Why Is Goal Setting Important in Organizations?

In business and in life, failing to plan is planning to fail, and many companies that launch without setting goals run into problems that may have been foreseeable. Organizations that only set a goal of month-to-month survival are missing out on the multiple benefits that a long-term plan can provide. Setting goals helps outline the path that an organization must take to achieve desirable outcomes.

Every business wants to be profitable; the higher the profit margin, the more likely it is that the company can grow. The problem is that too many business owners don’t take the time to set a specific profitability goal. It’s easy to tell employees, "We need to turn a profit," but how will you measure profitability? Instead of just setting a general goal of earning a profit, business owners should set a specific standard.

For example, if you own a skateboard company, set a goal of earning a 20 percent net profit margin within two years, based on sales of 50,000 skateboards. By specifying the profitability standard, it’s now much easier for your organization to make an action plan to achieve that goal.

Without specific goals, employees can feel as if they’re part of a ship that lacks a rudder. In other words, they show up every day and perform tasks, but no one is really working together toward one purpose. However, when a business leader communicates clear goals to the team, everyone is now unified by a single purpose. Even more important, everyone is motivated to work hard to achieve that goal, and that motivation will make it easier for workers to buy into the decisions you make to push the organization forward. When employees understand where an organization is headed, they are much more likely to leverage their own skills and talent in efficient and effective ways to help steer the company in the right direction.

Without goals, organizations find it difficult to understand whether they’ve achieved success. Goals provide an important benchmark that guides an organization toward increased efficiency, growth and profitability. Too often, organizational success is measured strictly in terms of how much money a company earned. However, clear goals help the people within an organization understand that success is incremental and progressive, and that hitting monthly, annual, and bi-annual benchmarks are all essential parts of overall success. For example, your organization may have failed to hit a profitability goal, but it was able to increase productivity, which means you achieved success in one area, and need to reassess how to achieve success in the area that lagged.