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Setting Effective Business goals

Guest post by: John Heap

Article Overview: All companies need to know whether they are 'on track' ... moving in the direction they intend to move in. This requires the business to understand this direction ... and the goals it has to meet to ensure it does indeed keep on track. Explains how to link goals to strategy ... and how to measure progress towards those goals and the ultimate strategic objectives.

Setting Effective Business goals

First a question for you …..Do you know what the vision, mission and strategy are for your organisation … AND have you got some specific, strategic objectives to reach in the next year or so?

Very simply, having a vision and mission means you know where you want to get to, having a strategy means you know more or less how you intend to get there and having strategic objectives allows you to establish effective business goals.

Do you think these are effective strategic objectives?

We will become the best supplier of widgets in the New Jersey

We will cut absenteeism by 5%

They are not! The first is more a general aim than a true objective. There is no quantification, nothing that can be measured. The second has no time period attached - though it could just about be 'strategic' if absenteeism is something that is really important and affects overall organisational performance.

Strategy

If you have not got a formal strategy document where your strategy and objectives are written down, it is worth spending the time to do so. Doing this will help you understand it better and the resulting document will make it much easier to communicate your plans to everybody else.




Communication

Next – make sure that everyone else understands the strategy – again, not necessarily by giving them a formal document but by communicating – appropriately - where the organisation is heading in the next few years.

Not everyone needs to know the whole strategy but everyone needs to know about the parts that apply to their department and their job – and of course everyone should know about objectives and goals that need their contribution.

The other thing to think about is the best way of communicating with particular individuals or groups – by letter, in a newsletter, face-to-face, via their supervisors or …..

Linking Objectives

Sometimes it is helpful to also think about ways in which your objectives inter-relate … especially where one cannot be reached without one of the others being achieved first…. So there is inter-dependence and a ‘right’ sequence in which they have to be achieved.

Examples of linkages

To improve the number of new products developed by …..

might depend on

To increase the percentage of turnover devoted to Research & Development to 15%

To improve Customer Satisfaction through ……

might depend on

To reduce average product cycle times by ….

which in turn might depend on

To improve Employee Productivity by 10% in the next 12 months

Measures

Now you have to think about the kinds of measures which will show that you are making progress towards your objectives. Some of these will already exist; others may not.

So for an objective relating to quality (number of defects), you would obviously need to measure the number of defects. For some objectives you might have more than one measure.

A good question to keep asking yourself is … Could a stranger have a good guess as to what our strategic objective is (in this area) by knowing what we are measuring?

Goals

Now we have some measures – and we know what will cause them to change. The next step is to set a goal for each measure. If we have a strategic objective which is going to take 3 years to reach, we need to know well before then whether we are on track to reach it or falling behind. We know we have at least one measure that relates to each objective, so we might want to establish goals for, say, 3 or 6 months time .. or for some targets, on a monthly basis. This` ensures we have a proper control process.

Remember, though, that we have a variety of objectives and associated measures – some of which may relate to ‘softer’ issues. Not all goals will therefore be of the “by 10%” or “double the …” variety. Some will be ‘milestones’ or ‘landmarks’ where a particular component of a project or activity will have been completed.

Example Goals

• · By March 1^st, the virtual factory project team will have implemented and tested the core software

• · Within 1 year, the number of customer complaints will have reduced from an average of 40 per month to 20 per month.

• · By September 1^st we will have designed and agreed the new packaging.

• Within 9 months we will deliver orders to customers within 5 working days

Those of you who are still paying attention will probably have noticed that sometimes it seems that goals come before (or could come before) measures since sometimes they derive directly from the strategic objective. Similarly, we are now going to come on to the actions necessary to reach the goals … but often these are already obvious from the nature of the goal itself.

This ‘messiness’ is typical of most planning processes … and there is no point trying to clean it up. We are presenting the process here as if it was a strict linear process where each step is completed before the next one starts. In reality, we often go up and down the process a few times making adjustments each time. What matters is that at the end, we are happy with all the bits we have put in place.

Actions

You have to decide how the goal is going to be achieved – what is going to be done, what is going to change? Each goal should have an action plan to go with it. Again, these plans can be very simple … but they must exist.

Example

Goal:	To reduce the cost of production of components by 10% per unit in the next 12 months
How:	By establishing a value analysis team to identify and remove or minimise all non-value adding activity.
	By introducing a bonus payment scheme for all employees, rewarding reduction in production error rates

Once you have got a list of goals and actions, you need to check for conflicts between them – and find a way of resolving – or accepting – them. For example, one goal might be concerned with reducing operating costs; another with higher investment in marketing. This might need you to clarify the goals and the measures. (No-one said this was going to be easy.)

Presenting Results

Finally you have to set up a reporting regime … so that the data from all the measures is brought together at regular intervals (whether that is monthly or quarterly or whatever) together with the goals and all the people who need to know whether the organisation is ‘on track’ do indeed get to know.

This is a bit like producing a newspaper. All the data (news items, photos and articles) has to be brought together at the right time …. put into a sensible order … and presented in a way that helps people understand it.

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Article Tags: business goals, strategic objectives



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Re: Did you meet your goals in 2010? - Hey Yinka, I met some of my goals, but I didn't meet others. One of my goals was to get out of debt. I managed to do so, only to get back into debt due to an unforeseen circumstance. Business-wise, I didn't quite reach the goals I had; although, I came much closer than I did back in 2009. At least it was an improvement, and I expect to reach my goals for 2011. Best wishes for you, and I hope you can reach all the goals you set.
My entry - 1. The Best Business Books Ever: The 100 Most Influential Business Books You'll Never Have Time to Read - this is a fascinating book about the history of Business theory, and I'd recommend it to anybody. 2. The Big Book of Small Business: You Don't Have to Run Your Business by the Seat of Your Pants, by Tom Gegax. Ditto. 3. PADI: The Business of Diving Book Okay, so this book won't be of use to anyone who doesn't want to start a scuba store, but I did, and this book was of course invaluable to me in reaching that goal.
Re: Quote of the Day - "People are not lazy. They simply have im - To stay motivated and work to achieve your goals, first thing is that the goals must be ones that you truly want and believe you can achieve. If the goals are ones that you think you should have,(in other words impotent goals) then forget it, it just won't happen. MichelleJ
Re: How To Stay Motivated In Your Business - Business does not happen over night. Be patient and persistent, with the right mind set and short term and long term goals you will be successful. Keep your eyes on the prize and don't let anything get in your way. Great post, thanks Evan. Dallas.
Re: How do you monitor what people say about you in the web? - Setting up Google alerts for your keywords can give updates about your site. Also the publicity you create in the social media sites will do help too


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