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Management compass: Setting performance goals

03 Mar 2014 - {{hitsCtrl.values.hits}}

“If you don’t know where you are going, any road will get you there.” This line from Alice in Wonderland has been true in many organisations and companies. They often don’t have or maybe don’t articulate very well real business goals other than ‘staying in business’.

Because of stiffer competition, new technologies, more complex regulations and increasing global opportunities, organisations today see the value of setting a clearer direction from top to bottom. This would help them to put all their energies and resources into moving toward their required destination.

Goal setting is one of the most prominent and basic tools used by both individuals and organisations to assist in setting their direction and in accomplishing it.
Successful companies and other organisations (public sector and non-profit entities) often set both long- and short-term goals, not only for sales, products and service development but also for improving quality, reducing errors, becoming more customer-focused and building better internal and public relations.

Right viewpoint
Suppose you are a manager in an organisation that has set some business objectives at the executive level and you’ve been told to make it happen in your part of the organisation. For some, this may mean not so much setting the goals as redefining them for your department and then developing the action plans to reach those goals. Others may be asked to set their own departmental goals but to make sure that they actually further the organisation’s broader mission.
Goal setting has a wider application than just managing people for performance. However, its greatest focus seems to be as a tool for realising performance, including an expectation about how this will be done.

Part of your problem here is how the parties involved in goal setting in your organisation see themselves and the process in which they are engaged. For the sports coach, the role is a supportive and facilitative one; in business, it too often to be more of a directive one.

Often the process itself is something that is to be endured as a yoke rather than exploited as a springboard. The question, then, is whether you can transform goal setting into a productive process. The answer is – yes, it can.

Benefits
Goal setting has been extensively studied by researchers. The broad conclusions from all these are as follows:
Setting business goals provides your business with a structured framework. It is a skill that assists your company to understand whether the firm is successful or not. A business is likely to meet failure without clearly constructed business goals. Well-defined business goals provide a detailed guideline to everyone involved with the company.

Setting realistic and achievable goals helps a business in the following ways:

Motivates workforce

Setting goals helps the new entrants to understand what is expected from them. Firm goals help to maintain a consistent level of motivation to encourage the workforce. They help the employees to improve their performance for achieving the goals.

Attracts new clients

Specific goals can attract potential vendors and partners. Such business goals will assure the clients they will benefit from working with the company. The same goal-setting method plays a key role in cementing the client-company relationship.

Helps stakeholders

The investors, shareholders and lenders form an intrinsic part of the company. Such external forces invest in a particular company only after understanding the short-term and long-term business goals of the company. Setting goals helps these stakeholders to take better decisions about the company.

Aids performance evaluation

Setting business goals helps in evaluating the performance of employees. The performance of the employees can be evaluated by calculating their contribution in the overall realisation of the company’s goals. It provides them with a direction and they can put in the required efforts to achieve their individual goals.

Meet financial targets

Sales form an intrinsic part of any business set-up and business goals. Well-structured business goals help the company to gauge the efforts that need to be put in to meet the sales targets. Other details, such as the profit margin can also be accurately estimated with proper business goals.

Prerequisites
Goal setting involves five prerequisites that determine their effectiveness:

Specific

Goals should be specific and not use vague terms. They should be clearly understood and interpreted. The mode of action that needs to be approached should be evident from the goals.

Measurable

Goals should always be measurable. You should be able to track and measure the performance in achieving these goals.

Attainable

The goals should be within the reach of your company and should be achievable. They should also be realistic. It makes sense to start off with smaller targets and then work on improving them.

Relevant

The objectives and goals should be relevant to the functioning and nature of work carried out by the company. You cannot have goals that do not complement the nature of your business.

Timely

Goals should have a fixed time frame for your goals. This prevents any sort of lethargy and provides an internal deadline to the entire organisation. Time-bound goals will also keep you motivated.

Motivation and goal attainment
The importance of motivation and goal setting in business cannot be overstated. The setting of goals is important to guide the company and employees toward defined objectives.

Motivation is important because it is the psychological catalyst employees and owners require to reach the goal. Without goal setting and the necessary motivation for goal attainment businesses are without purpose or direction.

Motivation is important in business because it impacts mental and physical human reactions. Highly-motivated individuals and staff have a willingness to get the job done efficiently and effectively, resulting in higher productivity, increased revenue, cost savings and satisfied employees and business owners. Low motivation can be caused by a lack of direction or purpose and can sometimes be reversed by the introduction of goals.

Just as goals have an effect on motivation, motivation has an important effect on goal attainment. Even the most well-defined, reachable goals will be difficult to attain if motivation is low and goals alone are not a sure cure for low motivation. The company’s culture, working atmosphere and attitude must be positive in order to raise motivation to productive levels. The importance of a positive environment is a paradigm that every business must understand, as employees working with undue stress and pressure will invariably lose the motivation necessary to reach goals.

Balance
There is an important balance between goals and motivation. Goal-setters within the organisation must always consider how goals will effect motivation and how the current motivation level will effect attaining the goal. One way to create and maintain this balance is to add incentives to the goal that positively impact employees. When employees see a reward on the horizon, motivation often improves and the goal has a better chance at being realized. Ultimately, employees are motivated by factors that directly and positively impact their careers and personal lives.

(To be continued next week)

(Lionel Wijesiri, a corporate director with over 25 years’ senior managerial experience, can be contacted at [email protected])

Features

Management compass: Setting performance goals

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