5 Insights to Help Employees to More Effectively Set Goals

For most companies, the staff is the greatest cost. Yet there is no question that staff is also usually a company’s greatest asset. In order to maximize staff loyalty while also getting the best from them, you need to have solid personal development plans in place. Goal setting for teams and individuals is the key to achieving this but is also something that many managers and business owners struggle with. In this article, we explore some different approaches to goal-setting and identify 5 key insights to make the process more effective.

Firstly, let’s explore one of the common causes of frustration: what is the difference between goals and objectives? “Goals” are relatively broad aspirational outcome statements. They are usually broad, general and descriptive in nature, describing the purpose toward which activity is directed. An example would be “Make our widget a category leader in sales revenue by year X”.

Objectives, on the other hand, are much more specific. They are clearly identified measurable steps to achieve goals and are usually written as a specific target that the activity is intended to accomplish. An example of an objective would be “Retain at least 70% of the North American market, according to Nielsen data”.

In reality then, what we are really talking about is helping employees and staff with “objective setting” as opposed to just goal-setting. In our performance management certification training, we use three common approaches to goal and objective setting and it is worth reviewing each of these to identify the five themes that are common to each.

The first approach is simply known as “S.M.A.R.T” goal setting, with the acronym standing for the characteristics of an effective goal (objective). In this approach a goal must 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 second 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 are 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 obviously less prescriptive than S.M.A.R.T goals as it is widely open to interpretation depending on the priorities of each business (or indeed each department). 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 is often complementary as opposed to being mutually exclusive.

The third and final approach that we will evaluate is known as “Objectives 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.

A key aspect of OKRs is that they are never tied to appraisals or compensation. As they are stretch goals, an organization should not consistently achieve 100% (or else the goals have not been stretching enough). As a result, it would unfair to tie compensation to them. In this regard, OKRs do not necessarily meet the “Achievable” aspect of the S.M.A.R.T methodology.

So, what are our five key takeaways from the review of the landscape of goal-setting methodologies? Well clearly, all three have commonalities.

Key Insight 1: By “Goals” we really mean “Objectives”

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.

Key Insight 2: Employee Goals Must Align with Business Objectives

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.

Key Insight 3: Must Goals be Achievable?

Do you need to ask yourself how important this is for your organization? Do your employees need to hit every goal of 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.

Key Insight 4: Timeframes are Critical

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.

Key Insight 5: Consider using all three as a framework

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.

For more information, take a look at CertifiedPerformance management training for business professionals.