5 Pitfalls That Business Leaders Must Avoid When Setting Business Goals

As the owner or CEO of your business, you're probably well aware how important setting business goals are for ensuring success in the coming year.

When done properly, the business goals you set can play a significant role in shaping the day-to-day operations and decision-making processes in your business. In addition, they serve as a guidepost for everyone in your business, from the C-suite down to your employees, to know and understand the priorities of your business.

However, it's easy to fall afoul of several common pitfalls when you're in the process of setting your business goals. These pitfalls are the result of relying on goal-setting methods that are outdated, and insufficient in helping you manage your business goals properly in today's rapidly-evolving business environment.

These Are The 3 Leadership No-Nos To Avoid, According To The CEO Of SAP.

Here are five common pitfalls you should avoid when you're setting and managing your business goals, along with our tips on how you can work around them; 

1. Relying On The SWOT Analysis
2. Setting Goals Using Only The SMART Framework
3. Using Only KPIs As The Key Metric
4. Collecting Feedback The Old-fashioned Way
5. Not Tracking Progress Towards Goals In Real-time
   
   

1. Ditch The SWOT Analysis For Modern Ways Of Assessing Your Business

Porter's five forces; Source: Investopedia

The SWOT framework has long been a popular tool for assessing the current state of businesses like yours for many years. However, it does have its shortcomings in today's rapidly changing business landscape.

One of the main limitations of SWOT analysis is its focus on internal factors and neglect of external forces that can significantly impact a business. Additionally, SWOT analysis tends to oversimplify complex issues, and can be subjective depending on who is conducting the analysis.

This is where more modern analysis methods like Porter's Five Forces come into play. Unlike SWOT analysis, Porter's Five Forces examines external forces such as the threat of new entrants, the bargaining power of suppliers and buyers, and the intensity of competition. They are as follows;

1. Competition in the industry
2. Potential of new entrants into the industry
3. Power of suppliers
4. Power of customers
5. Threat of substitute products

This framework provides a more holistic view of the industry and allows business leaders like yourself to identify potential risks and opportunities more effectively. By embracing more modern analysis methods like Porter's Five Forces, you can clarify which are the business goals you want to set and prioritise, which can then inform your decisions and help you develop strategies to achieve them.

2. Look Beyond SMART Goals for Business Growth

Once you have assessed the current state of your business, you should use the insights gleaned from it to set goals that are clear, measurable, and aligned with your overall business objectives.

Because of this, you want to set your goals according to an effective framework. The SMART framework has been widely used for goal-setting in businesses; however, it's been argued that the SMART framework may trap you in a finite mindset when business is an infinite game, making them outdated in the rapidly-evolving business landscape of today.

One alternative framework you could consider is IDEAL, an active five-step model which includes the following; Intent, Direct, Engage, Assess and Learn;

• Intent: Is it an actionable goal, which is sufficiently specific to allow planning? 
• Direct: Is success possible via a process of steps and objectives? 
• Engage: Can productivity be defined as a performance standard? 
• Access: What data do you need to identify what is, and is not, working when it comes to achieving progress towards your goals? 
• Learn: Where are improvements needed? How can you apply new knowledge to improve your plan as necessary?  

The fifth step of the IDEAL framework - Learn - makes it a cyclical process, and encourages you to reexamine and revise your goals. With the insights you derive from this, you can then iterate your goal-setting process until you've optimised your goals to achieve the best possible results for your business.

By embracing the IDEAL framework, which offers a more relevant and effective approach to goal-setting and business growth, business leaders like yourself can more easily adapt to the increasingly dynamic nature of the business world.

3. Don't Rely On KPIs Alone; Use OKRs To Set The Direction For Your Business 

Defining OKR; Source: Quantive

Speaking of setting measurable business goals, you'd want to establish specific metrics by which to measure the levels of progress towards these goals. The most established way of doing so is to put in place key performance indicators (KPIs).

However, the issue with KPIs are that they're standalone metrics - that is, they may tell you whether certain targets have been met, but they don't provide necessary context nor indicate how you should adjust the direction of your business as a whole.

This makes them sufficient for tracking progress for a single project, but your intent is to set overarching goals for your business as a whole. In that respect, objectives and key results (OKRs) are a more systemic method of goal-setting.

Using OKRs not only allows you to set ambitious targets for the stakeholders and employees to hit, but also provides an avenue through which any progress which falls short of them can be analysed for insights on how to do better next time.

By establishing these metrics, you can effectively track the progress of your business towards the goals you've set, and identify areas that need improvement.

4. Change The Way You Get Feedback From Your Stakeholders

Setting business goals doesn't end with yourself. It's crucial to gather input and feedback from your stakeholders; that is, the managers and individual employees who'll be on the ground working towards making progress on the goals you've set. They have valuable insights and perspectives that can help shape and refine your business goals.

