How to set meaningful business goals
This article appears in the Sep/Oct 2014 issue of Business Franchise Australia & New Zealand
All successful businesses need to develop and utilise a goal driven mentality in their daily activity.
Goals should focus the mind and the activity of all employees from the CEO to the newest apprentice and everyone in between.
Studies have shown a strong relationship between successful businesses and an effective goal setting process. Business owners and managers are then able to empower their workforce and ensure everyone is working towards the same objectives.
Successful businesses will have short term (less than 12 months) and longer term goals (say 1 - 5 years) for a number of key objectives. These can include increase sales volumes; improve overhead efficiency; raise gross margins; build customer service levels etc.
The key to meaningful goal setting is to set ‘SMART’ goals that align with the purpose of the business. Strong alignment with purpose allows for a more effective execution of the business strategy by enabling business management to allocate and prioritise limited resources across various objectives.
S.M.A.R.T. is an acronym for the five characteristics of:
It’s a simple tool used by businesses for an actionable plan for results.
CONSIDER EACH OF THESE ATTRIBUTES IN DETAIL:
To be meaningful business goals need to be specific.
Specific means goals are described in as much detail as possible. That is, what the business wants to achieve or accomplish and to what extent.
Specific goals should be simply written, understandable and clearly defined. They need to have the ability to be communicated to everyone involved in its achievement. Well-defined and specific goals answer the questions: “Which?”, “Who?”, “What?”, “Where?”, “When?” and “Why?”
To be meaningful business goals need to be measurable.
This means tangible evidence that the goal has been achieved is available.
To determine if a goal is measurable consider, “How will I know when it has been accomplished?” and “What methods of measurement are available to use?”
It is important to be able to track progress and measure outcomes because ‘what gets measured gets managed’. When progress is regularly measured changes can be made to ensure the business stays on track to reach its targets.
To be meaningful business goals need to be achievable.
This does not mean goals should be easy. Far from it, as goals should stretch a business so owners and employees feel challenged in achieving them. It is essential to have the appropriate knowledge, skills, abilities and desire to achieve the goal.
Consider what results can be realistically achieved, given the available resources. Ask yourself, “Can this really happen?” An achievable goal should also allow for some flexibility. A goal that can no longer be achieved should be refined or abandoned. This is not a soft option as business goals are based on current conditions and realities at the time. For example, there may be a desire to increase sales by 25 per cent but if a recession is looming or a natural disaster occurs then the goals may not be achievable in the current market conditions.
To be meaningful business goals need to be relevant.
Relevant means goals that move the business forward, towards the achievement of its vision and does not conflict with other business goals. In times of rapid change it can be very easy to lose sight of the goals. It is important for short-term goals to be relevant and consistent with the longer term and broader organisational goals in the business.
To be meaningful business goals need to be time bound.
This is necessary to create a sense of urgency. Tension needs to be created between the current reality and the vision of the goal. Without tension the goal is less likely to produce the desired outcome. Meaningful business goals have a start and end point. They will also have some intermediate or milestone points at which progress can be assessed and reviewed. Limiting time in which a goal must be accomplished helps to focus effort towards its achievement.
By using the SMART methodology for goal setting in a business there is a greater chance of successful achievement of business goals. By addressing the attributes of Specific, Measurable, Achievable, Relevant and Time- Bound as the goals are being set they become more robust and effective tools to support the long term vision and desired outcomes.
Additional free information is available at Westpac’s Davidson Institute, see website located at https://www.davidsoninstitute.edu.au.
Steve Seddon is Westpac’s Senior Business Development Manager – Franchising, WA and SA. He is a CPA and a member of the Franchise Council of Australia’s WA committee.
Westpac continues a long-term commitment to the franchise sector in Australia. The bank has a national network of franchise specialist business bankers who are able to deal with the specific needs of the franchise sector.
Contact Steve at:
P: 0407 401 892