SMART objectives definition
SMART is an acronym that defines important criteria for setting ideal goals and objectives to manage your staff or a company. SMART objectives must be specific, measurable, achievable, realistic and time-bound.
For teams to work effectively and efficiently, they need clear objectives. Adopting SMART objectives is one way of doing that.
According to Jean-Claude Gagné, Business Advisor, BDC Advisory Services, “SMART objectives help you determine what direction you’re going in and help you communicate that properly to people on your team so that everyone’s heading in the same direction and it’s possible to track progress properly.”
He goes on to explain in detail what SMART objectives are and provides concrete examples so that you can start using them or make better use of them in your day-to-day work.
Working with SMART objectives doesn’t mean that they’ll be easy to achieve, but at least it’ll be easier to see everything that needs to be done, what setbacks occur, the impact they have on other actions and how to adapt to limit any resulting mess.
What are SMART objectives
SMART is an acronym. Here’s what each letter means.
S for specific
The objective should specify what needs to be done, who needs to do it and how. It shouldn’t be ambiguous.
The objective must be simple to understand, clear, precise and something that everyone can grasp quickly. If the objective is overly complicated, it needs to be broken down into several smaller objectives.
A SMART objective shouldn’t look something like, “make sure there’s a positive tangent gradient for product X sales.” Instead, it should be worded, “achieve X in sales.”
Here are a few questions that you can ask yourself to help you create your objective or make it more specific.
- Can the objective be divided into several smaller ones?
- Can a single measurement criterion be used to confirm that this objective has been achieved?
- Is the objective worded in a way that all stakeholders can understand?
- Is it possible to make it more positive?
M for measurable
The objective must explain expected results in terms of quantity, quality, costs, etc.
It should also have a threshold. That means that it should tell us what level needs to be achieved, the value of the measurement that needs to be achieved, or the line that needs to be crossed to conclude that the objective has been met.
For example, if you define an objective that says, “increase our market shares,” it’s understood that market shares need to be measured, but there’s no threshold that needs to be reached. Is a 1% increase in market shares enough to say that you’ve reached this objective?
Instead, you could say, “increase our market shares by 7%,” but once again, this is vague for anyone unfamiliar with the context of your company. They need to know the initial value.
You should word your objective as follows: “increase market shares within Canada from 13% to 42%.”
A for achievable
It must be possible to achieve the objective with the resources available to encourage people to work towards it.
The two next criteria—“achievable” and “realistic”—are often defined together because they often depend on common elements, like feasibility or how we perceive an objective.
Basically, the “A” means that you should find an objective that is big enough to be a challenge and to motivate your team. That said, it needs to be small enough for it to be achievable and realistic for your team to agree to work towards it.
In an organization where decisions are dictated by management, objectives need to be cleared by the executive committee. In an organization that encourages everyone to participate, the entire team could be consulted before an objective is adopted.
R for realistic
The objective must be relevant and make sense based on a person’s position and department as well as the company’s more general objectives.
That means that even after meeting all the previously mentioned criteria, your objective needs to align with other relevant objectives, including financial and general business objectives, because the entire organization's support and assistance is required for success. The objective therefore needs to be aligned with the overall strategy.
This raises another series of questions.
- Is the objective worthwhile?
- Is this the right time to work towards this objective?
- Does it meet other needs?
- Is this initiative being led by the right person?
- Does it align with current social or economic trends?
If the answer to these questions is yes, then it’s realistic.
T for time-bound
A clear deadline is needed for achieving the objective. You can also divide the objective into key steps with deadlines for each one to better track progress.
Like the definition for measurable, the “time-bound” criterion also needs to be worded clearly with no room for interpretation.
For example, do not set a deadline with a duration, such as “within the next three years” or use vague wording that cannot be measured, such as “as soon as possible” or “before our competitors.”
Instead, use wording that allows everyone to understand exactly when the objective needs to be achieved, like in the following examples:
- “by 2025”
- “by fiscal year-end”
- “before December 1”
“There’s no question that taking the time to define all these elements makes communication much easier,” says Gagné. “Because, for example, if I ask someone to do something quickly, for that person that could mean by the end of the day, when really I meant within the next 30 minutes. SMART objectives help you avoid lots of misunderstandings.”
By taking the time to clearly define each objective, you rarely set more than two or three of them, and that’s more than enough.
How do you write SMART objectives?
There are many ways of implementing SMART objectives. Company management can begin by setting an overall objective. “Then it’s easy to go from that big objective to handing out smaller objectives to each department, then to each team and individual so that everyone can contribute,” explains Gagné.
That said, you don’t have to go through this big overall strategy. “You can also go directly to setting clear objectives for an individual,” he specifies.
Then it’s simply a matter of going through the list of questions for each of the five letters of the SMART acronym.
Start with specific: what is the project and what are the products, services or problems involved?
Then, how can you measure the progress of this project? What do you want to accomplish and by when? Essentially, you’re creating a dashboard to measure the various aspects of a project based on the reference criteria that you established at the planning stage.
