GOAL SETTING & ACHIEVEMENT - Business Tactics

Situation: It is early December and the Board of Directors has approved the final 2011 budget that took 3 months for the senior team to pull together. As the new CFO, while you are anxious that “the number” for 2011 is aggressive compared to what the company did in 2010, you feel pretty good that the team was highly engaged in building the plan and laying out the major milestones required. The senior team knows what it has to do and feels sufficiently uncomfortable, but is not screaming in pain with what will be required.

One day, while you are refining the management reports and tracking tools that the team will use to measure performance and forecast resource investment, you decide to walk into the CEO’s office to discuss what changes the company should make in its employee goal setting and evaluation process to accommodate the 2011 company goals. Jim the CEO, while a big fan of company events and building employee morale, has never been an advocate of investing in formal individual employee goal setting, evaluation and feedback processes. “It is our job to communicate the revenue and expense goals to the employees and tell them what they have to do. If they do it, they get rewarded, if they don’t they should be worried about their jobs. Big formal employee quarterly or annual evaluation processes just add administrative burden and take up time better spent out with customers closing deals. Remember we are not IBM, we are a $50mm company.” You respond “Jim, you are right that it takes time for each employee and his / her manager to sit down and talk about individual goals, how they are linked to company goals, and then follow-up with written reports on performance. If we don’t do that though, how will Jenny the new hire in marketing understand how what she does every day contributes to the bigger goal of growing revenue 100% for the year? It also makes it clear to her what she has to do to shine, get promoted and make more money.”

How strongly should you push?

Setting and achieving big goals requires detailed planning, team buy-in, broad communication and clear connection of individual performance to the goal.

All of us have goals and dreams, small and large. Except for a gifted few that are born with IQs of 180, have music flowing out of their fingers at age 4, or are lucky enough to have unlimited access to resources, most of us are forced to set and achieve little goals on the path to reaching our dreams.

For an organization, the effectiveness of that goal setting, the planning involved, and the techniques used to direct and motivate a workforce will determine whether a company will achieve great things and have ecstatic stakeholders or be mired in mediocrity or worse – out of business. Will it climb the mountain or stand in the meadow wondering what it is like to hang on the side of El Capitan.

Goal setting is a basic function of a successful organization. Set a long term vision / plan, detail the milestones necessary to meet that vision / plan, then drive the team to hit the milestones. Pretty simple, pretty basic. Planning and tracking progress whether it is long term forecasting, yearly budgeting, monthly goals, or weekly staff meetings is an essential part of the DNA of an organization and the only way to get a group of people working together toward a mutual goal.

The senior management team and the Board understand clearly how setting business and financial goals, planning, reporting / tracking, accountability, etc. directly relate to creating value (financial and otherwise) for the business and themselves personally. The challenge for senior management and the Board is institutionalizing “buy-in” of those goals throughout the organization.

While employees get satisfaction when an organization is successful and achieves great things, I believe most people look at goal achievement in generally three ways:

(1) the financial and other personal benefits of achieving their near term individual targets (hitting sales goals, new client / product goals, cost reduction goals, closing that deal, etc.);

(2) the feeling of pride and accomplishment of being a part of a winning team / an industry success story / being a game changer; and

(3) a general knowledge that if the company does well and they have a stake in the success - at some point in the future when the company goes public, is sold, or gives capital back to the shareholders, they will get something.

In order to align personal success with organizational success, the company must create “buy-in” throughout the organization and directly connect individual employee goals with corporate goals and the long term vision. How do you do that?

• At the top of the organization set a long term vision for the company and communicate that vision often – “This is our long term goal”.

• Set reasonable intermediate and annual stretch goals with the Board and investors that layout the path to reach that long term goal.

• Get input and buy-in from the team on the intermediate and annual goals, adjust as necessary and layout the major milestones to hit those goals.

• Drive the company to build team and individual action plans that set forth what has to happen on a day-to-day, month-to-month basis to hit those goals.

• Build individual and team incentive plans that reward goal achievement and over reward over achievement.

• Institute individual and team employee performance evaluation systems and tools to measure performance against those goals.

• CREATE MANY OPPORTUNITIES TO “RING THE BELL”. Success breeds success, strong and excited employees attract more strong and excited employees, achieving small goals will lead to achieving big ones and result in many reasons to celebrate individual and group performance. This last point is the critical connection point between the corporate goal and the employee. If done properly, it lays the foundation for a great corporate culture.

Organizational success is directly tied to goal setting and achievement. If you set a long term goal people believe in, reasonable short and medium term goals that create many opportunities to “Ring the Success Bell” and reward performance then you will be building a “winning” corporate culture that will attract the best and the brightest and maximize the chance for success. If you set unrealistic goals that lack buy-in and rarely allow you to celebrate “wins”, then corporate culture will suffer, people will become unmotivated, the best will leave, and achieving the organization’s long term goals will become very difficult. In business, as in climbing El Capitan, the cost of failure of setting unrealistic goals can be devastating.

-Bob

For those of you interested in knowing what it is like to hang on the side of El Capitan in Yosemite Valley, this clip will show you what it is like. 

Youtube Video - El Capitan Climb

FOCUS - A Key Fundamental Business Tenant

Situation: The Vice President of Sales for a young snack food company runs into the Founder’s office and says “I just had lunch with an importer who has done a ton of business in Asia. We were talking about how well our main product would do there and he said the only thing we would have to do is translate the label! What is really great is that he said he would be willing to buy a container so we would not be on the hook if it didn’t sell. If we sold a container of product, that would really make up for our being behind plan in our main US business this quarter.”

