The Goal Trap For Small Businesses

The Goal Trap For Small Businesses

Small businesses realize as they grow that they need goals and goal setting to manage their company but often fail to adopt them. Here we show what are the most common mistakes and the best practices setting the right goals and align your company behind them.

What we mean by goals and goal setting

With the term “goals”, we mean any objective or target that entrepreneurs and small businesses aim to reach within a certain timeframe. Goal setting refers to how these goals are defined, tracked and managed.

When a small business grows beyond 5 people, it becomes difficult to gather the whole team to align on the priorities and next steps. This is even more compelling with a remote team, especially across multiple time zones.

Therefore, it is essential to develop and manage specific goals that are clear and unambiguous, and that everyone understands.

Goals make clear across the business, it allows the teams and employees to understand what they need to achieve. These goals can be tracked through metrics that gives continuous feedback such as OKR, MBO, etc.

These metrics are like receiving a score in a video game, which allows everybody to know if they are going in the right direction.

There are many different frameworks that can be used to define and track goals. However, regardless of the specific implementation, several factors may make or break their adoption and effectiveness.

Why goals are important

The definition and the use of the metrics for tracking company goals should come before formalizing the processes and organization in a small business.

Mission and Vision tells us WHY a company exists while Goals and the Metrics that track them makes clear WHAT the company should do.

Finally, Processes and Organization defines HOW these goals are achieved. These last ones should come after if they need to be aligned with the desired long-term direction of the business.

As mentioned above, Goals are necessary in a small business because they keep people focused on the right priorities without the need of direct communication.

1 on 1 and Team Meetings are important but time-hungry, these tools should be used sparingly. In this case, Goals are the perfect way to efficiently coordinate a growing and often delocalized team.

Moreover, beyond telling an organization what to do, goal-derived metrics allow the teams to know their progress and entrepreneurs how their company is doing.

Exactly like the video-game example, where employees know what they should do and what progress they made. The feedback loop is much faster compared to quarterly or yearly reviews and corrective actions where necessary can be taken earlier.

Why Goals and Goal setting is difficult

If that’s the case and goals are so important companies should all adopt and use them regularly right? Unfortunately, no. Though goals and performance indicators are recognized as a necessary tool for startups in early stages. The definition, measurement and use of them often wither and fail within a short period of time.

The specific reasons that determine this adoption failure in small businesses are multiple but can be grouped into the following categories:

LACK OF EXECUTIVE COMMITMENT –

Entrepreneurs and top management say they want to adopt goals and track them, but they don’t use them themselves. They change priorities on the fly, overriding existing goals, or simply get bored of sticking to meeting agendas structured around goals and metrics.

TOO MANY GOALS –

Companies try to chew more than they are capable of. For fear of leaving something out they define long lists of overlapping targets. The critical and irrelevant goals are placed at the same level and the employees are stretched out in many directions.

In this scenario business performance will not improve, people work more and the goal setting is blamed and abandoned.

METRICS DIFFICULT TO MEASURE –

The appeal of the score in the video game resides in its accessibility, players (in our case employees) know at all times how they are doing. In small business, progress against goals should be tracked via accessible performance indicators.

If customer lifetime value requires one man-day of work, it may be better to find proxy metrics that are more easily calculated. Though the metrics may not contain the same level of information.

Think of the goal setting like a diet. You have ambitious objectives and actions that you want to consistently do, but if you drop out after one month you get no benefit.

Simplicity and incremental changes makes it easier for companies. Especially for small businesses, to ease into new habits and start organizing their time and initiatives around goals and metrics.

Which goal setting system is better

As you may have guessed by now, this article does not argue for any goal setting framework in particular. We believe that each technique has its own merits, and we have worked with all of them during our projects at Asamby.

You are free to pick your favorite goal setting framework. However, keep in mind that simplicity and consistency go much further than grandiose or software-based goal setting frameworks that are quickly forgotten (or hated).

That said, here’s a list of frameworks for you to consider. You can also check our previous article on OKR vs KPI for further information on these specific goal setting strategies.

  • KPI (Key Performance Indicators)
    This framework defines and measures usually numeric Indicators (or metrics) that define the overall health of the company.
  • OKR (Objective and Key Results)
    Made popular by John Doerr and the examples of Google and Intel (beyond many other companies), it argues for setting collaboratively and transparently challenging Objectives (the goals) and cascading for each of them measurable Key Results (or actions) to achieve them.
  • MBO (Management By Objectives)
    Presented by Peter Drucker in 1954 “The Practice of Management.” MBO are top-down targets used by managers to define and measure their employees’ performance.

There are many other frameworks that you can consider (SMART, BHAG, …). When you have selected one, make sure to stick to it!

How to implement goals successfully in your business

Regardless of the methodology, you and your company will have more changes of successfully setting targets if you follow the guidelines below.

START FROM THE TOP

Entrepreneurs, founders and managers cannot expect their team to blindly adopt goals if they are not using them in the first place. Successful adoption of goal setting frameworks starts at the top of the organization.

The goal framework is piloted and tuned by the executive team. After it is tuned and internalized by this group it is incrementally extended to their reports. When the goal setting is introduced lower in the organization the existing goals can be broken down and cascaded.

DEFINE FEW OBJECTIVES

It is painful to leave out some goals but also necessary; if everything is a priority nothing is and there is no focus. Define 1 to 3 objectives that the person or team will need to focus on for the next period, and identify the metrics that tracks them the best.

SELECT HIGH QUALITY METRICS

Once goals are set, select the smallest set of metrics or indicators that allow you to measure the progress against your goal. Metrics should be:

  • Meaningful: Improving this indicator will get me closer to my target
  • Manageable: I have the means and skill to influence this metric
  • Measurable: I can easily and unambiguously track the progress of this metric

It is also preferable to use leading indicators (e.g. sales calls) and not lagging ones (e.g. sales). As this allows the company to adjust faster if necessary.

Finally, avoid “vanity metrics” i.e. those indicators that look good but are less informative about the actual company performance. For example the monthly growth of sales leads is a better indicator than the total number of leads year to date.

MAKE IT A COMPANY PRIORITY

The entrepreneur and management should make clear that they are serious about goal setting. The goals should not be forgotten at the first emergency and there should be good reasons to change them.

Also, people’s agenda should be blocked for regular progress reviews (at least quarterly, but monthly is better). Initiatives and corrective actions should derive from the discussion about the Goals and Metrics.

A real life example of Goals and Indicators for a Small Business

So what does it look like when we put together everything described until now? Here we have an example of an e-commerce goal system along with a simple dashboard that was created on Airtable to track its progress.

We hope this blog post have bring you some insights in avoiding making mistakes, setting goals and metrics to monitor them. If you have any further questions or would like to know more about Asamby, just reach out!

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