In terms of determining whether the objective is achievable, make sure that the organization has approved of the project. It should be aligned with the company's overall strategy.
But is it also realistic? Can the project solve a problem or offer a useful product or service?
Lastly, what are the time constraints? How much time do you have to finish the project to seize this business opportunity?
What are examples of SMART objectives?
Let’s take the example of someone working in online marketing. You could tell them that online sales are currently $100,000 and that their objective for the next fiscal year is to increase sales by 50% to achieve $150,000.
“It’s very clear, especially if you have only asked them to increase online sales,” explains Gagné.
The letters of the SMART acronym stand for the following:
Specific: The project is specific because online sales are one part of the business that can provide good growth for the company.
Measurable: The 50% increase in sales is easy to measure. This simply involves tracking sales.
Achievable: Given the amount of work required to complete a sale, this is an ambitious objective, but based on market research, it is achievable.
Realistic: The objective is realistic because the company’s online sales are showing an upward trend.
Time-bound: By requiring the increase in sales to be achieved by fiscal year-end, a 12-month time limit is being provided for this objective.
The team can consequently easily plan their work based on the objective that they’re working towards. “Of course, you can’t just dump tasks on someone and that’s it,” says the expert. “For example, you could ask whether they need resources to achieve the objective. You also need to give them feedback. If it’s clear that they're on track to achieve the objective, you can encourage them to pursue their efforts, and if they’re not progressing quickly enough, you can offer them assistance. Clear objectives make discussions easier.”
How can SMART objectives be used in an action plan?
SMART objectives can easily be included in an action plan that has been developed following strategic planning. “For example, an important part of strategic planning is developing new markets, and it’s obvious that a series of actions are required to achieve that. You can take each action and turn it into a SMART objective,” Gagné explains.
You need to start by prioritizing which markets to develop. If management has a vision that involves initially targeting the eastern United States, you need to verify that this would be a strategic course of action by carrying out market research. This can be turned into a SMART objective.
Specific: The marketing research team needs to carry out market research for the eastern United States.
Measurable: The market research should determine whether it would be realistic to consider trying to corner at least 5% of market shares in the eastern United States.
Achievable: Two people on the marketing research team will be freed up from other projects to focus on this market research.
Realistic: The market research for the eastern United States being carried out by the marketing research team is aligned with the company's objective to develop new markets.
Time-bound: The market research needs to be delivered within two months.
“To track progress, the manager can go see those two people on the team to see how work is progressing after two weeks and if needed can ask for assistance from other people on the marketing research team or even subcontract a few parts of the research to an external firm,” explains Gagné.
How can SMART objectives be used in a business plan?
Launching a business is a huge undertaking on its own, but you can decide to adopt the SMART method right away. You can even use the method to carry out an expansion project with its own business plan.
“This type of project needs to work on a schedule where every action follows another,” Gagné clarifies. “For example, let's say that a start-up has their first order to deliver by September 1. By that time, they’ll need to have ordered the machines, hired staff, received the machines, trained staff to work with the machines, started testing and begun production to be able to deliver the first order in time.”
It’s best to err on the side of caution and give yourself an extra few days or weeks before the delivery date to be able to handle any delays that might come up.
“Working with SMART objectives doesn’t mean that they’ll be easy to achieve, but at least it’ll be easier to see everything that needs to be done, what setbacks occur, the impact they have on other actions and how to adapt to limit any resulting mess,” Gagné adds.
How can SMART objectives be used to manage finances?
The SMART method can also be used to manage a company’s finances. For example, management could set an objective to improve pre-tax net profit, which is currently $163,000, by at least 10% over the next fiscal year to reach at least $180,000.
“It’s effective and lets you act quickly if the results obtained don’t align with the set objective,” explains Gagné. “For example, if no progress has been made after three months, you need to look at what the problem is.”
How can SMART objectives be used to manage operations?
SMART objectives can also be used to help with the operational side of things. For example, you could decide to review your manufacturing process using SMART objectives to reduce labour costs.
“Let’s say that you’ve realized that the average cost of labour in your industry is 23%, but that yours in 32%,” offers Gagné. “While setting an objective to reduce this proportion to 23% wouldn’t be achievable, reducing it to 27% could be. To get there, the operations team could implement various strategies, including automating certain parts of the production process, to be more efficient.”
How can SMART objectives be used to manage human resources?
Human resource managers can also use SMART objectives, notably for staff performance evaluations. For example, you could ask the sales team to increase its customer satisfaction rating from 87% to 92%.
“Then, you can evaluate whether you’re moving towards achieving that objective by following up with each employee on the team,” Gagné adds. “If that’s not the case, you need to look at what’s hurting customer satisfaction and try to correct the situation.”
According to Gagné, the list of objectives to be achieved tends to be shorter when you work using the SMART method.
“By taking the time to clearly define each objective, you rarely set more than two or three of them, and that’s more than enough,” he says. “If you set too many, they could be forgotten. And one objective includes several actions. You need to be aware of the amount of work involved for employees.”
Download our free employee goal-setting tool to start developing SMART objectives with your staff.