Setting business goals is an inspiring and exciting strategic planning exercise. Strategy sets the business direction. Execution delivers results. Successful businesses are good with identifying where to steer the business and they are tenacious with defining specific goals that are measurable so there is a barometer to gauge performance.
Having a performance gauge is critical as that is the best approach to determine whether results are tracking in the right direction. There are two steps to define measurable goals.
- Turn broad goals into specific results
In setting the business direction, it is common to use a broad description. Words such as innovative, efficient, customer-friendly are often used. These words create a general impression but it is hard for employees to grasp what specifically they should focus on.
While each of these words could apply to every department, it is haphazard to have each department randomly select areas they feel they could contribute. Time and effort could be invested in improvements that deliver diminishing returns.
Instead, take additional time to identify specific results for each goal. Ask what innovation is desirable? Is the focus on new product development or service delivery? Is efficiency most urgent for field operations? Which aspect of customer-friendly solutions would bring the most delight to customers?
Answering the above questions help to clarify the specific improvements the business seeks.
For example, the business might want to develop two new product features, or increase the productivity of field operation, or improve customer support services.
These specific results make the goals more meaningful for teams as specificity adds context to the broad goals.
- Identify applicable performance indicators
With the results well articulated, the next step is to determine how to measure results. This requires defining the performance indicator(s) for each result.
The thought process involves finding a good indicator of success or failure for that result.
On new product features, an indicator of success might be return on product development investment. This can be computed using revenue growth and expenses incurred on development of the two new features.
On productivity of field operations, an indicator of success might be reduction in idle time caused by delays in equipment delivery. Every hour a crew stands idle is a cost. This cost includes labour hours and potentially penalty incurred due to late project completion.
On customer support improvement, an indicator of success might be customer satisfaction improvement related to the specific change implemented.
With clearly defined performance indicators, teams can relate to the results they are responsible for. This also helps to guide decisions when situations call for resource re-allocation and prioritization.
Team alignment across the organization becomes easier because there is clarity on results. This facilitates focused execution.
This exercise usually requires engagement of team members to define meaningful performance indicators. It is an excellent way to get buy-in and ownership of results.
Setting measurable goals is a critical step to ensure that business goals identified by senior leaders can be communicated clearly and there is a good understanding on what the focus is. The above steps do require more effort to move the business from vague goals to well defined success that guides decisions and actions. However, the work can minimize confusion and align execution for optimized results.
Check out this whitepaper on Essential Qualities of A Sound Strategy for more ideas in developing your strategic plan.
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