For many business owners, the question “where do you want to be in 5years?” can be extremely daunting. Especially in times of economic uncertainty. This is why setting SMART Objectives is so important for small to medium businesses.
Setting SMART objectives can support owners define their growth vision and build a clear path to success. Establishing objectives can motivate both the business owner and employees to strive for business success. Yet setting objectives that either lack ambition or are too far reaching can have the opposite effect.
First: what are business objectives?
Before looking at SMART objectives, it’s important to define what is, and isn’t, a business objective.
In short, business objectives are results that are achieved – not tasks or actions to be completed.
For example, a business objective may be:
✅ Increase the number of subscribers by 25% within 12 months.
Opposed to an action or task that may be:
❌ Finish the company website by the end of the year.
The latter, which has a clear target, is an action – or task – which is completed. Whereas the former can’t be ‘actioned’ or ‘done.’ It must be achieved.
Business Objectives should always support the company’s overall business mission and vision.
Objectives vs. Strategies
When it comes to setting business objectives vs. strategies, business owners can remember the following simple phrase: implement strategies to achieve the objectives.
Strategies are high-level decisions that guide the business towards achieving the objective.
For example, if the business objective is:
✅ Increase employee productivity by 10% over the next 2 years
The focused strategies associated with this may include decisions such as:
- Invest in new technologies to streamline efficiencies
- Increase employee training budgets to allow for upskilling
- Review all ‘regular meetings’ to reduce non-critical face to face meetings
The objective is the result the company wants to achieve; strategies are how management decided to do it. Following this, is an implementation plan with actionable tasks.
Business objectives are therefore vital in ensuring the business stays focused and on track. And, setting SMART objectives ensures goals are aspirational enough to inspire effort, yet also realistic enough to ensure confidence.
What are SMART Objectives?
The acronym SMART stands for Specific, Measurable, Attainable, Relevant and Time-Bound.
Keep your objectives clear and simple. Each objective should only have one core achievement to focus on. You can have multiple objectives, but not multiple goals within the one objective. This ensures each objective is focused and clear. Further, the objective should be specific to avoid ambiguity.
✅ – Example of specific: Achieve a net profit margin of 30%
❌ – Incorrect example: Achieve a net profit margin of 30% and increase repeat business by 10%
❌ – Incorrect example: Grow the business by 30%
Objectives need to be able to be measured. In other words, business owners should know what success looks like and if an objective has been achieved or not. This means each objective should have a target associated with it.
✅ – Example of measurable: Increase number of subscribers by 25%
❌ – Incorrect example: Increase number of subscribers
Note: If it can’t be measured at all, it’s likely not an objective but may be a Priority or Strategy.
Achievable and realistic targets are vital. Whilst objectives should be somewhat challenging and showcase improvements, setting objectives that are out of reach may cause owners and teams to disengage. Attainable also considers the team’s ability to achieve the goal.
✅ – Example of attainable: Increase current market share by 5%
❌ – Incorrect example: have 100% market share
Relevance is sometimes forgotten in SMART Objectives. However, it is one of the most important criteria as it establishes focus. Relevance means objectives need to align with the company priorities and current business focus.
✅ – Example of relevant: achieve an 8/10 average score from customer reviews collected across all online platforms.
❌ – Incorrect example: be loved by everybody worldwide
Each objective should include a timeframe in which to achieve it. A ‘due date’ allows business owners to stop, reflect and assess if the goal is still ‘SMART.’ Without being time-bound, objectives can linger for longer than required and become irrelevant.
✅ – Example of time-bound: Achieve an increase in revenue by 30% by EOFY 2023
❌ – Incorrect example: Achieve an increase in revenue
There are many categories of SMART objectives. For example, a business may have financial objectives, marketing objectives, employee recruitment objectives and/or corporate social responsibility objectives.
However, knowing what SMART objectives are is only one part of setting objectives.
How to set SMART objectives
Deciding what the SMART objectives are can also be a challenge. Our Strategic Plan Framework recommends setting multiple objectives to achieve over time. We also recommend setting a larger 10yr/long term Future Goal to guide the development of the shorter 1-3yr SMART Objectives.
When setting objectives business owners can undertake the following actions to ensure they are SMART:
1. Establish the start point: before deciding where they want to get to, business owners should know where they currently are. This can be done by reviewing key business metrics such as financial performance, customer results and team efficiencies. Business metrics will vary, pending the industry the business is in, so it’s important to determine which metrics are right for the business and industry.
2. Do the industry and market research: even for business owners with vast industry experience, research is still vital. Knowing what is happening in the industry, the latest market trends, innovations and who key competitors are, will support setting SMART objectives. This is because research should highlight where there are opportunities to leverage and where the company should steer away from. Whilst there are few shortcuts to high-quality research, the Business Benchmarking Report provides an industry analysis that is designed to support business owners establish SMART objectives.
3. Focus on the key opportunities: in many cases, there will be a plethora of opportunities for businesses to focus on. Therefore, an important step is to determine which opportunities to choose. Opportunities should be selected based on sound research. One way to undertake the review is via a benchmarking analysis to determine how the business is performing against industry peers. This can highlight where the business is falling behind the industry benchmarks, and where they are excelling; thus showcasing the largest opportunities for growth. You can also find industry information via the Australian Bureau of Statistics.
4. Know your capability, resources and gaps: reviewing internal capabilities ensures business owners set objectives that can be achieved by either internal skill sets, or by external support. Further, knowing the financial position of the business ensures owners can confidently invest in achieving the objectives. Subsequently, this also highlights financial gaps and shows additional funding required.
A few more tips on setting SMART Objectives
When establishing objectives, we recommend the following:
✅ Ensure they support the big picture: SMART objectives are just one part of a strategic plan. They should always support the company future goal, priorities and purpose.
✅ Make the time frame 1-3 years: in our experience, this is enough time to achieve the target without it becoming irrelevant.
✅ Include a variety of metrics: try to avoid having all financial objectives as this can steer the business too far in one direction. Instead have a variety of objectives such as customers, employees, quality, and value.
✅ Don’t make them public: objectives are for the business owner and some employees. The greater public and competitors don’t need to know them. Businesses can share their vision, mission and (in some cases) priorities. Objectives should be confidential and only shared with those who are working to achieve them (if required).
✅ They don’t have to be ‘nice’: objectives may, at times, seem harsh. For example, an objective may be to improve labour efficiencies which may result in reduction of employees. The objectives are for the business owner and desired growth may result in tough choices.
The SMART Objectives are set – what’s next?
Once the objectives are defined and agreed upon by the required parties, the next step is to make high level decisions on how they will be achieved. These are the strategies.
From strategies, team leaders can form implementation plans that align with the company objectives and priorities.
Lastly: don’t set and forget
SMART Objectives are easy to regularly track to ensure they remain achievable. One way to monitor them is to establish periodic goals within the objective. For example, if the business has an objective to generate 120 new premium level customers in 12 months, the periodic goals may be to achieve 10 new customers each month.
Regular reviews ensure changes can be made if needed to strategies. Alternatively, objectives that are surpassing the expectation can be either stretched or enhanced to ensure the business continues a growth trajectory.