http://performanceevolution.wordpress.com/2006/05/11/writing-smart-goals-%e2%80%93-part-3/

Cool, very good article, i like it.. plz wrte more…

You have raised some really good points. Getting people in a large organisation aligned with the business goals and balancing those goals are all things I’ll be going into in future articles.

When you say “It might be better to to set an objective that focuses on expanding the revenue from custmers while also constraining sales costs” that’s quite insightful. At the right levels in the organisation you would be wanting to do that. At the lower levels you want to stay aligned with that goal, but also set objectives that are within a person’s control.

It is possible to set SMART goals within your own unit without the clarity of business goals. But you really want support from the top down. So you’ll be pleased to know that there’s research showing that organisations using good performance management practices are more profitable.

Heaps of great stuff to talk about … I can’t wait to get some of these articles out.

One other thing that normally makes existing customers important is that retaining existing customers generally costs considerably less than finding new customers (although there may be some existing customers that cost more to service than they are worth). However, business growth generally relies on expanding the customer base, so there needs to be a balance between retaining the existing customer base and growing it.

I know you are trying to keep things simple here, but there are a couple of aspects that I think are important to add about setting good objectives, implied by my last two paragraphs.

Keeping 99% of existing customers or getting a customer service rating of 4 out of 5 is only a good outcome if the cost of doing so is adequately lower than the revenue generated. Also, focusing only on existing customers usually limits business growth and leaves the business more exposed to changes in fortune than it would be with a larger customer base – losing one of three customers is much worse than losing one of one hundred.

It might be better to to set an objective that focuses on expanding the revenue from custmers while also constraining sales costs. The right objective would result in growing a customer base that was relatively inexpensive to obtain and retain and provided healthy revenues, relative to their costs. The difficulty in setting such an objective at an individual or team level is that many other factors outside of their direct control, such as your example of the customer service staff, directly affect the bottom line and their personal objectives.

Even ignoring these factors setting objectives as I described requires the business keep accurate records of sales costs and revenue on customer by customer basis or a salesperson by sales person basis – often very difficult to do in larger businesses where the channel to market and/or the supply chain is long and/or complex.

For this approach to work best, it needs the full support from the top down and a business that maintains an adequate resolution of business metrics. Again, something I have found in the last 20 years to be a rare thing.

How do I set SMART objectives that I can clearly link to the business bottom line without necessarily having the the clarity of business goals or resolution of metrics? If the answer is “I can’t”, then how do I convince the organisation from the top down, to make significant changes to their business systems so that I can set these objectives in a practical way (how do I prove an adequate return on investment)?

I look forward to your future articles.