Table of Contents
- Common Goal-Setting Problems
- Setting Goals For Your Business Plan
- Goal-Setting Best Practices
- 5 Key Points for Goal Setting
- Using Pareto Analysis
- Setting Short-Term Business Goals
- Setting Long-Term Business Goals
- How to Motivate Your Team
- Goal Setting for Small Businesses
Common Goal-Setting Problems
So, you're trying to set some business goals. Great! However, business goals aren't really that easy to achieve. Many of these goals are not achieved in full or fail entirely. There's obviously a reason why, so, what is it? Most problems with setting business goals DON'T emerge based on the methodology that you use for goal setting. Instead, problems arise with everyone's overall attitude towards work goals as a whole.
Your Goals Exist Only in Your Head
So, here's your first problem. If your goals are only in your head, it's not the same as establishing a goal at all. You have to make a commitment to your goals. To do this, you really have to write them down. In addition, you can't set and forget your goals. You have to make sure that you're making progress on the goals you set every week.
To demonstrate just how important writing down your goals is, psychologist Dr. Gail Matthews of the Dominican University in California conducted a goal-setting study. Her results confirmed that you are 42% more likely to achieve your goals by writing them down on a regular basis.
So, hey! There's science to back up the reasons you're giving up your New Year's resolutions after only a week! This also applies to those big, company Objectives that never seem to happen.
That being said, writing down your goals is only a first step. Even if you have the best-written goals ever, they won't really mean much unless everyone in the organization or team is also down with them. You know, because communication is important and getting everyone on the same page and working towards a common goal isn't the easiest thing to accomplish.
Your clear idea only means so much if no one else understands it or values it the same way you do. So, our main objective is to help you create goals everyone can understand.
Your Goals are Vague
You have an idea and you've written it down. Great! Good start. But the next step you need to remember is that dreams are not the same as realistic goals. If you truly want to succeed, your written goals need to be specific, focused, and have a set deadline. If you don't follow these three criteria, it's very easy to ignore your goals entirely or procrastinate on them until they're no longer achievable.
Tim Ferris has a phrase for this in his book, Tribe of Mentors: "Life punishes the vague and rewards the specific." That should be the first motivational phrase you print out over a stock photo of an eagle when setting up your office.
There are several strategies to double-check your goals as well. One of the most popular is the SMART goal setting model.
SMART stands for:
Your Goals are Unrealistic
Having incredible ambition is a great thing. That being said, having incredible ambition towards something that is physically impossible ends in nothing being accomplished at all. Wishing for immortality is wasted ambition, since going to find the Fountain of Youth is a fool's game. You waste your time and everyone else's by shooting for the unachievable.
Many goal-setting methodologies encourage you to set lofty goals, but you need to make sure that progress can actually be made towards them.
Ambitious and unrealistic are two different words for a reason.
You Don't Measure Your Progress Regularly
This was touched on before, but it's so important, it needs an entire section dedicated to it. You need to make sure that you measure your goals regularly. One of the easiest ways to keep track of your progress is to use a weekly tool that reminds you and communicates what you're doing to everyone else. This is called weekly reporting, and it's one of the best options at your disposal to make sure you never forget and abandon your goals.
If most of your weekly tasks look like they're really helping in the short run, but don't link up to long-term goals, then the question arises: why are you doing so many of those tasks? By focusing on what really matters in the day-to-day work that you do, you can think in the long term instead of the short term all the time.
Setting Goals For Your Business Plan
This may sound a little straightforward, but please make sure that your goals are relevant to your business plan. You'll need to do that for sure if you want to seek outside financing. Just double-check that your business plan and current company goals are aligned.
What Business Goals Should You Focus On?
Let's do a little exercise first and foremost. Think about your organization. Just how many Objectives does that organization have at the moment? More often than not, the number is going to be higher than it should be. Doing too many things at once and spreading yourself too thin is a cultural thing that really needs to change. Again, it's about keeping ambition in check and remembering that you, and your team, are not superhuman.
So, when you want to focus, avoid goals like "successfully launching all new products in the next two quarters" or "marketing should write a new article on every single content theme available." No one benefits when you don't focus.
That being said, knowing which goals are the most important is not easy. You might not know what you want to focus on and, honestly, the best advice I can think of is that it's better to accidentally focus on the wrong things and learn from it for the next quarter than waste an entire year trying to do everything at once.
Another big thing is to structure your Objectives on multiple levels. For example, organization, department, team, and individual. That way, goals can be connected to each other and apply to various departments while still landing in that sweet spot of only have 1-3 goals per person.
The 80/20 Principle
One of the easiest ways to think about the importance of focusing is the 80/20 principle. This states that roughly 80% of the positive effects come from 20% of the work.
