Goal-setting may seem like one of the simpler elements of a successful business strategy, but the reality of defining these objectives is much trickier. It goes way beyond ‘make money’ and ‘do your best’ (although it’s hard to find a business that doesn’t aspire to do both of these). There’s an art to goal-setting that, if done well, can have a tremendous impact on the future of your business. If done badly can be demotivating and even destructive.
Effective goal-setting is surprisingly easy to get wrong. A study published early last year of companies found half of managers don’t set effective employee goals.
So how do you avoid going down this path and set meaningful goals that will grow your small business? Here are some of the biggest pitfalls to watch out for.
1) Being too vague
According to psychologist Dr Edwin Locke, the pioneer of goal-setting theory, in order for goals to truly be effective, they need to challenge, motivate and incentivise. His research has been used to guide and build some of the world’s biggest billion-dollar companies, but no matter what size your business, the basic principles are the same. Goals must be very clearly defined from the outset and be deadline-driven to inspire employees to achieve them (even if you’re the only employee).
A simple but effective approach for goal-setting is the SMART framework, which calls for all objectives to be Specific, Measurable, Achievable, Relevant (i.e. your employees should know how they can affect their goals) and Time-based.
2) Setting goals based on wants, not facts
Sitting down to set your business goals before the financial year starts can be a daunting and time-consuming process. And because many businesses begin their goal-setting while they’re still focused on hitting the targets they set the previous year, it can be tempting not to give them the attention they deserve.
To create truly SMART goals requires number-crunching based on existing figures and business performance, then forecasting growth that is challenging but achievable.
It’s also worth doing your research on your market and customers. There’s no point in forecasting 50 per cent growth if you know the market for your product is getting saturated and you have new competition moving in. It’s important to base goals on facts and real-life data rather than what you want to happen. There’s nothing worse for your own and your team’s morale than spending an entire FY chasing a goal that’s impossible to achieve.
3) Taking a short-termist view
If your strategy for achieving a particular goal is ‘charge customers more’, you need to think about whether this will benefit your business in the long term. Chances are it’s the quickest way to kill your customer base.
Your customers should always come first. When looking at each individual goal, ask yourself honestly if it could have a detrimental effect on customer satisfaction. Goals that help grow your business not just this financial year but the next (and the next!) tend to focus on making your product or service better while increasing its appeal to more people.
Amazon founder Jeff Bezos had it right when he said: “There are two kinds of companies: those that work to try to charge more and those that work to charge less. We will be the second.” His long-term view has made him one of the richest men on the planet.
4) You’re too ambitious
While playing it safe with goals too easy to achieve doesn’t give your business or your staff the motivation to strive for even greater success, being too aggressive with your targets could be even more problematic.
One of the most famous and disastrous examples of goal-setting gone too far is the Enron scandal of 2001. According to a report, Goals Gone Wild, published by Harvard Business School experts, the energy-trading giant’s collapse was driven in part by its incentives and substantial revenue target. These goals rewarded its sales people purely on volume of sales, not on the quality or stability of the deals they were involved in. And the effects of this had catastrophic consequences.
It’s vital to set targets that provide a challenge, but they shouldn’t result in employees engaging in risky or careless behaviour to achieve them. The damage to your business by over-stretching to hit an unrealistic goal could be major.
5) Not prioritising what’s important
When it comes to the number of goals you set, less is definitely more. It can be easy to outline a long list of objectives you want to achieve in a given time period, but if you try to tackle them all at once, you’re setting yourself and your team up for failure.
The authors of the Goals Gone Wild report found employees are unable to focus on too many goals at a time, and when faced with multiple objectives they are likely to commit to just one of them.
It’s your job to set the priorities. Start by asking yourself, ‘if the business could achieve only one thing, what would it be?’ and work from there. If you end up with three key goals, that’s fine. If you have more than five, you’re venturing into ‘too many targets’ territory.
6) Not communicating goals effectively
So you’ve set your goals, you followed the SMART principles and you’re ready to give the them to your team. But when you do, your employees aren’t as enthusiastic as you’d hoped. Sound familiar? Failure to get buy-in could render all your goal-setting work useless. The secret to getting your team to commit to your objectives and get excited about achieving them lies in the communication.
When should you start communicating your goals? Often before they’re even set. Employees are more likely to respond well to their key objectives when they’ve had a hand in setting them. They’ll be able to flag if a target seems too unrealistic, and will be more likely to take ownership of the outcome.
It’s also important to give the goals context. Explain what your company hopes to achieve, what the positive benefits will be if objectives are met, and how valuable each person’s individual contribution is.
7) Not tracking your goals
The most important step after setting your goals is tracking them. Miss this out or set goals that can’t easily be tracked and your objectives are redundant. The good news is it’s pretty easy to create a regular process for monitoring performance versus targets. All it takes is a basic spreadsheet to get started.
Ideally, you should produce reports monthly, quarterly and annually. This not only helps identify if performance is way off track and enables you to do some course correction, but it also serves as continual motivation throughout the year. If you have employees, make them part of the reporting process and encourage them to check their stats regularly. It will make them more accountable for their performance.
8) Focusing only on ‘show me the money’ goals
When you’re a small business reaching for the stars it can be easy to get tunnel-vision when it comes to the bottom line. But if you’re in this for the long haul (which of course you are!), then you should have one eye on your profit and another on your product. A secure business is one that strives to continually evolve, improve and diversify its offering.
As Google’s Larry Page puts it: “If we were motivated by money, we would have sold the company a long time ago and ended up on a beach.”
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