“If you don’t know where you’re going, you might not get there.”
I always ask my clients what their goals are when I first meet with them. The answers to this question reveal as much about the culture of a material handling company as they do about the goals themselves.
Many times I am told that the goals are to “grow” or to “improve profitability.” Sometimes I’m told that the goals are to “improve customer service” or to “install a new financial reporting system.”
What Do I Wish They’d Say?
Goals should be a call to action for the entire company. Everyone should be engaged in an effort to reach those goals, on a daily basis. That represents a company culture that is goal-focused and places true value on the engagement of its employees.
To do this requires that you establish some clear criteria for the goals you create. Here they are:
- Challenging, yet reasonable
- Limited to three or less
- Important to the success or survival of the firm
- Encompass many lesser, or subservient, objectives
The goals should be “a stretch,” not an easy walk in the park. If they’re not challenging, your employees will think you’re insulting them, or that the program is a strange joke. Conversely, if they think that the goals are virtually impossible to reach, they may give up before they start.
The goals should be limited to three or less, because everyone must know what they are at all times to stay focused on accomplishing them.
The goals should be company-wide and thus of importance to the success or survival of the firm. You need to pick goals that are of the highest importance and go beyond single departments or groups.
These highly important goals, in turn, should encompass many other lesser objectives. For example, if you choose a goal to be “net profit of $1 million,” you know that you must manage all expenses in order to reach this goal. You don’t need another goal for expense management.
Your goals must be measurable. You must know when you’ve reached the goals. Thus, statements such as “grow” and “improve profitability” don’t measure up. But if you say, “double our revenues within four years” or “increase profitability to $1 million by 2005,” you have measurable goals.
My favorite goals are related to profits (or cash flow), customer opinions and strategic initiatives. For example, one goal might be to “make a net profit of $1 million in 2004.” Another goal might be to “attain a score of eight on our annual customer survey.” Yet another goal might be to “open a new location in Oregon that attains breakeven financial performance within six months.”
Follow the criteria. Once you set your goals, the next step is to monitor them on a regular basis in order to determine what needs to be done, as soon as possible, to achieve them.
Scuba Divers are Like Business Owners
There’s an old saying among scuba divers: “Plan your dive, and dive your plan.” Basically, it means that you should plan ahead for each dive you make, and that you should stick to that plan.
This is especially important in scuba diving, since there are some real hazards associated with this activity. For example, if you descend deeper than you should, you could contract the “bends,” a painful and potentially fatal condition, on your return to the surface. But if you plan ahead for that deep descent, you can avoid the bends and safely return to the surface by stopping at several pre-determined depths for specific periods of time. It’s not even difficult to do this; but if you don’t do it, you could die.
What’s This Got to Do With My Business? I Don’t Even Like to Swim!
Like scuba diving, business owners are faced with conditions that can be fatal – fatal to the business. One of these conditions is not knowing where you are or where you’re going. As Yogi Berra once said, “If you don’t know where you’re going, you might not get there.”
Most business owners are hard-working, diligent individuals. They really want to be successful, but many times they work really hard at doing the wrong things. Not because they want to do the wrong things, but because they seem to have lost focus on the right things. A sure way to correct this situation is to create a plan for the company and then to track progress over time in executing that plan.
Plan vs. Actual
The first step in conducting the Plan vs. Actual activity is to establish the company’s goals for the year. For example, you might set your annual goal as net profit before tax (NPBT) of $1 million.
Next, you’d create an annual budget for the year that would include your expected revenues and all expected expenses, in order to show clearly how you’d create that $1 million. This budget would look like an annual income statement, with the figures representing next year.
Take it a step further, and break that annual budget into monthly budgets. In other words, create an income statement for each month of the coming year.
Once the monthly plans are completed, conduct the Plan vs. Actual activity by comparing the planned result to your actual result. Do this for the current month, as well as for the year-to-date.
During the Plan vs. Actual activity, you can take one of two routes, depending upon whether you are ahead of plan or behind it. Both of these routes are very important.
If you are ahead of plan, determine the cause of this great performance so that you can duplicate it in the months ahead. For example, you might determine that your great performance this month was due to the new sales training program. So you’d make specific plans to continue that program and perhaps even improve it further.
If you are behind plan, create strategies and action steps to get back on plan. And don’t leave the room until you are satisfied that those action steps will, indeed, get you back on plan. For example, you might determine that you are behind plan because you continue to run out of key items that customers want to buy. Then, create specific plans to make the company’s purchasing and inventory programs responsive to your customers’ needs, without putting you in a dangerous cash-flow position.
The Plan vs. Actual activity should be one of your most important activities as a material handling company. If you follow this procedure, you’ll always know where you are, where you intend to go, and how you intend to get there.
To Yogi, that would be a home run.
|Meet the Author
John Cioffi is a partner at GoalMakers Management Consultants, located in Seattle, Washington, and on the Web at www.goalmakers.com.