How to Set Effective Business Goals for 2021
January 15, 2021 |
The C2FO Team
New year’s resolutions can be about more than just setting personal goals. Now is a good time to lay the foundation for a prosperous 2021 for your business.
The custom of making New Year’s resolutions has been around for thousands of years. More than 4,000 years ago, the ancient Babylonians held celebrations to honor the new year. During the 12-day religious festival, the Babylonians made promises to the gods to pay their debts and return objects they had borrowed. If they kept their word, their pagan gods would grant them favor for the coming year.
Today, New Year’s resolutions are a commonplace practice found around the world, albeit sometimes less extravagantly. Each year, about 60% of Americans make New Year’s resolutions, yet only 8% follow through with them.
You’ve likely already set your personal goals for the new year: “drink more water,” “travel more,” hit the gym.”
This is also an ideal time to set your intentions for a successful business year. After the curveballs many companies were thrown in 2020, goal-setting can be a welcome tool to create a solid foundation for 2021.
Laying the groundwork for a prosperous and rewarding year for your business looks a little different than personal aspirations. Here are some tips to help you establish, track and complete your business goals and objectives:
It’s important to connect vision to strategy. Take stock of what your business accomplished last year and where you fell short. Then, connect each of these achievements and losses, and think about how they fed your ultimate mission and how new goals can complement your game plan for the future.
Whether you’re hoping to improve the financial health of your business, increase market share, or create a new product, SMART goals can help get you where you want to go. The acronym stands for “Specific, Measurable, Attainable, Realistic and Timely.”
Developed by a group of professors and entrepreneurs in 1981, SMART goals create a framework that promotes clarity and discourages vague or imprecise language. Consider using this method to create specific, well-defined business goals that are attainable, but still promote growth.
Setting OKRs, or “Objectives and Key Results,” is another valuable approach to goal-setting and tracking progress. OKRs evolved from a collaborative tool introduced by former Intel CEO Andy Grove in the 1970s. OKRs comprise an objective — a clearly defined goal — and three to five key results — specific measures used to track the achievement of that goal.
These high-level, qualitative, inspirational goals are quantified by key results, which measure the success and impact of the ultimate objective. Like the SMART method, OKRs define how to achieve objectives through concrete, specific and measurable actions.
In a recent article from the Harvard Business Review, the authors argue that strategy, an abstract concept, is being hijacked by numbers, or performance metrics. Our tendency to mentally replace strategy with metrics can destroy company value, according to the article. This tendency, also called surrogation, is especially harmful when the metric and the strategy are poorly aligned. The greater the discrepancy, the bigger the potential harm.
To avoid this phenomenon, the article suggests loosening the link between metrics and incentives, and making sure those responsible for implementing strategies also help formulate them.
The key to effective goal-setting lies in motivating employees. When done correctly, goal-setting can help improve employee engagement in a way that elevates performance and benefits organizations overall, according to McKinsey & Company research.
Consider team size, company culture, and individual strengths and weaknesses. Because people tend to invest themselves more fully in goals that were set specifically for them, linking individual goals to company objectives can help employees grasp the direct impact of their performance.
The Bottom Line
Goal-setting isn’t just an activity for January. You should be creating, defining and tracking your business objectives at least every quarter.
To ensure the future success of your company, monitor your progress on an ongoing basis and hold yourself accountable for successes and failures.