How To Create SMART Goals For Your Small Business

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.

In his article, “There’s a S.M.A.R.T. way to write management’s goals and objectives,” Dr. Doran is credited as being one of the first to use the “SMART” acronym.

Other management thinkers like Peter Drucker had used the SMART 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,” outlined in Drucker’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 is a SMART goal. The process of cascading goals ensures that each goal is “Related” or linked to its strategy. The important part to remember here is that SMART goals should help the company achieve its long-term strategy.

In Doran’s article, he used the same concepts but introduced the acronym, using the following words to describe S.M.A.R.T:

Notice the “A” in SMART is “Assignable.” In recent years, the “A” is described as “Achievable,” but I really like Doran’s definition since businesses often push against specific accountability. To be determined as achievable, someone in the organization needs to take responsibility.

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.

Even further back, Dr. Doran’s work built on Locke’s work on goals. Locke is considered the “father of goal-setting theory.” Locke’s 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 this article’s purposes, we’ll focus on the “SMART” part that Dr. Doran introduced.

Diving Deeper – What Are S.M.A.R.T Goals?

Let’s break down SMART Goals into their two parts, (1) “SMART” and (2) “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 assumed development.”

I like how Wikipedia defines a goal (Drucker would call it an “objective”) as a desired result or endpoint. It’s what you plan to achieve. It’s where you are headed.

According to Donovan, “specific, difficult goals enhance performance because such goals clearly define acceptable levels of performance, increase the amount of effort an individual exerts, increase task persistence, lead to more extensive strategy development and planning, and orient individuals towards goal-related knowledge and activities” (Donovan, 2001).

You can see that there is a planning aspect to a goal.

Goal setting should be a thoughtful and intentional process. Defining “what you want to happen” is 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. If 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,” “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 unambiguously achieved your goal. This is typically some 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, or who specifically is responsible for this goal”?

This can be a difficult question to answer sometimes, which is why the individual responsible for delivering the result must be involved in the goal-setting process. This also attaches single-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 our 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 by 5% by offering our products and services to a new market segment.

Timely (or Time-Bound) – Ask the question, “Does the goal have a “due date.” When can we expect the result to be delivered”?

Example: By December 31st, 2018

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 at all, or if they do, they remain trapped up in the minds of the owner. Many small businesses are just bumping along, hoping that they will have enough cash to make payroll or that the prospect will say yes to their latest 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 that support 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 decide what to focus on and what NOT to focus on, which is a strategy’s essence.

Goals keep you from getting pulled away into activities that do not help you move the business in the direction of your desired end-point.

Your business will not magically drift into a better version of itself. It would help if you guided it there.

How To Set SMART Goals For Your Small Business

There is a bit of strategic work that needs to happen before you can set your business goals. You can read about that process here.

In that post, I lay out the step by step guide for setting small business goals.

I’ll 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 long-term.

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

 

• In the example above, you can see that we have a goal description “Grow software sales.”
• We make the goal 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 businesses 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 see 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 clarify what SMART goals 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 achieving the goal rise dramatically.

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

References

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.

Donovan, J. J. (2001). Work motivation. In Anderson, N., Ones, D.S., Sinangil, H. K., and Viswesvaran, C. (Eds.), Handbook of Industrial, Work, and Organizational Psychology (pp. 53-76). London: Sage Publications.