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Setting goals and achieving them is essential to the day-to-day operations of an organization. However, prioritization matters most when it comes to achieving success in any business; setting the wrong target could have the worst consequences for your organization’s success. Success in executing these purposes needs to be measured and evaluated to ensure that the achievement´s objectives lead to the right impact at all levels.
For this, companies use various KPIs. KPIs are defined, combined, and compared with some statistical data, i.e. metrics. In short, the achievement of the goals must be reflected in some important statistical data, namely metrics, to be later compared with other important metrics to see the impact of your actions on specific KPIs that indicate the measure of your success.
Types of metrics
There are several types of metrics, and only a few are important for your business. Therefore, your objectives must be linked to the appropriate metrics to measure success and levels of achievement against your purpose. Others don’t serve their purpose in measuring your success. For example, vanity metrics, as the name suggests, can give you a false sense of achievement while not helping to measure your organization’s success. Instead, you need to choose SMART metrics to measure your goals.
What are SMART metrics?
Successful organizations use goal-setting frameworks to select targets and their associated metrics to measure them. Different goal-setting frameworks are available and finding a suitable one aligned with SMART metrics will help organizations achieve their goals.
SMART: Specific, Measurable, Achievable, Relevant, and Time-bound.
SpecificTheobjective must be precisely quantifiable as a number. For example, the sales team’s specific goal would be to achieve a 10% increase in the number of units sold over the previous quarter. It’s a specific, unambiguous goal, and the SMART metric for that goal would be a ‘sales goal’.
Measurable: Goal achievement must be measurable so that managers can measure how much of the goal the team has achieved. SMART target achievement can be accurately measured using the ‘sales target’ metric by comparing current sales figures with those from the previous review period.
Achievable: While pushing boundaries and going further and further is indispensable for successful goal setting and achievement, targets must be achievable at the same time. The key is finding the right balance between being ambitious and realistic. For example, the best practice in the Objectives and Key Results (OKR) system is to set stretch targets, where results and achievements are measured by SMART metrics. For example, the objective linked to the ‘sales target’ metric should be defined based on the past performance of individuals and the team, increasing it according to the business purpose. If it increases too much from what the team could previously achieve, employees will find it difficult to achieve them on time, leading to a loss of motivation. If it is set to low, it can be easily achieved and business goals will not be met.
Relevant: The objective linked to the SMART metric must be aligned with the organization’s objectives. For example, if your organization’s goal is to achieve a 10% annual increase in sales growth, which is another important metric, the ‘sales target’ should be relevant to your organization’s goal and should be raised to similar levels. Otherwise, the purpose of the sales will not be relevant.
Time-bound: The objective must be completed within a predefined time, and achievements must only be measured within that period. For example, the ‘sales growth’ year over year should be 10%, and the ‘sales target’ should be measured at 10% for the year. Achieving 10% beyond a year translates to failure.
Importance of SMART
Metrics 1. SMART metrics give teams clarity
When SMART objectives are defined, they give teams clarity on what they need to achieve, what the objective is, and how to measure their success. Key metrics or key performance indicators (KPIs) are used to measure performance against specific objectives. This allows the team to focus on what matters and work towards achieving their goals.
2. SMART metrics make evaluation fair and objective
When the achievement of objectives is measured using SMART metrics, there is no other way to misinterpret the results. The evaluation has to go through pure numbers, which makes it fair and objective.
3. SMART metrics allow you to track progress
SMART metrics allow individuals and teams to track their progress against their targets because they are specific and measurable. This allows employees to look at the numbers and constantly stay on track to achieve their goals on time.
4. SMART metrics provide team motivation
When goals and measurement mechanisms are based on past performance and future needs, they motivate employees as goals are realistic and yet ambitious. They give employees the confidence to push the boundaries as much as possible.
5. SMART metrics allow you to verify the alignment of the purpose with the organization
Objectives SMART objectives are aligned with the organizational objectives. Therefore, any progress against these targets must continue to create results for the success of the organization. Otherwise, SMART metrics will reveal a lack of alignment, which allows leadership to make quick course corrections.
6. SMART metrics help you verify the effectiveness of actions and activities
SMART metrics help you verify that your actions are producing the desired results. This helps identify needed changes to your operations and allows teams to optimize their action plan and performance.
SMART: Frequently Asked Questions
1. What are examples of good KPIs?
Good KPIs avoid ambiguity. They are measurable and based on SMART goals.
2. What’s the difference between a KPI and a goal?
Goals are the results of your actions; are aligned with the vision and objectives of the organization. KPIs are the means to measure how well you are working towards goals.
3. What are the KPI uses?
KPIs are measurable values that monitor a company’s progress against defined goals. What is the KPI? Primarily used for tracking goals and making more informed decisions.
Final Thoughts
Using smart metrics to measure and evaluate your business at periodic intervals helps you redefine strategy and correct course without wasting time. As Peter Drucker pointed out, “what gets measured gets managed”. Businesses will benefit significantly from making SMART metrics part of their daily operations.