This comes from the mind of Richard Koch, author of the book the 80/20 Principle.
In his own words, "You have to isolate where you are really making the profits and, just as important, where you are losing money." Despite how obvious this may sound, Koch emphasizes that most people get this idea wrong.
Products, Customers, Competitors
So, let's move forward and use the 80/20 principle to analyze profits based on the different departments and teams within your organization.
Product: It makes quite a bit of sense to start with product. See what data you have about the product or product group. From there, go to your sale from the quarter prior and work out the profitability after allocating all costs. Your big question is if there's a product, or part of the product, that is creating the most profit.
Customers: Whether you're B2C or B2B, you should conduct the same analysis with your customers. The goal here is to look at the total purchases by each customer. You need to see if there are any customers that pay a higher price, but are also expensive to deal with. For example, you may have some large customers that really help bolster sales, but they may ask for a considerable bargain that ends up hurting you in the long run. The key is to find a pattern and to point out the strange components that don't fit into it.
Competitors: Your profitability is determined by your competitors just as much as the product and customers. When conducting an analysis, your first step will be to figure out if you have different competitors in one part of the business compared to the rest. Your big question when looking at your competitors is if there's an area where you get more profit with less effort than them. Focus on that.
Goal-Setting Best Practices
So, for the next section, we're going to focus on the best practices for goal-setting.
First things first, make sure to be aware of your own biases. Your own judgment and decision making processes may not always be as reliable as you think they are.
The Harvard Business Review has a few key ideas to improve your chances of overcoming your own biases.
Use pre-mortems: Also called prospective hindsight, pre-mortems help you identify potential problems that your own judgment may not even recognize. The purpose is to imagine a future failure and then explain the causes leading up to it instead of the other way around.
When coming up with a goal, you should ask what the possible failure are. What might cause these failures to happen?
Align goals: You need to make sure your goals are aligned throughout the organization. According to research conducted by WCW Partners, only ⅓ of managers create goals with employees. Involving your employees early on increases business communication and transparency throughout the organization.
Collaborate: Team collaboration on a goal gives us accountability for more than just ourselves. This is crucial when it comes to achieving a goal. Sharing responsibility also means that employees can worry less about their individual contribution, hopefully increasing their amount of focused work.
What Does Success Look Like as a Methodology?
We touched on SMART goals earlier, but there's another, unrelated methodology that can help you achieve goals in a different way. The Objectives and Key Results methodology, pride and joy of Google, helps maintain the accountability and focusing aspects of goal setting. In addition, OKRs offer a structure for you to follow on how to set business goals yourself.
We have plenty of materials on OKRs already, so you can consult those if it seems like a good strategy for you.
5 Key Points for Goal Setting
So, if you've gotten this far, you're probably already sold on the importance of goals in your organization. However, as a refresher, goals help you:
- Communicate future actions with everyone in the organization
- Engage and motivate employees
- Improve productivity and business performance
We'll now address step-by-step methods to improve your goals practically (not just theoretically):
1. Revisit Your Company Values, Mission, and Vision
Having a purpose is essential for your organization to survive and thrive. Make sure you know what your company's core beliefs are and the change you want to bring to your target audience. Ask yourself some key questions. Why do you do what you do? How can you do it? Where do you want to take your organization in five years? When you answer these questions, you should be reminded of what makes your company different from others. This, in turn, inspires your employees. This helps answer the question for you about how to set business goals for your company.
2. Review the Past and Visualize the Future
Remember that looking long-term is more beneficial than short-term. The quote that "success does not happen overnight" stays relevant for a reason. When looking to the future, make sure to make your decisions based on the data that you have.
When reviewing your departments, customers, and competitors, remember to review your business' performance as a whole the quarter or year prior. Using KPIs is a huge benefit when collecting quantitative data in this regard. Using whatever benchmark format you have, answer the following questions: Where did you exceed expectations? Where did you fall short? That way, you can see what drives success as well as areas for improvement.
In addition, make sure to look at the current market. This includes outside your niche. What are trends in the industry looking like for the coming year/quarter? How are your competitors performing (keep your competitor analysis up to date)? How does your company fit into the larger picture?
Another key point is to give employee feedback. Feedback improves business communication significantly and helps your organization be a bit more team-oriented. And, after all, your employees likely have many observations you may miss to help create a good strategy. In addition, asking for employee input shows that you care about their opinions and the work that they do, increasing overall company alignment and morale.
Then, decide on your long-term strategy. With the analysis you conducted, you can determine your approach to the next year/quarter and the priorities you should focus on. There are different analysis strategies you can use (like SWOT) to help you identify the opportunities and challenges that you may face.
