| Do Your Corporate Goals Need Re-Aligned? |
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VANCOUVER BUSINESS JOURNAL Essential Management Concepts
As 1999 came to a close, many businesses went through a strategic planning process of some sort and set new goals for the year 2000 or beyond. Success of that business plan will depend upon numerous factors, including whether the organization is serious about improvement and change, whether all the stakeholders know about the objectives and/or embrace the plan, and whether or not the goals are appropriate to the company’s success. Too often, companies do not have the proper goals in mind. Their vision is short-sighted or just plain wrong. Goals are not properly aligned with the greater mission and vision of the company. There’s a great book on the subject, titled The Goal, by Eliyahu Goldratt. In this text masquerading as a novel, Goldratt tells the story of a failing manufacturing firm that has made just about every error possible in the planning and implementation of a business plan. HOLISTIC MEASURES: One example in the book was the misuse of component production ratios to measure success, at the expense of broader, more holistic measures. In this failing company, the organization focused on the efficiency ratios of their large machines rather than throughput, quality of product, and meeting customer timelines. The company had lost sight of its ultimate goal (making a profit) and the critical related activity (delivery of the product). This is not unusual. Many businesses lose sight of the critical components that make them successful. They forget why they are in business in the first place and why their customers come to call. It is very helpful in the planning process to make a list of the ultimate goals of the owners (profit, cash flow, return on equity) and the ultimate goals of the customer. This might include quality and quantity of product or service, timeliness, price and a myriad of other measures. CRITICAL ACTIVITIES: Next, the planning process must clearly identify activities that are critical to the ultimate goals. In a manufacturing environment, throughput is one of the important measures. Other activities or concepts or terms may be dominant in other industries. Regardless, the idea is to determine those activities that move the company toward the ultimate goals, to identify ways to increase and improve those activities, and to design methods for measuring success. A few years ago I facilitated a firm through the year-end planning process and I asked the president of the company "in your industry, what is the critical determinant to success." He quickly answered "an ability to stay technologically expert." And yet the firm had no formal research or training program to stay ahead of the technology curve. A core activity had been overlooked— one that was critical to their success. SILO EFFECT: Often the systems for measurement and reward run counter to the real goals of the organization. A national company in the food industry discovered this fact several years ago. While the executives met annually to identify corporate goals and objectives, each division of the company was structured around its own set of goals. Bonuses were tied to division goals — not company-wide initiatives. Manufacturing was bonused based on efficiency (not throughput). Transportation was bonused on lowest cost delivery (not on-time delivery to the customer). Accounting focused on compliance with lengthy and meticulous procedures, often delaying commission checks to the sales department (causing disincentive to sell). Fortunately, upper management began to recognize the problems that naturally flow from this type of "silo" mentality and reorganized the company into a single set of objectives and a company-wide bonus. A company does well to accept the fact that it is an holistic, singular organism. Individual, department and division goals must align with those of the core plan. SUPPORTIVE SYSTEMS: It is also important to look at the underlying systems within the company to make certain that they support the company-wide goals. It is not enough to proclaim a goal of "outstanding customer service" — you must create systems that support that notion. You cannot claim that the customer is king and then make it difficult to return an unwanted garment. Some organizations, such as Nordstrom’s, have successfully carried the service goal throughout every system of their organization; many have not. In their book, Service America, Karl Albrecht and Ron Zemke write specifically about customer service goals, claiming that there is a 3-legged support system key to good service. There must be a commitment to service principles permeating the organization, employees must be trained to these principles, and underlying systems must support the goal. This same 3-legged support system applies to every goal of an organization, not just the service goal. It is also important that everyone in the organization know the strategic mandates, and their roles in helping the company move toward those goals. Better yet, involve as many people as possible in the strategic process. Knowledge of company goals is a powerful thing, but "buy-in" to those goals, through participation, is even more potent. YEAR 2000: It’s not too late for a company to create its strategic plan for the year 2000, or to appropriately update the one in place.
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