Why is it important to set business goals?
Goals are powerful—they can focus attention on achieving desirable outcomes. In business, one desirable outcome would be profitability. Profitability does not happen without making sales, plus correctly managing expenses. Employees prefer to know what management expects them to accomplish, and goals provide that direction. The human brain has amazing problem solving abilities, and goals channel brain power toward finding solutions.
Whether business goals are to set company direction or provide motivation, they should be specific, measurable, achievable, and timely. Let’s go back to the profitability goal mentioned previously. A company goal stating: “XYZ Company will be profitable” is not very specific. How profitable? Are there enough customers to achieve that? By when will profitability be reached? How will you know the company is profitable? A better way to state that goal is: “XYZ Company will attain a 10 percent net profit margin by the end of 2014, based on sales of 100,000 units.” Now it’s possible to plan action steps to reach that goal and adjust the progress toward attaining the goal if necessary.
Once in a while, management will want to change the course of an organization by motivating employees to reach higher. Jim Collins and Jerry Porras, in their book “Built To Last” talk about “big, hairy, audacious goals (BHAGs).” One of my favorite examples of a BHAG occurred May 25, 1961, when then President John F. Kennedy announced the ambitious goal of sending an American safely to the moon before the end of the decade. That goal was achieved on July 20, 1969. In 1961, no one knew exactly how to make that happen, but the goal inspired many to work toward a desirable outcome. The brain power of many was channeled toward finding a solution.
Goals that have been achieved are an opportunity for celebration. Successful companies set goals that support the business mission and recognize employees for a job well done. Even a sole proprietor can benefit from goal setting and celebrating accomplishments. What desirable outcomes would you like to achieve? Now is the time to create goals to make those outcomes happen.
Have a question about your small business? You can reach Arlene at firstname.lastname@example.org or leave it in the comments here!
[ Down to Business is a weekly small business advice column featured in The World Newspaper, originally published online by the Oregon Small Business Development Center Network, and republished here with permission. ]