3. Set Goals For Your Next Quarter
Once you've reviewed and analyzed your past, it's time to start making plans for the next quarter. You can see how to set business goals depending on your work culture and company size. To make sure your goals fit into your strategy, try to think in terms of the outcomes you would like to see happen and work backward from there.
We have to plug our own methodology, but again, Objectives and Key Results are an excellent way to structure your goals. They can help you put your goals in concrete and measurable terms so you know whether your work is actually leading to those aspirational goals of yours. That's where the Key Results come in.
You can set OKRs at the company, department, team, and personal level. From there, at the end of the quarter, you can evaluate your progress, look at successes, and set new OKRs all over again for the following quarter or year. Since Key Results serve as your measurable variable, you can look at them and see whether or not they were met in quantitative terms. If they weren't, it's easy to look for the reasons why and decide if you need to change or adjust them in the future.
4. Make Progress Toward Your Goals with Weekly Plans
We briefly mentioned the "set and forget" problem when talking about how important it is to write down your goals. We also emphasized the importance of weekly reporting to avoid this problem. We will state again just how important it is to review your goals on a regular basis. Try to think about what you can do to meet them weekly.
5. Value Your Employees' Efforts
Your employees will be more engaged and productive if they feel like their efforts 1: contribute to something larger and 2: feel that their efforts are being recognized. Try and discuss your goals in weekly meetings, or, if you don't have meetings regularly, use a tool where everyone can report how they're doing on their goals on a weekly basis. Make sure to give feedback and recognize good efforts regularly. Likewise, feedback should go both ways. Allow employees to let you know how you're doing as a manager or leader as well. That way, you can really understand how to set business goals that will leave a significant impact.
Everyone should know what the company goals are so they know what they have to do to work towards them. In addition, increased transparency helps everyone understand the impact their work is making.
Using Pareto Analysis
The Pareto analysis is a tool to improve performance on a mass level. The goal of the Pareto analysis is to increase productivity while decreasing your overall workload. The idea is to work smarter not harder so you can work less while accomplishing more. In addition, decreased workplace stress increases productivity and overall job happiness across the company.
So, what does the Pareto Analysis do? It's' a technique that focuses on choosing a small set of tasks that will have the greatest effect overall. Earlier, we talked about how 20% of tasks account for 80% of the total benefits. This is the main idea. It all comes down to focusing. By really honing into that 20% of work, then everyone is likely to get more done at a faster rate.
So, how do you implement Pareto Analysis?
A good place to start is with task managers and to-do lists. To put it simply, cut back. Having more than 5-7 items per week helps no one and is incredibly stressful. So, you know, reel it back if you have 30 tasks, buster! Try to hit that sweet spot of accomplishing 6 or so (or 20%) to move forward faster. Often, those less important tasks don't really amount to much.
That's the purpose of the Pareto analysis at its core. You need to select a small number of important tasks. These important tasks have the greatest impact on other areas of work. Keeping that laser focus makes sure your goals get done with little of the fluffy garbage. For proof of how this works, you can look at how Google sets goals. You're gonna start realizing that hyper-focusing on specific tasks will have a greater impact on the entire office.
Really, the benefits of focusing throughout the entire week not only help with production, but with that nasty little creature called procrastination. Increased production leads to better time management and time management is one of the most essential soft skills in the workplace. It only takes about 10 minutes of planning at the beginning of the week to determine what you are actually going to get done. And by focusing on these key elements through your weekly planning system, you can accomplish so much more though it looks like you're doing much less.
Setting Short-Term Business Goals
So, the big problem with setting business goals is that it is always a difficult process. This is especially true with getting started. Goals need to serve as your visionary road map for where you want to go. With short-term business goals, you need to figure this out very quickly and often on the go. Therefore, short-term business goals should be built from the bottom up based on the projects that are already in place.
The biggest thing to focus on is that your goals are clear, practical, and easy to understand. Short-term goals are employee-centric first and foremost.
Setting Long-Term Business Goals
Though short-term goals really help to keep your employees grounded, setting long-term goals is the most important task for leaders and managers. Long term business goals show where you're headed and, more importantly, the steps you need to take to get to that aspirational goal.
Map out the long-term strategy for your business. Try to think about where you want to take the company within the next 5 years. This is also where research comes in. Look at the market situation and the competition surrounding your industry. You can rely on planning methods like SWOT to better understand what you should do.
Setting Long Term Business Goals With OKRs
OKRs are one of the better strategies you can implement when setting long-term goals. Some of the main benefits of OKRs are:
- Always being able to know what's happening in your team with a focus on transparency. Basically, Objectives show you what is happening at every level of your company.
