Goal setting is an important part of any strategy. But this is hard to do. In today’s post we take a look at why goal setting is difficult and how to do it.
I’ve noticed a trend recently for the projects we’ve been bidding on: medium sized businesses are bad at goal setting.
This is puzzling to me.
I totally get small business being bad at goal setting. After all, the defining feature of small businesses is that they are a reflection of their owner. They aren’t known as being bastions of proper business process. But medium sized businesses? That’s a different matter entirely.
It just stands to reason that in a medium sized business there are several departments. Those departments are all fighting over resources – and as such are out to prove that their projects are the ones worth funding. Successful departments therefore are aggressive in setting goals and achieving them as a way to protect their budget.
But in practice, this doesn’t seem to be the case. In reality, departments keep their budgets as much through business inertia, political wrangling, and influence.
This leads to some bad behaviors.
The baddest of them all is that it alters the goals of the business from being CUSTOMER-CENTRIC to being ORGANIZATIONALLY-CENTRIC.
The problem with being focused on organizational politics is that the goals for success change. Goals that used to be about sales numbers get supplanted by goals that ensure department safety and functionality. While you’d think that this could be achievable through setting and exceeding business goals, the truth is, once you’re playing politics – it’s impossible to properly focus on your customers.
Goals Are Very Often Arbitrary
“But Ben,” you’re probably thinking. “Isn’t this really simple stuff? And plus, aren’t goals boring?”
YES! It is really simple stuff. And YES! It is kinda boring to talk about. But the things that goals achieve are anything but boring.
The overwhelming majority of the time, and this is important GOALS DO NOT MATTER.
As in, the specific goal you pick is pretty much arbitrary.
Once you have an idea of performance metrics, you can begin to set more realistic goals but the biggest problem I’ve found to setting goals is setting the first one. We’re all looking for a frame of reference. And too often, the frame of reference doesn’t exist.
And so, instead of setting goals where there’s uncertainty in whether they are too easy or too hard, it strikes a kind of paralysis.
Paralysis is a Bad Thing
Paralysis kills businesses. And those it doesn’t kill, it renders impotent.
I worked in the music business around the time mp3s first became a big thing. What hurt the music business wasn’t “free” music. It was their reaction to it. They did practically nothing except sue people for 3 years. I personally watched paralysis at the highest echelons of RCA/BMG, Island Records, Sony Records, and more (and then wrote a well received piece on Salon.com about it).
The lesson I learned was crystal clear: Have data, make decisions… and KEEP IT MOVING.
Anything but paralysis.
Business Projects Are Like Life…
It’s the journey, not the destination that counts. And like dying, goals are meant to be motivators.
We often hear “live every day like it’s your last”. A similar idea can be extended to business projects. “Work every project like it’s the project’s last day.”
By creating a goal, you give yourself permission to reach it.
You instinctively know that if you reach a goal you’re going to reassess and reset to something more appropriate.
It’s the basis of the iterative cycle of web design.
To this end, it’s more important that you HAVE a goal than that you have a GOOD goal. Goals can always be revised, but only if you bother to set them in the first place.
Smart Goal Setting
I don’t want to sound like the only way to set goals is to set them carelessly. It’s totally possible to set appropriate goals. But this is a case of prove vs. improve. Setting any goal is likely to result in improvement. And that’s the major takeaway: if you don’t know how to set a goal, just make one up. It’s better than nothing.
But if you’d like to design a goal for your project that makes sense, here’s how to do it.
First, you need to know your break-even point. For the sake of argument, let’s say it’s $50,000.
Now you need to know where your revenue comes from and what your average conversion is worth. Let’s say that you’re a service company and that the average profit on a job is $100. With these two numbers, we can easily figure out how many sales it takes to break even: 50,000 / 100 = 500.
Now we know the number of conversions.
Next, we need a time period. Luckily, this is usually also a function of cost.
There are two types of cost: sunk costs and variable costs. A sunk cost is what you have to spend anyway just to stay in business. Variable costs are the costs that vary depending on your activity.
For example, rent is a fixed cost. Advertising is a variable cost.
The variable cost means there’s a cost to doing business over time.
In the above example, $50,000 is our break even point – but only within a specific period of time (6 months, a year, etc.). So to break even, one has to achieve the necessary number of sales within the specific period of time.
This is what’s known as a SMART goal.
Smart goals help you PROVE things. Once you have some experience with goals, you’ll find yourself attracted to creating SMART ones. But there’s nothing inherently wrong with picking an arbitrary goal.
Arbitrary goals motivate you towards change.
SMART goals are meant to be achieved.
Use What Works
So which should you do? Prove or improve?
That depends on your organizational needs. If you have the data and discipline to achieve SMART goals then by all means, start there. But if you’re bewildered and are looking for which way is up – then really, just pick something. And pick something achievable. Once you hit it, you can reassess and pick another. After a few rounds of this, you will begin to see how to develop your SMART goals. And once you start hitting those, you’re in the money.