Every company, no matter the size, should create business goals to keep the enterprise moving forward. The most effective goals are SMART - specific, measurable, attainable, realistic, and timely. The advantages of using the SMART philosophy in setting objectives include improving focus and clarity, providing a common framework for collaboration and discussion, and creating a bias toward action.
Defining a SMART Goal
SMART goals and objectives can be adopted as a team or used by individual employees, managers or entrepreneurs. The Massachusetts Institute of Technology recommends asking the following questions to create SMART goals:
- S: What is specific about the goal?
- M: Is the goal measurable? How will it be determined that the goal has been achieved?
- A: Is the goal achievable?
- R: Is the goal realistic to performance expectations or professional development?
- T: Is the goal time-bound? When will this goal be accomplished?
Some organizations substitute other words within the acronym; for example, 'realistic' may be replaced with 'relevant' to highlight the fact that a goal should relate to the overall company objective.
SMART Goal Examples
Any business or individual can apply the SMART discipline in setting goals. The details will differ, but the questions are relevant to any situation.
Not: Increase sales by 50 percent
Instead: To meet the sales objective of booking $1,000 in yearly orders, two additional salespeople will be hired to grow sales of red widgets by 10 percent in the first quarter, 15 percent in the second quarter, five percent in the third quarter and 20 percent in the fourth quarter.
Why: The goal is very specific (red widgets), measurable, and achievable. The project has been realistically resourced and targets have been thoughtfully arranged through the year to accommodate business conditions. The goal links back to a higher-level objective. Further, it is time-bound (to be completed in one year with quarterly targets).
Not: Improve product quality by 25 percent
Instead: To meet the company's annual goal of reducing defects to less than two percent of shipped product, a new test and inspection procedure will reduce the shipping of cracked pumps by 20 percent per quarter, with data tracked weekly to assure compliance.
Why: The goal is specific (focused on pumps), measurable (with quarterly increases in improvement and weekly tracking to stay accountable to the goal), achievable (through new procedures), realistic (steadily improved performance), timely, and relevant to a larger company goal.
Not: Reduce staff absences by 50 percent
Instead: To meet the practice goal of a 50 percent reduction in staff absences, management will implement a new employee health and safety program including monthly training modules, new modern hygiene equipment, and improved patient intake procedures, with results tracked quarterly.
Why: The goal is specific and achievable (focused on giving employees the right tools to achieve the goal), measurable, realistic and time-based.
Not: Improve customer payment times by 25 percent
Instead: Eliminate mistakes in customer invoicing, the key driver in long payment times, through new accounting system and clerical training, to be implemented over a three-month term; results to be tracked monthly to stay on track to goal.
Why: The goal is specific to the problem area identified, measurable, achievable given the resources, relevant and time-bound.
Not: Decrease food costs by 20 percent
Instead: To meet company's food cost reduction goal of 20 percent, management oversight will focus on reducing food waste, including spoilage and scrap, by ten percent per month for six months, then six percent for six months, tracked every two weeks.
Why: The goal is specific (focusing on waste as a cost reduction), measurable with regular tracking, realistic with incremental improvement targets that reduce over time, time-bound, and relevant to a higher level goal.
The Right Level of Detail
By nature, goals should be fairly high-level strategic statements. Details on how to achieve the goal belong in a tactical plan. Thus, the restaurant manager who is focusing on food waste (the SMART goal) knows that spoiled produce, and in particular spinach, is a primary driver of waste cost. He sees that he must find a new spinach source or change his purchasing process. However, this detail needn't be a part of the goal.
Other Ways to Use SMART Objectives
SMART goals aren't only for business. Students, coaches, artists, couples and families can apply this method in nearly any aspect of life. For example:
- A student may desire to score straight A's in all of her classes. When applying the SMART questions to the situation, she realizes that the goal is not realistic since she's taking a challenging course load, has a part-time job, and plays on a competitive soccer team.
- A couple who decides to get in shape may use this approach to map out a plan. They might develop SMART goals to streamline their focus on weight loss through a vegan diet over a three-month term.
Why SMART Goals Work
Business consultant George Doran developed the SMART goal concept in 1981. He advocated that managers use the philosophy to "frame a statement of results to be achieved." When goals and expected results are defined and communicated, people are motivated to stop procrastinating and work toward the goal. The practical attention on specific, measurable, achievable, realistic and timely objectives provides the discipline to help people and teams improve their chances of success.