Many managers think that setting their company's goals amounts to making baseless declarations about the company's future, but the wrong goals can derail progress for months or even years. How do you know if you've set the right goals for your company? Are they too big? Too small? Will your employees rally behind them? Should you follow Jim Collins's advice and set a BHAG (Big Hairy Audacious Goal)? These days, with all of the recent attention on The Law of Attraction -- which should really be called The Unproven Hypothesis of Attraction -- the most frightening trend seems to be goal setting by the process of wishful thinking. Setting the right goals is a tricky matter. If you aim too low, then the goals become trivial, but if you make them so high that they seem unattainable, your employees will likely think you're delusional. To avoid these pitfalls, the steps to successful goal setting should be carefully considered.

Standard annual or monthly goals, as opposed to big-bet BHAGs, should have three main elements: 1. They should be realistic, 2. They should be consistent, and 3. They should be well planned and supported. A realistic goal does not mean small or trivial, but they should be attainable in the eyes of the people who have the primary responsibility for reaching them. Goals that seem unreasonable will often create the opposite effect of what leaders are trying to accomplish. If the target seems too difficult to reach, people will give up before they even start. One of the best ways to make sure your goals are realistic in the eyes of your employees is to elicit their input when creating them. Few things are more disheartening than having a senior manager hand down a directive that rank and file employees see as unattainable.

Another area where managers fall short is in creating goals that are consistent. Company goals that go in different directions from month to month or year to year will only confuse and de-motivate employees. From a psychological standpoint, humans are essentially hard-wired to follow consistent behaviors. When companies, departments or even individual managers cannot agree on a consistent course of action, employees will typically start to discount the value of their work because of the amount of wasted effort "rowing" in different directions. Goals that are consistent with the company mission and build from one success to another are absolutely imperative for maintaining high levels of employee engagement.

Finally, goals should be well planned and supported. Planning for a goal is actually twofold. The first part entails understanding the underlying efforts that will be required to accomplish the goal. For example, companies will often toss out a random revenue or profit number. Senior management will declare something along the lines of, "we will reach $10 million in sales this year" without analyzing how many customers or units that equals or even if the engineering and /or supply chain can deliver that number. In many cases it's just a number that sounded good. When -- as is often the case with a fabricated number -- the company fails to reach it, employee morale plummets, managers look like fools, and people start to play the blame game. Senior managers can largely avoid this problem by simply questioning the underlying assumptions of their stated goals down to the core components required to achieve them.

The second element of supporting a goal is the actual execution plan. For example, even a sales manager who understands that a certain revenue target equals a certain number of units sold will often have no real plan to actually sell more units. For these managers their execution plan consists of blindly commanding their team to reach the target without additional support. Unfortunately working harder is rarely as effective as working smarter, more efficiently, and with better systems in place.

If you're considering setting a Big Hairy Audacious Goal for your company, then you must also consider the full commitment that will be required to achieve that goal. In most cases BHAGs require companies to bet the proverbial farm. At Boeing, if the B-17, 707, or 747 had failed, there likely wouldn't be a Boeing today. Ask yourself if you are prepared to bet the farm to achieve your company's BHAG -- if you are prepared to align every resource in the company to achieve the stated goal. In many companies the term BHAG has become so diluted that what is referred to as a BHAG really doesn't qualify. I've seen companies refer to a 20 percent increase in sales as a BHAG. While a 20 percent sales increase is nice, it certainly does not constitute a Big Hairy Audacious Goal. If you're planning on going big with your company goals, then you should be absolutely clear that they will require an even bigger commitment from you.

Effective goal setting is a little bit like common sense. It should be easy and obvious, but just like with common sense, it isn't very common. With the rise of the Law of Attraction/positive thinking movement and the pressure to set high, difficult to reach goals, leaders can easily set targets that are based on little more than blind hope. Should the company fall short -- which is likely to happen when goals are based on nonexistent foundations -- the resulting loss of management credibility and damage to company morale will be difficult to overcome. Without serious consideration to setting achievable, well planned, and supported company goals, a leader can easily cross the line from inspirational to delusional.