In Pursuit of Profit
Read our expert article below or sign up to get articles sent to your inbox.
In Part 1 of this series, we explored what strategic business drivers are and how to choose the right ones for your company. Part 2 discussed translating those business drivers into measurable goals and the various ways that a business can monitor and track its progress.
But what happens when those results aren't as positive as you had hoped? Do you abandon the plan altogether or just work "harder"? The answer to that question will depend on several factors, which we will explore in this Part 3 of the series.
Why We Often Fail to Achieve Business Goals
There are few companies today who don't set goals in some form, although many probably don't spend enough time identifying their strategic business drivers first. Unfortunately, too many companies put together a plan simply because they feel like they are supposed to take part in this exercise. Even organizations which lay down some meaningful objectives will fail to achieve them if they don't understand what it's going to take to get the job done. This might involve the allocation of resources, and it always requires buy-in from the company's employees at every level.
Writing out and then shelving business drivers and goals are probably the quickest way to ensure that they won't receive the attention they need to drive results. Likewise, if there is no accountability or follow through on the objectives, they stand little chance of being met. Finally, some goals are simply unrealistic or lack focus, but ideally, these are elements that your business' leaders would have identified while either establishing objectives or the metrics to measure results.
Key Questions While Evaluating Your Business Results
If your company isn't meeting its goals, one of the first things that you should do is re-evaluate the metrics that you are using to make sure that they are appropriate. Choosing a measuring stick can be a challenge, and there is a tendency to tie everything to financial results, which could produce an unbalanced picture of your firm's health.
You should also carefully consider any bias that could affect the reporting of business results. Are any performance indicators tied to compensation? If so, there could be a conflict of interest if the managers measuring the results are the ones who stand to reap the rewards.
Other questions to ask while monitoring and evaluating your results include:
Assess Results to Determine the Cause of Poor Performance
In one survey of business executives, more than one-third admit that their company's financial forecasts deliver less than half of the desired performance. Stated another way, if management were to realize the full value of its strategies, it could increase results by as much as 100%.
Organizations who'd like a shot at achieving these gains need to spend a significant amount of time assessing their results to determine the cause of poor performance. The reasons could be a combination of factors such as breakdowns in communication, limited access to resources, lack of expertise, limited accountability for results, and having poorly formulated plans.
Deviate from the Plan or Change the Plan?
Plans are just a guideline and aren't set in stone. That being said, they shouldn't be considered disposable. One of the things that you need to avoid doing is changing either the plan or your entire organization in a kneejerk reaction to a negative result. The companies that take the time to thoroughly analyze data and translate it into likely outcomes make the soundest strategic choices. In cases where a simple operational adjustment is needed, it would be overkill to alter the company's business model.
On the other hand, being nimble in today's marketplace is essential. In fact, it's the businesses who fail to quickly adapt that get left behind. We've seen this happen time and again. Blockbuster is a company that experienced massive success in the movie rental market and even survived the transition from VHS to DVD. What they failed to do was adapt to digital media and other market demands, which companies like Netflix and Redbox were quick to do. Motorola completely missed the boat when it decided to take a pass on the growing the smartphone market. At the time, the phone company had the bestselling mobile phone on the market.
So, is it better to alter the execution or change the plan? It depends. Provided the assumptions underlying your goals and projections are sound, you may only need to make adjustments to the way that your plans are executed. This could involve a re-allocation of resources or internal programs to facilitate buy-in from employees.
If business conditions have shifted or there was a flaw in your assumptions, you may need to change your plan - or pivot. This would require that you re-evaluate your company's business drivers and then produce new measurable goals that fit your revised plan. For example, if you have selected "value" as a primary business driver, make sure that this is still a priority before you move forward. If it's not, take another look at what is going to drive your company's success before making any changes.
Many businesses have successfully made adjustments to meet changing conditions over the past several decades. Take Aveda, for example. When Horst Rechelbacher first founded the successful styling salon, he found that many of his stylists would leave after being trained in his groundbreaking techniques. Instead of throwing in the proverbial towel, he closed the salons and instead opened up schools to train hairstylists. Sam Walton spent a dozen years trying to find the right formula for a successful business in rural America. He eventually found his winning strategy of opening up large stores in small towns and has left his legacy through the Wal-Mart name.
It Makes Sense to Be Flexible
Setting realistic goals for your organization is not the same thing as wishful thinking. Your company's objectives should be established based on a systematic process that takes into account business drivers, available resources, and reasonable time periods. Goals are like stepping stones to your company's vision and mission, which when achieved will help you transform those ideas into reality.
Because goals are specific and measured, they represent commitments throughout the organization to certain actions and outcomes. The beauty of goals is that they aren't made of concrete and can change as conditions on the ground shift. The key to success in just about any type of business is having a detailed plan for success that is routinely reviewed for progress and possible adjustments.