Benefits and Compensation

Goal Setting with the “SMART” Model

Dorf, who is managing director of Compensation Resources, Inc. in Upper Saddle River, NJ., recommends following the SMART approach in developing goals:

    • Specificity
    • Measurement
    • Attainability
    • Results-oriented
    • Timing

Remember, says Dorf, sometimes the pay-for-performance goal is a milestone, not the full completion of a project. For example, he says, he worked with a client that was building an aircraft carrier—an 8-year project. Clearly completion was not a good annual goal!

Performance Objectives By Employee Level

Typically, goals are differentiated by employee level, Dorf says. For example:

  • Senior/top management goals focus on overall company performance
  • Middle managers focus on business unit/functional performance
  • Professional/technical goals are often project related
  • Staff goals (when needed) focus on individual development

Maintain ‘Line of Sight’

Keep in mind that you can only hold someone accountable for those things he or she can impact directly. The “line of sight” concept helps you as much as possible to avoid the situation in which the major goals are not under control of the person with the goal.

Multiple Performance Objectives Are Required

Never have one performance measurement, says Dorf. It’s too easy to manipulate one measurement. For example, you can always increase net income by not paying bills, and you can increase revenue by cutting margins.

In setting goals, don’t forget:

  • Establish goals that drive the business plan
  • Consider goals that look at performance against peers, that is, industry comparators
  • Look at financial metrics that are key indicators of performance, for example:
    • Loan reserves within commercial banks
    • Market share for manufacturing companies
    • Number of new clients for professional service companies

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Here’s Dorf’s goal-setting worksheet:

Sample Goal Setting Worksheet

Performance Goal: Provide a written statement summarizing the goal, including the expected end result(s).

Accountability: Indicate the individual(s) responsible to lead the accomplishment of this goal.

Performance Measures: Identify the key quantitative and qualitative performance measures that should be used to determine if, and to what extent, the goal has been achieved.

Timetable: Indicate the target date for completion of the goal.

Resources Needed: Identify the expected budget and staff requirements necessary to achieve the performance goal.

Influences/Constraints: Identify potential obstacles, prerequisites, and intradepartmental activities that could impact the ability to accomplish the performance goal.

Milestones: Identify the major milestones and corresponding dates that indicate the extent to which the goal has been achieved.

Documentation: Identify documentation needed to support the achievement of each milestone, as well as goal completion.

Goals should be weighted, Dorf says. Here’s his sample Weightings Schedule:


Corporate Performance

Business Unit Performance

Individual performance





Business Unit Management




Department Management








Individual Contributor




Wrap Up Story

Dorf collects wine bottle labels as a hobby. He was in a restaurant and loved the label on the bottle. He asked the waitress, “Can you get the label off this bottle for me?”

She said, sure. Later she came back holding the naked bottle, and said, I had a hell of a time scraping that label off, but I finally got the bottle clean for you.
Reality is, be sure you know what you’re asking for.

Setting good goals, one of dozens of compensation challenges, and in 2012, there’s not much taking as much time and energy as wage and hour—off-the-clock work, calculating “regular rates,” dealing with exemptions, complying with the Fair Labor Standards Act (FLSA), it can be confusing and challenging for even the most savvy compensation practitioner.

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