- Making informed decisions. OKRs help you see at a glance what things are working and what's not. These help you address some of the main problems with your loftier goals before they arise.
- Being able to FOCUS. Focusing is one of the most important elements of setting goals. OKRs really help you tune into this by letting you measure your Objectives through difficult Key Results and your weekly tasks and projects through weekly Plans. Being able to make steps towards your larger goals on a weekly basis means that no one gets side-tracked with busy work that doesn't really help anyone.
You can read more about OKRs and how to use them at objectives-key-results.com.
So, we're gonna provide you with some general goal examples for setting long-term business goals.
Company Goal: Research, analyze, and understand what our users and non-users really think
- Sale Team: conduct 50 phone interviews with key accounts
- Support Team: conduct 50 phone interviews with churned accounts.
- Product Management: interview 25 external team leaders (non-users).
- Design Team: conduct 30 web-based user testing sessions on new and old users.
Company Goal: Improve overall product and experience for both employees and customers
- Host internal brainstorm meeting: "How can we improve? Where are we not the best yet?"
- Benchmark everything related to our product against 10 key competitors.
- Survey 100 customers on their thoughts about where we need to improve.
- Create an action list of 10 company-wide improvement activities.
If you would like more OKR specific goal-setting examples, look to:
How to Motivate Your Team
So, you understand how to set goals for your company and have a great workplace strategy in order to do so. There's one little problem, however. Your team isn't nearly as excited as you are. After all, it's the beginning of a new quarter. I mean, view this from the other perspective for a second. Not too many people are going to be incredibly excited when you ask them to discuss next quarter's goals. So, how do you motivate your team?
It's definitely not by pouring on about last quarter's business results, using the word "growth" about 18 times in the first 5 minutes. And it's for sure not in a position where the manager already has all the personal goals decided for next quarter.
This not only kills motivation, it can straight up terrify people. Doing this really doesn't let anyone besides you understand where the goals come from, how they are to be achieved, or why those personal goals were chosen over others.
What Motivates People?
So, before we deal with what you can do to get everyone engaged about their goals, first, you should understand what motivates people in the first place.
Using these 3 factors, let's go into some greater detail:
Autonomy: If you're not focusing on the autonomy of everyone, then the goals you assign have probably been given without explaining how or why that specific goal is important. The individual didn't have a say in it. It could have been mentioned once that the company needs to grow in revenue x number of times, and therefore, the individual needs to do x amount more.
To explain why this doesn't work, we can look to well-known author and motivational speaker, Simon Sinek. Sinek states that "People don't buy what you do; they buy why you do it." Basically, an employee probably knows what they have to do. That being said, they may not know why it's important. Let people be involved in the process of coming up with their goals. After all, all the research interviewees from a 2006 study collected and published in 2016 emphasize that clear, two-way communication is integral to the goal-setting process.
Mastery: Giving ambitious goals helps people improve at their craft. But how do you do this? You may get lucky with independent individuals who genuinely enjoy the task of figuring out how to achieve goals. These people naturally fall into the autonomy category.
That being said, not all people are like this. As a leader, it is your job to let people know how to achieve their goals. Some guidelines, potential projects, or tactical ideas can really go a long way. Understanding how people should measure their performance helps them make sense of the goals they should achieve.
Purpose: Purpose goes hand-in-hand with autonomy. Generally, people want to know why their goals are important to their own development and the company's development. This is especially true considering the changing work world. With millennials making up most of the workforce, there are more and more people who really don't care if the only purpose of a goal is to get more growth. They need to understand more about how their accomplishments feed into other systems of success.
Goal Setting for Small Businesses
As a small business owner, you probably spend most of your time putting out fires. You might have not given much thought on planning for the future. That's why it's important to set goals and go back to them every so often, so you can make sure you're focusing on what's important. Here's a quick guide on setting goals for your business.
Step 1: Go Back to Your "Why"
Think beyond making a profit. What motivates you to do what you do? What is the purpose and mission of your company? What do you envision for your company's future?
Step 2: Benchmark Your Current Activities
You can make strategic decisions for your company based on objective data.
Metrics such as KPIs are useful for gauging business performance. Industry trends, competitors' activities, and employee feedback provide valuable information and insights as well. Then you can determine your strategic priorities.
Step 3: Write Goals for the Year and Quarter
You can then set annual and quarterly goals. To make sure that your goals complement your strategy, think in terms of outcomes you would like to see happen.
You can use the Objective and Key Results (OKR) system to structure your goals. It helps you put your goals in concrete and measurable terms, so you know whether your work is delivering the outcomes you desire.