However, it can be tricky to get useful feedback from your stakeholders in the first place, for a variety of reasons. Here are some common challenges when it comes to collecting stakeholder feedback, and how you can overcome them;

• Identifying the relevant stakeholders can be difficult. Carefully identify which goals affect which stakeholders the most, before you spend the time reaching out to them. 
• The quality and reliability of feedback can vary. After identifying the relevant stakeholders, further separate those willing to offer constructive feedback from those who're prone to offering only feedback which is vague, or influenced by external interests. ,
• Limited availability of stakeholders. Another reason your stakeholders may be reluctant to provide feedback is because it conflicts with their schedules and priorities. You may have to provide them with an incentive to come forward. 
• No single outreach method works for everyone. This may especially be the case if you have a large and diverse group of stakeholders. Employ several different methods to collect their feedback, so your stakeholders can choose which one is most convenient for them. ‍
• Too much feedback. It could be a good problem to have, but it'll still present significant challenges to you. Make sure you've put an effective feedback management system in place, before you proceed. 

5. Failing To Track Business Goals In Real-time

Setting business goals in place, getting relevant feedback, and establishing key metrics to track progress towards these goals is one thing. However, it won't work as well as you hope if you don't arrange to track progress towards these goals in real-time.

According to research from Censuswide and Geckoboard, small and medium-sized enterprises (SMEs) that track their growth targets in real-time hit them nearly twice as often as those that don’t. Yet, only 1 in 10 businesses actually track their goals proactively.

Thus, you need an effective goal assessment strategy, one which focuses on the process and not solely on the objective. This is key to creating an agile business that can hit the goals you set, and quickly adjust said goals if necessary.

This allows you to identify any potential challenges or obstacles - such as less progress made than expected, or 'black swan' events such as disruptive technology or a pandemic affecting the business, industry or market - and adjust or pivot your business goals accordingly.

Of course, it's easier to keep track of your business's progress towards the goals you've set if you have the right tools to help you monitor them. Let's look at an example of such a solution.

ERP Software Can Be An Effective Tool To Help You Manage Business Goals

An ERP software can be a valuable tool in helping you track your business's progress towards the goals you've set in real-time. With its comprehensive and integrated features, ERP software can provide a clear, concise, and shared understanding of what success looks like for the business.

ERP software can play a pivotal role in helping you set and track progress towards your business goals in the following ways;

Full Visibility Into The Current State Of Your Business

An ERP software centralises and unifies data across departments in real-time, giving you full visibility into your business in real-time. This is especially important at the stage where you're setting your desired goals for your business, as it makes it easier to conduct the SWOT analysis on your business, and subsequently create goals according to the SMART framework.

Data Analytics And Visualisation

Introducing Power BI; Source: Microsoft Power BI

Many ERP software comes with advanced analytics capabilities which can help you generate valuable insights from unified data, enabling you to pinpoint the level of progress made towards each of the business goals you've set at any given time.

Some, like Microsoft Dynamics 365 Business Central, can integrate powerful visualisation tools such as Power BI; these generate reports that can be customised to give you the insights you need at a glance. This makes it easy for you to monitor the level of progress made towards each metric, gauge the overall performance of your business, and identify areas with room for improvement. 

Fosters Collaboration And Communication

Because it unifies all data generated across your business, an ERP software provides all of your employees using it with a single source of truth. This extends to key metrics you've set at the start of the year, which means that everyone is on the same page on the level of progress they've made on the goals which are relevant to their respective roles, and thus facilitates collaboration and communication amongst team members.

Setting Business Goals Is Key To The Success Of Your Business

Setting business goals at the start of the year, and monitoring the progress made towards these goals throughout, is key to the growth and success of your business going into the new year.

However, you'll want to make sure that you don't wind up in one of the most common pitfalls when you're setting your business goals. Instead of relying on the long-outdated SWOT analysis, use a more up-to-date system like Porter's Five Forces to assess the current state of your business. Similarly, try a more modern framework like IDEAL, instead of the obsolete SMART framework.

Complement your KPIs by setting OKRs as the overarching measure of progress towards your business goals, and take a second look at how you gather the feedback you need to inform any adjustments to the goal you've set.

Last but not least, don't forget to put a goal assessment strategy in place to ensure you're tracking progress towards your goals, and don't underestimate the value of technological solutions such as ERP software in helping your keep an eye on said progress in real-time.

Need more guidance on how to set business goals that will promote the growth and success of your business? Click on the image for the top 10 business goals for small and mid-sized businesses like yours, and how you can achieve them.