses focus purely on profit or other financial indicators, however, BSC says that the company´s strategy, and therefore its goals, should be symmetrical. You should therefore define four different goals, one from each of the following areas:
- Internal business process
- Training and growth
What do these areas represent and which goals fall under them?
Strategic business goals: Finance
First of the goals should cover the area of financial indicators. It may concern costs, profit, or turnover. An example of such a goal is:
“Reach the annual turnover of 50 mil CZK by the end of 2025.”
Strategic business goals: Customers
Another area of strategic business goals is its customers. You can focus on their satisfaction, retention rate, number of new customers, or gained market share. A target from this category can look like this:
“In the first half of 2021 increase, the customer retention rate by 5% compared to the second half of 2020.”
Strategic business goals: Internal and business processes
The company´s processes also fall into the strategic target category. They can include production, marketing, or relationship with suppliers. Here´s an example:
“During August, reduce the time necessary for the production of a particular component by 5 seconds.”
Strategic business goals: Training and growth
This label covers the whole human resources area, including targets for employee qualification, team communication, or company culture. A company culture from this area can be:
“By the end of 2021, increase the percentage of university graduates by 10%.”
Make sure to include business goals from each of the four categories and help your company grow and develop in a steady manner.
Introduce your employees to the company goals
When employees understand why they are supposed to do certain tasks, their motivation and effort increase significantly. That is why it is not enough to announce a monthly target and tie their pay to the results. Your staff should know their work matters. Explain your company goals and the role each employee plays in achieving them.
Company goals need to be frequently evaluated
Lots of companies manage to set their goals but not all of them actually review the results. To ensure that you won´t forget or postpone the evaluation, set a periodical date for the assessment and stick to it.
Pro tip: Try evaluating the results at the beginning of each new month and use the conclusions to define new goals.
Take charge of your business: let us create a tailor-made strategy for you
Are you struggling with setting the right goals? Not achieving the results you aim for and unsure why? Or are you just at the beginning of your business journey and don´t know how to get started?
Contact us – we will design a bulletproof business strategy for you, help you set goals, and give direction to your business journey. How does it work?
We provide an assessment and help you set the strategic business goals that are right for you, as well as steps towards achieving them. We optimize the business strategy periodically so that it goes hand in hand with your current needs and requirements. We agree on the price beforehand. We are a professional team and create results-oriented business strategies.