What are business goals?
Business goals articulate what a business aims to achieve over a period of time. To be effective, business goals should be specific and include a date by which they should be accomplished. The specificity and the timeline enable organizations to measure if they’ve met their stated goals — and, if not, to know by how much they’ve fallen short.
“Business goals are the way that businesses keep their activities aligned,” said George Westerman, senior lecturer at the MIT Sloan School of Management.
An organization can set as many goals as it chooses, and it can set goals for the enterprise as a whole and for individual units within the organization. Business goals can also be broken into short-term goals, midterm goals and long-term goals. But all business goals must identify a specific target the business aims to achieve over the specified timeline, said Jennifer Jones, senior research advisor in the industry practice at Info-Tech Research Group and SoftwareReviews.
“Grow the production department by 20% over the next three years” is an example of the specificity that makes up a business goal, she said.
Business goals identify what the business aims to achieve, but they do not state how the organization plans to get them done. The business’s strategic plan typically lays out at a high level the actions that the organization intends to take to reach its goals.
It’s also important to note that, in many companies, business goals are not synonymous with business objectives. Some organizations differentiate between the two by defining business objectives as achievements or milestones that can be achieved in support of and along the way to reaching the business goal.
Furthermore, business goals are not the same as a mission statement or a vision statement, Jones noted. These high-level statements, in contrast to business goals, typically state the reason the organization exists and how it sees itself fulfilling its mission. They drive “a company’s organizational culture and answer the questions, ‘What do we do? Whom do we serve? How do we service them?'” she said.
Why is it important to set business goals?
Although the concept of a business goal seems basic, setting business goals is considered a key ingredient for achieving success.
That’s because business goals, when done well, play a significant role in shaping everyday activities and decisions. They help the enterprise, from executives down through the entry-level workers, know and understand the organization’s priorities.
Thus, each employee has the ability to prioritize team decisions, as well as individual actions and activities, that will help them support the organization in its quest to achieve its business goals. This then helps the organization stay focused on what matters most: The crew rows together to the same finish line, Jones said, with timelines to motivate them to do what they must to reach the destination on time.
“Without business goals, an organization becomes rudderless and can be led in conflicting directions,” she said. “Goals that are tied to a larger strategic vision provide direction to the entire organization. Well-crafted goals provide clear focus, motivate and set tangible targets for your business to work towards.”
Business goals help set direction for business departments and help them know if they are successful, she added. For example, the IT organization must support the business goals by identifying the people, processes and technologies that enable business success.
“IT can do this by participating in their own strategic planning exercises and by clearly documenting what processes they currently participate in and what processes they need to develop,” she said.
Benefits of having business goals
Setting business goals — and measuring progress against them — provides businesses with the following advantages:
- a clear, concise and shared understanding of what success is, particularly when objectives and key results (OKRs) are included as part of business goals;
- a way to communicate priorities and align workers, teams and business units who might not otherwise know how their roles and responsibilities fit with achieving the business goals;
- a framework for better measuring accountability, as the contributions of workers, teams and business units can be assessed on how they met the established OKRs; and
- a way to motivate and engage all employees.
Steps to setting business goals
Here are six steps to setting business goals:
- Assess the current state of the business, as well as industry, market, economic, demographic and other trends. There are various methods for analyzing and measuring an organization’s status, with SWOT analysis being one of the most commonly used approaches. The SWOT framework guides business owners through a process to identify their company’s strengths, weaknesses, opportunities and threats — hence the name. Specifically, it helps business leaders identify what’s working and what needs to be improved; which new or expanding markets, products or services could provide growth for the company; and the barriers, challenges, competition and other factors that threaten growth and even survival. Benchmarking and market analysis provide further insights into these areas.
- Establish specific goals for the business to achieve based on the analysis of the business and the factors that present opportunities for growth and threats that pose challenges.
- Put a timeline to each goal; many business owners and executives set short-, mid- and long-term goals and then articulate a specific time frame for each category or each individual goal. Business leaders should consider industry and market factors when determining deadlines; startups and companies in fast-paced industries should have shorter, tighter timelines, while well-established companies might be able to opt for goals with longer timelines.
- Establish when and how progress against goals will be measured, who to hold accountable for reaching each business goal and how they’ll be held accountable.
- Integrate business goals into the organization’s business plan, and develop a business strategy that will drive the business toward its goals by identifying and incorporating milestones that can mark progress. “The goals are established at the top, but then they should trickle down so that every business unit can translate how they apply to their unit,” Westerman said.
- Communicate the business goals to the entire organization, and align the roles, responsibilities and deliverables assigned to business departments, teams and individual employees with the stated business goals. “Every person in the organization should understand the goals they’re aiming to meet,” Westerman said.
10 best practices for setting goals
Executive advisors and researchers offered the following best practices for setting goals:
- Set clearly defined, specific and straightforward goals that are well articulated.
- Establish clear timelines for when you want to achieve each goal.
- Create goals that enable progress and success to be quantified and measured.
- Set ambitious but achievable goals.
- Solicit input from employees at all levels of the organization to uncover new opportunities, as well as to increase buy-in.
- Be mindful of the company’s mission and vision statements, and ensure all business goals are aligned with those.
- Understand external forces that impact your business; Jones said doing a PESTLE analysis can be useful. PESTLE stands for political, economic, social, technological, legal and environmental factors.
- Use the Business Model Canvas, a management template, which Jones said can help companies uncover potential business goals.
- Seek external voices. “Interview key customers and accounts, which allow you to get direct feedback and input and can drive your strategic plan,” Jones said.
- Use SMART, a common framework used for setting goals. The framework lays out five attributes of well-set goals: specific, measurable, achievable, realistic, time-bound.