I wanted to talk a little about the right way to set goals to grow your international business. Much of this discussion is applicable to virtually anything, so even if you are not responsible for international growth, hopefully you will find this discussion interesting.
Over the past few years, I have learned one of the most important things a leader does is set effective goals for his business and employees. These goals help decide which activities to pursue, where to allocate resources (especially time, our most limited resource) and how to measure performance. Without goals, businesses and people tend to flounder.
The most important principle I have learned is to set goals that are SMART: specific, measurable, achievable, realistic and time-boxed. Goals that do not encompass these five elements are either useless or even counter-productive. Often you hear a goal is to “maximize profit.” That’s an innovative goal that will really produce results—not! First, how do you know if you are maximizing profit? Is it a 10 percent margin? A 20 percent margin? If a firm is losing money, is it just doing nothing so the loss goes down? While maximizing profit does nothing to drive productive behavior, it could provide an excuse for counter-productive behavior. Almost any activity can be said to be done in the interest of maximizing profit, because there is no accountability.
Another common excuse—I mean goal—is to increase “market share.” Does that mean selling one widget in Uruguay, or becoming the dominant player in Malaysia? Also, do you need to do it in the next six months or is it okay if share is stagnant but will increase in ten years? At what cost do you want to increase share (after all, you can acquire Microsoft and increase your share of the OS market)? Again, a goal like this provides cover for virtually anything without driving productive activity.
Although not covered in these examples, goals that are not achievable or realistic are really bumper stickers, not goals. If people do not feel they can achieve them, they will ignore them.
The way to increase performance would be creating SMART goals for these two “ambitions.” Rather than maximizing profit, a useful goal would be “increase margin by 20% in Portugal over the next six months without lowering gross revenue.” This goal is specific and measurable (take current profit and measure it in six months), hopefully achievable and realistic (would depend on the situation) and time boxed (six months). All activities can then be measured against whether or not they contribute to hitting this goal.
I cannot stress enough the importance of setting SMART goals and changing them when necessary. If you don’t have a real target in mind, you and your people are likely to wander aimlessly.