Rules for setting business goals and objectives: why and how to be SMART

We all know that nothing works without a plan, and a plan can’t work without having its goals set.

That goes for any type of plan, whether it’s business or personal finance, college degrees or NGO programs, website promotion, or weight loss.

Setting goals and milestones is of crucial importance to any planning activity and is at the core of its success or failure.

Knowing how to set objectives is not exactly rocket science in terms of complexity, but any strategist should know the basic rules of how to formulate and propose objectives. We will see in this article why objectives play such an important role within the planning and strategic activities of a company, how they influence all business processes and we will review some guidelines for setting objectives.

The importance of setting goals

One might wonder why we need to set goals in the first place, why not just let the business or a specific activity run smoothly in the future and see where it goes. That would be the case only if we really don’t care if the activity under discussion will be successful or not: but then, to use a popular saying, “if something is worth doing, then it’s worth doing well.” In other words, if we don’t care about the results, we shouldn’t be taking the action at all.

Setting goals before taking any action is the only right thing to do, for several reasons:

– gives a goal to aim for, so all actions and efforts will be focused on achieving the goal instead of being used inefficiently;

– gives participants a sense of direction, a glimpse of where they are going;

– Motivates leaders and their teams, since it is quite common to establish some kind of reward once the team has successfully completed a project;

– offers support in evaluating the success of an action or project.

The 5 Rules of Goal Setting: Be SMART!

I’m sure most managers and leaders know what SMART means, well, at least when it comes to goal setting. However, I have seen some of them who cannot fully explain the five characteristics of a well-established goal: things are somewhat fuzzy and confused in their minds. Since they cannot explain in detail what SMART objectives really are, it is highly doubtful that they can always formulate such objectives.

It’s still not clear where the confusion is coming from: maybe there are too many sources of information, each with a slightly different take on what a SMART goal really is; Or maybe most people only briefly “heard” about it and never quite get to the substance behind the packaging.

Either way, let’s try to figure out the meaning of the SMART acronym and see how we can formulate efficient goals.

SMART illustrates the 5 characteristics of an efficient goal; what represents Sspecific – METERmeasurable – TOachievable – R.high – youprompt


When it comes to business planning, “specific” illustrates a situation that is easily identified and understood. It is usually linked to some mathematical determinant that gives a specific character to a certain action: the most common determinants are numbers, ratios and fractions, percentages, frequencies. In this case, being “specific” means being “precise.”

Example: When you tell your team “I need this report in multiple copies,” you did not give the team a specific instruction. It is not clear what the determiner “several” means: for some it may be three, for some it may be a hundred. A much better instruction would sound like “I need this report in 5 copies” – your team will know exactly what you expect and have less chance of failing to deliver the desired result.


When we say that an objective, a goal, must be measurable, we mean that there is a strict need to be able to measure, to track the action(s) associated with the given objective.

We must establish a separate system or establish clear procedures for how actions will be monitored, measured and recorded. If an objective and the actions that correspond to it cannot be quantified, it is most likely that the objective is poorly formulated and we must rethink it.

Example: “our business must grow” is an obscure objective, not measurable. What exactly should we measure to know if the objective was met? But if we change it to “our business must grow in sales volume by 20%,” we have a measurable goal: the measure is the percentage increase in sales from now to a given time in the future. We can calculate this very easily, based on the recorded sales figures.

3. Be REACH!

Some use the term “achievable” instead of “attainable”, which as you will see is merely a synonym and we should not get bogged down in analyzing which is the correct one. Both are.

It is understood that each leader will want their company/unit to deliver outstanding performance; this is the spirit of competition and such thinking is very necessary. However, when setting goals, one must first deeply analyze the factors that determine the success or failure of these goals. Think about your team, your abilities, your motivation: are they enough to meet the objectives? Do you have the means and capabilities to achieve them?

Think about it and be honest and realistic with yourself: are you really capable of achieving the goals you have set for yourself or are you more likely to be disappointed? Always set goals that have a good chance of being met: Of course, they don’t have to be “easy” to be achieved, you are entitled to set difficult goals as long as they are realistic and not futile.

Example: You own a fledgling moving company and set yourself the goal of “becoming the #1 moving company in the state.” The problem is that you only have 3 trucks available, while all your competitors have 10 or more. Your goal is not reachable; try a more realistic one instead, such as “reaching the top 5 fastest growing moving companies in the state.”


This notion is a little more difficult to perceive in its full meaning; therefore, we will start explaining it using an example first.

Imagine going to the IT department and telling them they need to increase the profit to revenue ratio by 5%. They’ll probably stare at you and mutter something mediocre about managers and the way they mess with people’s minds.

Can you tell what is wrong with the above objective? Of course! IT has no idea what you were talking about and there’s nothing they can do about it: their job is to develop and maintain your computing infrastructure, not understand your business talk. What you can do is set a goal that IT can have an impact on and that will eventually lead to the increase you wanted in the first place. How about asking them to reduce hardware and software expenses by 10% per month and be more cautious with consumables within their department by not exceeding the allocated budget? They will surely understand what they need to do because the goal is relevant to their group.

So the quality of a goal to be “relevant” refers to setting goals that are appropriate for a given individual or team – you have to think about whether they can actually do something about it or whether it’s irrelevant to the work they do.


There is not much to discuss about this aspect, as it is probably the easiest to understand and apply.

Any usable and achievable goal should have a clear time frame of when it should start and/or when it should end. Without having a specified deadline, it is practically impossible to say if the objective is met or not.

For exampleIf you just say “we need to increase profit by 500,000 units”, you can never know if the goal was achieved or not, you can always say “well, we’ll do it next year”. Instead if you say “we need to increase profit by 500000 units within 6 months from now”, anyone can see in 6 months if the goal was reached or not. Without a clear and defined time frame, no goal is good.

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