Objective Setting (Is SMART Best?)

Many employers rely on objective setting frameworks such as the SMART system as part of their performance management process. While such frameworks can be useful tools – they have to be used effectively.

Focus on the purpose of performance management

The purpose of performance management is to help individual employees perform to the required level, to achieve work satisfaction and to contribute to the overall success of the organisation.

The term ‘performance management’ describes a system of synergistic strategies which are designed to maintain good performance among the workforce and identify and improve poor performance when it occurs.

Performance management involves an ongoing dialogue between management and employees, sharing clear direction and constructive feedback, while encouraging input and ownership from personnel for their development and performance.

When performance management is effective, every employee is given the platform to help shape their own performance and development measures, and understands what they are expected to achieve during their time at work, while being given the tools to improve their performance where required. Setting clear objectives is an essential piece of this puzzle.

When objective setting to maintain or improve performance measures, the targets and goals set for and with employees should be strategically aligned with the organisation’s bottom-line goals. This ensures the company can reap the maximum rewards from their employees’ efforts.

A cascading approach to objective setting 

‘Goal cascading’ is the objective setting system of choice for many established organisations. At first glance, objective cascading appears to be an effective way to align the individual objectives of every employee with the overall objectives of the company.

In a cascading approach to objective setting, the process of defining individual targets begins at the executive level. Overall performance goals and targets for the company are set, then ‘cascaded’ down through each level of management. At every level, broad objectives are established based on those passed down from above. Eventually, the overall company objective has been whittled down to reveal individual employee objectives.

Look at the system in reverse and it seems the cascading approach to objective setting perfectly defines employee targets to ensure they feed into the company’s overall goal. Though if individual employees do not consistently achieve their objectives, the entire system collapses. Unfortunately, this is often what happens in organisations reliant on cascading objective setting.

Cascading objective setting is rarely as effective in practice as it is in principle. In the modern workplace, it is widely understood that employees perform at their best when they have an active role in setting their own objectives with guidance and support from their managers.

The top-down delegation of set targets within the cascading system does not facilitate this. In fact, it often leaves bottom-rung employees feeling detached from the organisation’s overall goals and lacking motivation to achieve objectives.

Another problem with the cascading system is that it is usually rigid, as the entire organisation’s objectives are typically set just once a year.

While progress towards objectives may be assessed at quarterly intervals, adaptations to the overall plan cannot easily be made.

Under a cascading system of objective setting, performance management is typically carried out through annual employee performance appraisals without revisiting or adjusting individual employee’s goals throughout the year.

Cascading goal setting only leaves room for one route to achieving the company’s targets; it says, “succeed like this, or do not succeed at all.”

Objective setting systems that rely continuous performance management are better suited to the modern employee-centred workplace and are becoming increasingly prevalent. Such systems recognise that there are many ways an individual employee can contribute to the organisation’s bottom line and that a flexible, person-centred approach often yields the best results.

Employee-led objective setting

Studies have demonstrated that employees are far more likely to achieve personal targets, when they have an active role in the objective setting process and can see how their responsibilities align with the overall goals of the company. This type of bottom-to-top objective setting requires continuous performance management to be carried out as a reciprocal process between manager and employee.

To yield the best results, appraising employee performance should involve more than just objective setting and tracking performance measures. Employers must recognise that employees are human beings, not machines. It is impossible to maintain good performance – or identify and remedy the causes of poor performance – simply by analysing figures on a computer screen.

Recognising the human element 

Objective setting is an essential part of a successful performance management system. However, objective setting by itself is rarely enough to produce significant and lasting results, especially where significant dips in performance are concerned. To boost and maintain performance, managers should communicate with their employees during one-to-one meetings, to identify and tackle the real-world reasons behind the problem. Otherwise, you are simply giving the employee another target to hit without addressing the reasons they were not able to hit their initial targets.

Managers should engage in regular performance-oriented conversations with under performing employees. This will involve listening and asking questions to form a picture of what motivates the employee and what is going on in their work and personal life which may be distracting them from work. In doing so, they can:

• Help the employee identify problems and get troublesome feelings off their chest
• Offer practical support to help the employee overcome obstacles
• Ensure the employee remains on-track to achieve their new objective
• Acknowledge improvements in the employee’s performance as they occur

When objective setting with employees, managers should set a frequency at which they will meet their employee to evaluate progress as they work towards their goal. This will help to ensure the employee remains aligned with their task, stays motivated and feels supported throughout the process.

Objective setting strategies

When setting objectives to improve performance, it is not enough simply to tell an employee that they must ‘improve’ a certain aspect of their work. To be effective, objectives should be clearly defined, relevant and achievable. The employee should be given specific, measurable achievements to accomplish within a realistic context. The parameters of the objective should be outlined during discussions with the employee, to ensure they know what is expected of them and feel comfortable that it is attainable.

A key part of the objective setting process will be exploring what the employee feels they need to achieve their goals and putting measures in place to ensure these needs are met. A ‘plan of attack’ should also be established, outlining the specific actions the employee will take to work towards their target.

The resulting target and plan may look something like this:

• Objective: I will increase my personal sales by 10% by the next monthly review.
• Plan: I will achieve this by bringing my hourly call rate inline with company standards, re-writing my basic script to reflect effective sales techniques and taking on further product training.

SMART objective setting

Objective setting frameworks can help managers set effective goals with their employees, in accordance with the criteria discussed above. ‘SMART’ stands for ‘specific, measurable, achievable, realistic and time-bound’. Any performance objectives you establish with an employee should be detailed-enough to fit the five elements of the SMART acronym.

When assisting employees in setting their own performance objectives, managers should take a hands-on approach to ensure goals are built to fit the SMART system.

All too often, objectives end up being too subjective and therefore difficult to effectively track. As poor objectives can easily be manipulated to seem as if they fit the SMART acronym, the key to effective objective setting is to make sure the employee knows:

1. Precisely what they need to achieve
2. How they are going to achieve it
3. Which measures will determine their success

The SMART objective setting system can be used as a resolution strategy when dealing with instances of poor performance. In addition, it should form part of your organisation’s continuous performance management practices.

Continuous performance management

Continuous performance management can be thought of as the antithesis to the annual appraisal, which is commonly used under the cascading objective setting system. In contrast to the annual appraisal approach, continuous performance management is an on-going process which allows for individual goals to be adjusted as necessary throughout the year. Crucially, this agile approach to performance management makes it easier to detect and remedy instances of poor performance as they occur.

‘Check-ins’ are the basis of continuous performance management. During these one-to-one meetings, manager and employee can discuss:

• The progress made towards existing objectives
• The efficacy of the employee’s current action plan
• The employee’s level of work satisfaction
• The employee’s personal development
• Potential new objectives to be set
• Any problems the employee is experiencing

Research has shown that objective setting is typically far more effective when utilised as part of a continuous performance management strategy, as opposed to a cascading system over which the employee feels no ownership. Companies that have adopted this progressive approach to managing employee performance widely report higher levels of employee engagement and greater success in meeting bottom-line targets.

Need assistance?

DavidsonMorris’ HR specialists are on hand to support employers with all aspects of workforce engagement, management and development, including performance management and objective setting. To discuss improving your organisation’s approach to driving better engagement and results from your people, speak to us.

Objective setting: FAQs

Last updated: 2 October 2022