What are Smart Metrics and why are they Important? (2022)

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What are Smart Metrics and why are they Important? (1)

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Setting goals and achieving them are integral to an organization’s day-to-day operations. But the quality of goals matters the most when it comes to achieving success in any business; setting the wrong kind of goals can have serious consequences on the success of your organization. Success in attaining those goals needs to be measured and evaluated to ensure that your goal achievement leads to the right impact at every level.

For this purpose, businesses use various KPIs. KPIs are defined by combining and comparing a few statistical data, namely metrics. In short, your achievement of goals should get reflected in some key statistical data, namely metrics, which will be further compared to other important metrics to see the impact of your actions on specific KPIs that indicate the measure of your success.

Types of Metrics

There are various types of metrics, and only very few metrics matter to your business. So, your goals must be linked to the metrics that are suitable for measuring success and achievement levels against the goals. Others do not serve your purpose in measuring your success. For instance, vanity metrics, as the name suggests, can give you a false sense of achievement while not helping to measure the success of your organization. Instead, you need to choose SMART metrics to measure your goals.

What are Smart Metrics and why are they Important? (2)

What are SMART metrics?

Successful organizations use goal-setting frameworks to select the goals and their associated metrics to measure them. Different goal-setting frameworks are available and finding a suitable one aligning with smart metrics will help organizations achieve their goals. OKRs vs KPIs to achieve business outcomes is a debate closely associated with smart metrics. OKRs provide a simple and powerful approach to setting business targets while KPIs measure an aspect of the business. Both can work in tandem to bridge the strategy execution gap in Businesses.

SMART stands for Specific, Measurable, Achievable, Relevant, and Time-bound.

Specific: The goal should be precisely quantifiable as a number. For instance, the specific goal for the sales team would be to achieve a 10% increase in the number of units sold compared to the previous quarter. It is a specific goal free from ambiguities, and the SMART metric for this goal would be the ‘sales target.’

Measurable: The goal achievement should be measurable so that it will be possible for the managers to measure how much of the goal the team has completed. The achievement of the SMART goal can be precisely measured using the ‘sales target’ metric by comparing the current sales numbers against the ones in the previous review period.

Achievable: While pushing the limits and going farther every time is indispensable for successful goal-setting and achievement, targets should be achievable at the same time. The key is to find the right balance between being ambitious and realistic. For instance, the best practice in the goal-setting system of Objectives and Key Results (OKR) is to set stretch goals, where the outcomes and achievements are measured by SMART metrics. The goal connected to the ‘sales target’ metric, for instance, has to be set based on the past performance of the individuals and the team, while increasing it in line with the business goals. If it is increased too much compared to what the team could achieve previously, the employees will have difficulty reaching them on time, leading to a loss of motivation. If it is set low, it can then be easily achieved, and the business goals will not be met.

Relevant: The goal connected to the SMART metric should be aligned with the organization’s objectives. For instance, if your organization’s objective is to achieve a 10% YoY increase in ‘sales growth, which is another important metric, then the ‘sales target’ should be relevant to the organization’s objective and should be increased to similar levels accordingly. If not, the sales target will not be relevant.

Time-bound: The goal should be completed within a predefined timespan and achievements should be measured only within that time period. For instance, the year-on-year ‘sales growth is expected to be 10%, the ‘sales target’ should be measured at 10% for the year. Achieving 10% beyond a year translates into failure.

Importance of SMART Metrics

1. SMART metrics give clarity to the teams

When SMART goals are set, they give the teams clarity on what they need to achieve, what the target is, and how they will measure their success. Key metrics or key performance indicators (KPIs) are used to measure the performance of specific targeted objectives. This enables the team to focus on what matters and work towards achieving their goals.

2. SMART metrics make evaluation fair and objective

When the achievement of goals is measured by means of SMART metrics, there is no other way to misinterpret the outcomes. The evaluation has to go by pure numbers, which makes it fair and objective.

3. SMART metrics allow you to track progress

SMART metrics make it possible for individuals and teams to track their progress against their goals since they are specific and measurable. This allows employees to look up to the numbers and constantly stay on track towards achieving their goals within the deadline.

4. SMART metrics provide the team with motivation

When the goals and the measuring mechanisms are based on previous performance and future requirements, it motivates employees, as the goals are realistic and achievable, though they are ambitious. They give employees the confidence to push the boundaries as much as possible.

5. SMART metrics enable you to verify goal alignment with organization’s objectives

SMART goals are aligned with organizational objectives. So, any progress against these goals must go on to create outcomes for the organization’s success. If not, the SMART metrics will reveal a lack of alignment, which enables the leadership to do quick course corrections.

6. SMART metrics help verify the effectiveness of actions and activities

SMART metrics help you verify if your actions are producing the desired outcomes. This helps to identify changes required in your operations and enables teams to optimize their action plan and performance.

Smart Metrics: Frequently Asked Questions

1. What are examples of good KPIs?

Good KPIs avoid ambiguities. They are measurable and based on SMART goals.

2. What is the difference between KPI and a goal?

Goals are the outcomes of your actions; they are aligned with the organization’s vision and objectives. KPIs are the means to measure how well you are working towards the goal.

3. What are the uses of KPI?

KPIs are measurable values that monitor a company’s progress towards set goals. What is KPI used for? mainly used for tracking goals and making more informed decisions.

Final Thoughts

Using smart metrics to measure and evaluate your business at periodic intervals helps to restrategize and course correct without losing time. As Peter Drucker pointed out, “What gets measured gets managed.” enterprises will significantly benefit from making smart metrics part of their everyday operations.

Book a free demo with our team to learn more about how OKR software can optimize your organization’s performance by aligning your objectives with measurable key results.

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