Goal setting for teams and individual is the key to achieving high performance and staff loyalty, but is also something that many managers and business owners struggle with. Without effective goal-setting, performance development plans turn into nothing more than wish lists. Strong goal setting capabilities are the cornerstone of most performance management courses and are essential for effective performance development plans, so let’s examine a few different approaches that may work for you and the team that you manage.
The first model is where goals are described in terms of Key Performance Indicators (KPIs) that need to be achieved in order for the business to realize a successful outcome. KPIs are unique to every organization so choosing the most effective KPIs is based on a clear understanding of the organization’s priorities. KPIs may be described in operational terms (e.g. achieve x outcome by y date) or in terms of general progress towards achieving the business strategy.
This approach is less prescriptive than the “S.M.A.R.T Goals” approach which we will evaluate next. It is widely open to interpretation depending on the priorities of the business. However, no matter what “indicator” is chosen, the objective related to the indicator should adhere to the S.M.A.R.T guidelines in order to be effective. Thus, the use of KPIs and S.M.A.R.T goal setting are often complementary as opposed to being mutually exclusive.
The “S.M.A.R.T” approach to goal setting demands that a goal be:
- Specific – the goal to be achieved must be clearly described.
- Measurable – you must be able to clearly tell if the goal has been achieved.
- Achievable – the goal is both mutually agreed and realistic.
- Relevant – the goal is aligned with the company strategy and objectives.
- Time Bound – the goal must be achieved within a specific timeframe.
The final approach that we will evaluate is known as “Objective and Key Results” (OKRs). This is essentially a goal-setting framework that helps define goals and track outcomes. It is designed to stretch the individual in terms of achievement and should be uncomfortable and ambitious for them. In this way it is similar to the “Big Hairy Audacious Goal” (BHAG) made famous by Jim Collins in his book “Built to Last”.
OKRs are always tightly linked with business goals and objectives, similar to the “Relevant” in the S.M.A.R.T methodology. Many organizations use OKRs to cascade objectives throughout an organization. They will start with the overall business strategic objectives, through functional and departmental objectives and onto individual objectives, thereby aligning the entire organization into unified objectives.
As you have seen all three approaches to goal setting have similar themes:
In terms of employee development and performance management, we really need to focus on specific objectives rather than broad, aspirational goals. Objectives can be measured and rewarded, and this is what we are trying to achieve.
Employee Goals must be “relevant” to specific business objectives. The OKR methodology of cascading objectives in a waterfall effect through the organization may be a helpful tool to achieve this effect.
You need to ask yourself how important this is for your organization? Do your employees need to hit every goal 100%? Or is it better to give them stretch goals that may drive the organization further, but also bears the risk of non-achievement? Each manager and business owner will need to make their own decision on this as the answer is based on the business model, strategy and company culture.
No matter which approach is used, making sure that each objective has a deadline for its achievement is critical. It must be possible to measure the successful achievement of a goal within a set time period. If the goal is achieved outside of this time period then it can only be considered a partial success.
All three approaches may be used in tandem to create an effective framework for goal setting. This is probably the most important takeaway. Each different approach can reinforce the other leading to a synergistic approach where the whole is greater than the sum of the parts.
Effective goal setting is one of the most important activities with which you can help your employees. By using these five key insights you can help them to achieve their true potential, while they support your organization in achieving its goals.