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How To Create SMART Goals For Your Small Business

Posted by John Boudreau on Aug 26, 2017 1:35:04 PM

In this post on SMART goals for small business I would like to:

  • Give a little history of SMART goals
  • Define what SMART goals are
  • Make the case for why SMART goals are so important for your small business
  • Lastly, give you a template for ensuring the goals your set for your business are indeed SMART goals

I've seen many small businesses struggle with goal setting and the "SMART goals" framework can make the process less painful and much more productive.

Let's get started...


A History Of SMART Goals

In 1981, George T Doran (8/4/39 - 11/30/11) was published [1] in the November issue of Management Review. His article, “There’s a S.M.A.R.T. way to write management’s goals and objectives”. Dr. Doran's article is credited as being one of the first to use the "SMART" acronym. Other management thinkers like Peter Drucker had used the concept at an earlier date without specifically using the acronym.

Drucker's concept for setting SMART goals followed the "MBO" methodology or "Management by Objectives" which was outlined on Druker's 1951 book "The Practice of Management". Drucker introduced a five-step MBO process, where organizational objectives (goals) are set, cascaded through the organization, monitored, evaluated and rewarded. It is expected that each objective be a SMART goal. The process of cascading goals ensures that each goal is "Related" or linked to the organization's strategy. 

Drucker's MBO framework.jpg

Back to SMART goals....

Doran's acronym used the following words to describe SMART:

Doran's SMART goals acronym
 

with the "A" being "Assignable". In recent years, the "A" is described as "Achievable", but I really like Doran's definition since businesses often push against specific accountability.

You can watch a video of Dr. Doran speaking about the SMART acronym. In the video Dr. Doran shares that the SMART goals framework is a "tool to get results" not a "checklist" to be followed.

Dr. Doran's work built on Locke's work on goals. Locke is considered the "father of goal setting theory". His research focused on how goals drive motivation and are influenced by an individual's cognitive functions and will. Locke also researched how goals impact task performance (drive results).

For the purposes on this article we'll focus on the "SMART" part.

What Are SMART Goals?

Let's break down SMART Goals into their two parts "SMART" and "Goals". We'll start with goals first. 

What Are Goals?

According to Wikipedia, a goal is a "desired result or possible outcome that a person or a system envisions, plans and commits to achieve: a personal or organizational desired end-point in some sort of assumed development".

I like the how Wikipedia defines a goal (Drucker would call it an "objective") as a desired result. It's what you plan to achieve. You can see with in the definition that there is a planning aspect to a goal. Goal setting should be a thoughtful and intentional process. Defining "what you want to happen" critical. If you don't clearly define the desired result, you won't know if you've achieved it and failure is certain.

For example, if you would like to "grow sales", how will you know if you've achieved your goal? Technically, if you achieved $2,000,000 in sales last year and you achieve $2,000,005 in sales this year, you've "grown sales". I would be willing to bet that's not what someone means when their goal is to "grow sales".

So you can see that the "desired result" must be clear or else we will never know if we've achieved it. It we don't know if we've achieved the results, chances are we won't achieve what we're looking to achieve (interesting thought isn't it?).

We may be heading in the right direction, but we won't know how far we have left to go to arrive at our destination.

What Are "S.M.A.R.T" Goals?

The second part of "SMART goals", the "SMART" part is an acronym which stands for:

Specific - What specifically are you looking to accomplish. What is the result you are looking to achieve?

Example: Grow software sales

Measurable - How will you determine if you've achieved your goal in an unambiguous way. This is typically some kind of number. What I like to call a "target". It's the center of the bulls-eye.

I like to link every goal to a KPI or Key Performance Indicators. You can read about KPIs by going here.

Example: The target is $5.0M. By the way, this goal could be broken down into monthly increments.

Achievable (Assignable) - Each goal must be challenging, but achievable. Ask yourself the question, "do we have the resources, skills and knowledge to achieve this result"?

This can be a difficult question to answer sometimes which is why it's critical that the inidividuals responsible for delivering the result are involved in the goal setting process. This also attaches sigle point accountability to the goal that had been set.

Example: We have a team of 4 salespeople, each with a quota of $1.25M. Last year they each did $1.2M. This represents a 4.2% increase over last year. We have increased marketing spend to generate more opportunities. 

Relevant - Ask the question, "Does this goal align with, support, or advance the organization's vision, mission, values, principles, and strategies"?

This is where we test whether the goal is part of an overall strategy of the organization. Often people are working on things that don't align with what the organization is trying to accomplish. 

Example: As part of our strategic planning process we've decided we want to grow the business 5% by offering our products and services to a new market segment.

Timely (or Time Bound) - Does the goal have a "due date". When can we expect the result to be delivered?

Example: By December 31st, 2017

Why Are SMART Goals So Important For Your Small Business?

You might think that the answer to this question is pretty obvious. If we don't have SMART goals, we won't achieve the results we want to achieve. Yet, so many small businesses don't have goals. They are just bumping along hoping that they will have enough cash to make payroll or that the prospect will say yes to their proposal. Or that they can find the right person to hire. Goals are strategic (or they should be) whereas many small business owners are stuck in day to day tactical activities which should be supporting their goals.

The fact is, if you want to get out of the day to day state of constant chaos, you need to establish SMART goals. SMART goals give your business direction and focus. They help you to decide what to focus on and what NOT to focus on. They keep you from getting pulled away into activities which do not help you move the business in a positive direction.

Your business will not magically drift into a better version of itself. You must guide it there.

How To Set SMART Goals For Your Small Business

There is a bit of strategic work that needs to be done before you can begin to set goals for your business. You can read about that process here. In that post, I lay out the step by step guide for setting small business goals.

I we assume you've already done the strategic work so you know the goal you set will get you closer you where you are taking the business....

I'd like to give you some examples of how to make sure the goals you set are SMART.

smart-1

 

  • In the example above you can see that we have a goal description "Grow software sales".
  • We make the measurable by defining the target we are trying to reach, $5M.
  • We then ask the question, "Is this achievable". Before we jump to an immediate, "Yes", we ask what resources are required. Often business set goals, but then don't fund those goals. If they ran the goal through the SMART goal framework, they would have found that the goal was doomed to fail. Lastly ask the question, "who is accountable?". Who is going to raise their hand and lead the charge on this goal?
  • Next we if the goal is related to our strategy. This is where we test if we really want to put our energy into achieving this goal. Believe it or not, some companies are focused on retaining current customers and NOT growing. If you come to this question and can't answer with an emphatic, "Yes", you may not have the buy in from your team and the goal is again doomed to fail. Also you should be able to describe how this goal fits into your overall strategy.
  • Lastly, we ask, "when are the results due?" - You can see we have a due date of 12/31/17

I hope this post on SMART goals has helped to clarify what SMART goal are and how they can have a major impact on your business. I think you can see if you run each company goal through the SMART goal framework, the chances of you actually achieve the goal rise dramatically. 

To help you along the way, we created a SMART goal Excel template which you can download for FREE! Just click the button below!

Free SMART Goals Excel Template

[1] Doran, G. T. (1981). “There’s a S.M.A.R.T. way to write management’s goals and objectives”.Management Review(AMA FORUM)70(11): 35–36.

Topics: goal setting for small business, smart goals