Companies that rigidly adhere to traditional approaches to goal setting may be driving their business in the wrong direction. More than ever, goals must be set in relation to the competitive environment.
We rarely question the need for goals, and the familiar acronym SMART instructs us that good goals should be specific, measurable, achievable, realistic, and time-based. But none of these attributes say anything about the context in which we are setting goals.
Are SMART goals effective in every context? If not, what kinds of goals are most useful in what kinds of contexts? These are important questions at a time when competitive environments are constantly morphing and new ones are unexpectedly emerging.
Why We Need Goals
Every company needs goals. Goals fulfill several functions: coordination (to align intentions); abbreviation (to summarize a complex effort); prioritization (to ensure that activities and processes don’t become an end in and of themselves); calibration (to tell us how to allocate or invest resources); and evaluation (to tell us if we are making progress).
In stable, predictable environments, it makes sense to set goals that are specific and measurable. For instance, some markets, such as confectionary and cosmetics, grow with gross domestic product (GDP) and follow relatively predictable trends. Thus, a company like Mars Inc. can plan out a multiyear strategy in its core categories.
In more dynamic and uncertain environments, however, SMART goals can be problematic. It’s hard to manage to specific, time-based targets when demand, technology, business models, and competitor sets are incessantly shifting, as is common in emerging or recently disrupted industries, like genetic testing services or augmented reality technology. In such cases, companies need goals to do other jobs, like prompt new thinking or encourage experimentation and learning in situations they have not encountered before.
How We Think Matters
To see how different kinds of goals can be effective in different situations, it is helpful to consider how the human brain works in different contexts.
Varying predictability: In predictable environments, the brain breaks down goals into familiar actions that we know will add up to the overall outcome. SMART goals, by specifying details such as the destination and arrival time, help us identify the right actions in the right order.