Let’s start by stating the obvious. A goal is an expression of what you want to achieve, ideally constrained by time.
Business goals are often annual and quarterly, and we set our goals as a way of ensuring we focus on the most important and relevant activities, at the exclusion of others, therefore providing focus.
It is therefore obvious that the better you are at goal setting as a company, the better you are at focusing on what matters the most. Making goal-setting a really important business process and skill to acquire.
There is in fact a strong correlation between team performance and what is referred to as ‘goal, role and execution plan clarity’. Employees like to have success defined and to know how the work they are doing contributes to the success of the goal.
This provides purpose and meaning because being busy, with no clear outcomes, isn’t very fulfilling at all. Knowing whether what you’re working on is helping also aids learning, as you get to know what works and what doesn’t work.
1. Balanced Scorecard
What is a Balanced Scorecard and how will it improve your organization? It is a popular strategic planning system that companies use to plan and communicate what they are trying to accomplish.
The idea is to ‘balance’ strategic measurements with financial measurements, with supporting strategy execution is the Balanced Scorecard’s main role.
This is how it works. To create goals at the company level you need a strategy, objectives, and KPIs. From this, you can create metrics with targets to be achieved in a specific time period like a year. Financial goals are often linked to revenue and profit.
How you improve financial metrics and goals means having customers that like or love your products. You also need systems and processes that support making customers happy, and highly engaged employees driving those processes that are constantly learning and developing.
This relationship between financial objectives, the customer, process, and learning is what the Balanced Scorecard (BSC) is based on. The BSC approach to setting goals is still common today. Especially amongst teams in large corporations.
The advantage BSC has is that it is wide-reaching, has a good structure, is mature, and therefore well understood. But BSC does take some learning. BCG also tends to be a top-down approach that doesn’t provide much by way of opportunity to employees further down the organization to participate.
On the flip side, there is SMART goal setting. Smart goals overlap with BCG but are way less structured. The only guidance for SMART goals is that your goals need to be: Specific, Measurable, Actionable, Realistic, and Time-bound. For example: Generate 2,000 new leads in Q1.
Most employees at some point have come across SMART goals, and its strength is it is really easy to understand. It does however have weaknesses. The measurements are singular, and single metrics can be misleading.
For example, I could deliver 2,000 leads but they might not convert to opportunities. SMART goals can also fall victim to poor metric selection.
3. Key Performance Indicators (KPI)
Most people know what KPIs are. The clue is in the name. They are the few metrics that are key to understanding whether you are performing or not. They are also predictors of future performance.
KPIs that act as good predictors of future performance are called Leading Indicators. They influence Lagging Indicators like Revenue and Retention.
Every Company has a view on what its KPIs are. They tend to be the KPIs that are reported to investors in addition to the KPIs that are used to understand how departments are and teams are performing.
When you get to the team level the use of KPIs is more variable and the adoption of metrics that provide insights on where issues and opportunities are is less predictable.
There is a skill in planning and managing KPIs. You have got to:
- Define which metrics are required.
- Source the data and potentially combine data and do calculations on that combined data.
- Assign an owner, collaborators / the people that work to maintain or improve a KPI, and possibly the people that just need to be informed about a KPI performance.
- And of course, a KPI needs to be maintained, tracked and when the KPIs become an issue, escalate it.
Investing time planning and measuring KPIs is an exercise that all forms of goal setting require you to do. BSC has KPIs in, and SMART goals should do as well.
The next goal-setting framework that also uses them is the Objective and Key Result.
4. Objectives & Key Results or OKRs
Made famous by Intel, then by Google and pretty much every other tech unicorn out there, Objectives and Key Results which are also called OKRs are the go-to goal-setting framework of companies looking to be more agile, more inclusive, and empower employees to share in the ‘how’ company objectives should be achieved.
Objectives are qualitative statements that are designed to inspire teams to achieve a goal. For example: “Delivering an amazing customer experience is foundational to our growth”.
How you propose to measure this is where metric selection comes into play. For CX goals metrics like Net Promoter Score, CSAT and retention are often used.
What makes OKRs different from KPIs and SMART is these measurements and metrics are grouped around the Objective. Typically 1 to 4 Key Results are created for each Objective. You can read more about OKR vs KPIs here
Another difference OKRs have over BSC, SMART, and KPIs is that the targets set are meant to be hard to achieve. Hard goals have been proven to increase focus, effort, prolong effort and stimulate learning and innovation. Easy to achieve goals don’t.
The part of the OKR framework that allows employees to consider how hard a target should be is called OKR grading. There are three levels of difficulty that correspond with grades:
i). Moon Shot
Here the targets have been set so high that even achieving 30 percent would be seen as a major success, but the act of trying to achieve more and daring to dream is expected to inspire new ways of thinking and innovation amongst teams in the company.
This is the default and ideal level of difficulty when it comes to discussing, planning, and setting Objectives and Key Results.
The idea is to calibrate your targets at a level that 60 percent to 70 percent would be considered a great success. Much lower and there may be issues that need addressing.
Achieving a higher percentage might mean it was either too easy or of course, an amazing achievement happened.
iii). Business-as-Usual (BAU)
When 100 percent is the only definition of success for a team you should set the targets at a BAU level. There is no stretch component and it is a must-hit target for your company.
The alignment of OKRs is also central to this goal-setting framework. OKRs are created to support the achievement of other OKRs. This alignment is how ‘what matters’ can be shared and coordinated across teams in an organization.
This brings me to the final key difference OKRs have over other goals setting methods – they will always be transparent. OKRs are commitments to goals that are meant to be shared along with their progress. This public commitment and transparency is another driver of performance and accountability.
OKRs have obvious and very real advantages as discussed, but they really are a skill that needs to be learned. Common issues include employees not being used to thinking about measurement, business-as-usual activities are often proposed as goals, activities can be proposed as Key Results, and too many OKRs are often created. This has the potential to dilute and confuse efforts.
5. Activities are goals of a sort
Most of what goes on in a company are not the goal, as these are the outcomes of hard work. It is the activities – the project and tasks that we do are how time is invested.
Activities are a type of goal in that success is measured by speed and efficiency of delivery. Optimizing what we do to achieve desired outcomes is something all goal-setting frameworks written about here share.
There is a growing need for activities to be managed in an agile way. This means that outcomes are known and teams will work together in a more empowered and collaborative way to achieve them.
Processes like weekly check-ins to discuss priorities, plans and problems are used to ensure that any execution friction is removed and any changes to plans that are required to help you achieve your goals happen sooner rather than later. Long waterfall projects are an alternative way to plan a project and there is nothing to say that they can both be used.
You will have noticed that all of the above overlaps in some way. So choose the method that works best for you, your teams, and your company – then commit to it.
The better your systems and processes for setting goals and your subsequent management of them, the more likely you are to achieve success.
Disclaimer. The views and opinions expressed here are those of the authors. They do not purport to reflect the opinions or views of IdeasPlusBusiness.com.
Any content provided by our bloggers or authors is of their opinion and is not intended to malign any organization, company, individual, or anyone or anything.
For questions and inquiries on the blog, please send an email to the Editor at ideasplusbusiness[at]gmail[dot]com. You can also follow IdeasPlusBusiness.com on Twitter here and like our page on Facebook here.
This website contains affiliate links to some products and services. We may receive a commission for purchases made through these links at no extra cost to you.
Matt Roberts is the founder of the OKR software platform ZOKRI. He loves to share goal setting best practices and more can be found at ZOKRI.com.