How to Set Goals and Strategic Plans
Every company needs to invest time in these endeavors in order to improve performance.
If there is one thing I have learned during my career, it is that things that seem obvious to some people are not so obvious to others. In working with companies of all types, I have seen firsthand the benefits of goal-setting and strategic planning. While many others also see the value of such endeavors, some are not sure that the benefits outweigh the effort required. This month, I hope to make the case for any company to invest the time in creating goals and developing strategic plans.
In simple terms, a goal is a desired result. To truly be useful, a goal needs to be measurable, specific with respect to time, and challenging but attainable. When clearly communicated, goals clarify expectations throughout a company. For anyone who has ever worked in sales, goals (often referred to as quotas) are second-nature and a strong motivator, as they are typically tied to compensation. At some point, we have probably all set a goal for ourselves, whether it was related to education, paying off a debt, excelling in a sport or landing a certain type of job. Goals are good and help us to focus our efforts on what is important. Measuring performance against goals will tell us how well we are doing at any point in time.
A strategic plan is the means by which a company will allocate its resources to achieve its goals. Where goals serve as the “what,” strategic plans describe the “how.” Ideally, a strategic plan should result from a series of meetings of key stakeholders within the company. Each stakeholder should have something to offer. The completed strategic plan will include the resources, tasks and timing required to meet the company’s goals.
There are four approaches companies can employ to manage their business (perhaps you can identify which approach your company normally employs).
Approach 1: Company goals and a strategic plan.
This approach establishes a shared vision and accountability for achieving that vision. Performance is tracked and results are made visible throughout the company. The more experience companies gain with this approach, the better the outcomes, as employees gain a greater understanding of what really can be accomplished in a given period of time. This approach has a track record of helping companies improve overall performance over time.
Approach 2: Company goals without a strategic plan.
This can be characterized as the “wish list” approach to managing a business. Although everyone in the company understands what needs to be achieved, there is a lack of understanding of how to go about it. This leads to limited, if any, accountability for actions as a wait-and-see philosophy takes hold. Company performance may get better, but it is almost entirely based on luck. Some refer to this approach as “management by hoping.”
Approach 3: Strategic plans without company goals.
Without company goals, these strategic plans are generally department- or work-center-focused and describe actions to be taken independently. This fosters a “silo mentality” in which departments operate more or less in isolation. Performance may improve in some areas of the company, but this does not translate to significant improvement company wide.
Approach 4: No company goals or strategic plans.
This describes a wholly reactive environment. Very little is planned and managers operate in the here and now. Quick, often temporary, improvements are the norm. Overall performance remains substantially the same year after year, with any changes attributed to factors outside of the company’s control.
To help understand how effectively you are setting goals and developing plans today, ask yourself the following three questions:
- What was the last company initiative that was completed on schedule? The rationale behind this question is that companies often get caught in the difficult struggle of managing day-to-day operations. It is hard to complete other tasks that have the potential of significantly improving the business. Companies cannot address everything, so there needs to be a narrow focus on the initiatives that are truly important and can be completed in a timely manner.
- What was the last significant action your company took that you did not agree with? This is important because improved performance comes from considering different points of view and achieving consensus (not necessarily unanimity). Avoid the risk of inertia that often stems from “groupthink” by challenging current practices and not accepting the status quo.
- What is one thing you will do in the coming year to increase company earnings? Earnings are a company’s lifeblood—not sales, receivables, new products, inventory accuracy or anything else (although these factors obviously support overall earnings). Earnings, by whatever measure is used, need to be the focus of all performance-improvement initiatives being planned or currently underway at a company.