SMART Goals in Strategic Planning

Follow the SMART criteria for a goal-setting exercise; the risky practice is to pack all the results into a single line of text and call it a “goal.”

One of the common issues we identify on clients’ scorecards is with SMART goals. While this format is effective for task lists, it may not be suitable in the strategic planning environment governed by VUCA.

Solution?

• Decompose the SMART goals into: goal, metric, targets, owner, action plans.
• Improve quantification, address risks, and ensure better alignment.

An Example of a Typical SMART Goal

The SMART acronym stands for:

• Specific
• Measurable
• Achievable
• Realistic
• Time-bound

You can easily recognize such goals on a strategy scorecard; they are simply 2-3 times longer than “normal” goals.

Here is an example of a SMART goal:

Achieve an 85% customer satisfaction by the end of the year by introducing 3 innovative products.

To a certain degree, it complies with all criteria:

• Subjectively, it is quite specific.
• It’s measurable, especially if we agree about the quantification method used for customer satisfaction.
• It is achievable in terms of our ability to execute the proposed plan, but not necessary in terms of achieving desired outcomes.
• It is relevant, at least to the extent that we can judge without seeing other goals.
• It is time-bound as we defined the end of the year as a due date.

The SMART Goal Challenges in Strategic Planning

“The perfection of means and the confusion of ends seems to be our problem.” 

— Albert Einstein

Strictly speaking, SMART goal is not a pure goal:

• The goal is the END, what we want to achieve. And here we also have the MEANS – how we plan to achieve it, a suggested action plan.

What were the advantages in the case of short-term goals, become complexity nodes in strategic planning.

Challenge 1. No Room for Better Action Plans

Having a defined action plan is an advantage, but what if we find out that the reason for low customer satisfaction is poor customer service, not the limited product offer?

The very specific definition of the action plan (the MEAN) closes any further debates about achieving the goal in other ways.

Challenge 2. Aspirational Targets

Where does the 85% target come from?

• Was it the result of some previous validating tests, or is it just an aspirational target?
• Does achieving the 85% threshold lead to higher customer retention rates or financial outcomes?
• Should we stop when the 85% threshold is achieved?

Challenge 3. Non-Specific Relevance

What do we mean by a “relevant” goal?

• Is it relevant to our mission and vision? To our values?
• To the interests of stakeholders?
• To other goals that we have in our strategy?

Challenge 4. Achievable is Business as Usual

The term ‘achievable’ is well-suited for classical tasks in project management, a domain with established rules of the game. In strategic planning, we deal with uncertainties, relying on ‘educated hypotheses’ as our main tool.

Focusing only on achievable goals basically means focusing on business as usual.

The truly innovative ideas, by definition, involve risk and won’t pass the ‘achievable’ filter.

Challenge 5. No Risk Analysis

While uncertainty persists in the VUCA business landscape, conventional SMART goals overlook potential risks, focusing solely on positive outcomes.

Challenge 6. Treating Metrics as Reality

As formulated in the SMART goal, it appears that the ultimate objective is to enhance the customer satisfaction metric.

• What if customer satisfaction is not the most accurate proxy for customer happiness or loyalty?
• How do we isolate the impact of this goal/action plan on customer satisfaction from other activities?
• What if, by improving customer satisfaction, we won’t achieve financial outcomes?

That’s exactly the “confusion of the ENDS” from Einstein’s quote.

Decomposition of SMART Goal

Let’s take another look at this goal and try to break it down into smaller chunks.

Looking at:

• Achieve an 85% customer satisfaction by the end of the year by introducing 3 innovative products.

Decomposition of SMART goal into goal, metric, and action plan. Source: SMART Goals in Strategic Planning.

I’d say that:

• Our goal is to make the customer happier or more loyal.
• We quantify that goal by customer satisfaction (we still need to agree on a measurement method).
• We have a target of 85% for customer satisfaction due by the end of the year.
• There is an action plan suggested: introduce 3 innovative products.

With this decomposition, we have not modified the goal; we have just converted it into a more manageable form.

Adapting SMART Goal to Strategic Planning

With the goal in the new format, we can address the challenges mentioned above and add necessary details.

A goal with a hypothesis, leading and lagging metrics, and an action plan. Source: SMART Goals in Strategic Planning.

To improve the action part:

• For better clarity, we can formulate hypotheses to test, for example: “by extending the product line, our aim is to enhance customer loyalty.”
• We can make the action plan more specific by defining progress metrics and matching implementation progress with achieved results.
• We can formulate and further work on the risk, for example “No correlation with financial performance.”

To improve the quantification part:

• We are not limited to just one quantification of “customer happiness”; we can add an additional metric like “% of returning customers.”
• We might be interested in the analysis of success factors for customer satisfaction and their quantification as well, for example, by the leading metric “First-contact resolution rate, %” or “Response time.”

To improve target settings:

• Instead of having one 85% target for the end of the year, we can split this target by quarterly control points.
• For each control point, we can compare expected versus actuals, add comments or update the initial hypothesis.

To improve relevance:

• We explain the relevance of the goal by assigning stakeholders.
• We align the goal with another goal by the context or by data.

By presenting the SMART goal as a set of separated components, we have not changed anything fundamentally in the goal definition, but we made it more resilient for the VUCA business environment.

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