The Founder contemplates this idea. “I don’t know…. I am concerned about throwing a package change at Jim in marketing who is already overloaded with our new local marketing campaign. That campaign is focused on our core midwest consumers so that we can stop the high level of discounting we are doing to move product in that region. I agree our product would kill it in the international markets, our largest shareholder mentions it every time I see him. A full container would be the largest single order in company history and boy we could use that volume.”

What should they do?

FOCUS

One of the biggest challenges for most companies, particularly small to medium size ones, is managing the myriad of opportunities for growth that arise. Unfortunately, more often than not companies launch that new product, open that new region, hire that new executive, close that acquisition in the euphoric spirit of growth but sacrifice essential focus on the core competencies of the company or team, or the benefits its key products provide to its core consumers / clients. Maintaining focus is difficult for companies of all sizes, but small to medium size companies tend to lose focus due to abundance of opportunity and passion where larger companies often lose focus as they strive to bring growth back into the business. (I will focus on smaller companies in this post.)

One of the main reasons small to medium size companies have difficulty maintaining focus is that they are constantly bombarded with new ways to grow: new products, new markets, new territories, new customers, new technologies, new market trends, etc. Typically these companies have unique or innovative products and services that attract opportunity. They gain increased awareness in the industry, the media begins to notice them, vendors or customers pass along new ideas, friends and family enthusiastically forward ways to help out and the phone starts to ring. Additionally, one of the strengths of a smaller organization (ie. that decisions can be made quickly and the company can be nimble when attacking opportunities) can be a weakness in that new directions can get set without thorough analysis. Combine all of that with the intense passion and spirit that are required to make a young company successful, and the temptation to follow and act on every lead, market and product idea is great.

While this passion, hunt for opportunity and desire to find new ways to fill society’s needs are the essential engine of progress and innovation, the manager of a young company needs to balance that with a steely eyed focus on the mission of the company, the core market and consumers, and the key product benefits. Without that focus the direction of the company can shift frequently, the team can get demotivated, the organization can become highly inefficient, the customer can get confused and leave, and the cash balance can dwindle quickly. Here is just a sample of the repercussions:

- You will dilute your already scarce resources – money, people, time.

- The company will launch new products or enter new markets without sufficient research into the full implications to the business model, financials, organization, brand and long term strategy.

- Customers will become confused as to what the company truly stands for and what its products / services truly deliver. They will migrate away from you. This is death for a “brand”.

- The team will feel like the company direction shifts constantly, the place will feel unstable, even passionate employees will lose their desire to go the extra mile (because the work they did last month is not helping this month’s strategy.) The best people will leave.

- Corporate culture will be virtually impossible to build and maintain.

- Revenue growth and profitability will suffer as money spent on prior initiatives is lost as new initiatives become priority.

How do you not lose sight of organizational focus?

- Know the company’s core mission and soul. Why does it exist in the first place?

- Understand exactly the core customer need you are filling. Get granular with this. You may think your product or service has a dozen uses. That may be, but you need to focus your energies on the key one that sits at the core customer need.

- Know your customer and market cold. This is related to the prior bullet, but in addition to understanding the need, you need to understand the key customer and market you serve intimately and you need to target them with unwavering focus.

-Understand your true competitive differentiation - why your product / service fills the customer need better than the other alternatives in the market.

- Concentrate on doing these core things really really well in one market first. If you do this, you will get well known in your key market, build a core customer group of fanatics, and have a solid base upon which to expand. This means you don’t launch in Asia if you have not yet “owned” your key customers and markets.

- Communicate the core competencies and strategy with abandon. Communicate to everyone all the time. To your staff, your investors, your customers, your clients, the media. Do it all the time, in staff meetings, company meetings, sales calls, on company fliers, on the walls in the office, in marketing material. Be consistent. This defines you and helps you build a brand rather than just sell a service or product.

When considering new avenues of growth (products, markets, etc.) stay focused and be an incredibly good listener. Trust your team and let unfiltered debate take place. If you and the team are focused on your core competencies, then the company will make the right decisions about new growth opportunities and all members of the team will know that their tireless efforts are a part of a grand and well defined strategy.

-Bob

Click here for unbelievable video footage of what happens when you don't focus

First Posting to The Young Business Blog (TYBB)

I am starting The YBB because of what I see as a general lack of relevant and actionable content written by people that have actually lived through starting, growing, funding, and transitioning a business.  Most content is written by consultants or vendors (bankers, lawyers, accountants, etc.) who have only seen it from a distance or been advisors for a short period of time.  While I have been a banker helping others fund their business plans, I have also lived the dream (nightmare to some) of actually implementing growth strategies for a start-up as well as a public company.  I intend to keep these postings generally short and manageable (not massive B-school essays) that touch on the main points of an issue.  I may deepen a discussion if I get sufficient feedback requesting more detail.  I am also one that doesn't take myself too seriously, and as such I hope this to be entertaining - if not, no one will read it.

The following outlines some of the topics I intend to cover:

Key Fundamental Business Tenants regardless of business size.

Considerations for the really young business:
• Turning an idea into reality - what an idea needs to have any chance at all.
• The business plan - what do I really need to do?
• Raising money - dos and don't, banker or no? other considerations.
• The financial plan - how do I do this and what does this have to be to raise the money?
• Hiring your first staff, hiring people over the coming years, firing people.
• Strategy - what is it really and why does it matter?
• The biggest ways things go wrong.
• The most important things to get right.

Considerations for business adolesence:
• "Yippee we closed that huge account...Oh no, what is it going to do to our business?"
• Funding the growth - how much capital? what kind of capital? where do we get it? what do we give up / how much will it cost?
• Growing the team, managing the team, culling the team, incenting the team, keeping the team motivated and bought in.
• Roles of the Founders vs. other senior staff.
• Building the systems you need to scale from 3 guys and a fax machine to a real business.
• Staying Focused - avoid a huge fatal mistake.
• The Business Model - Do we have a sustainable business?
• COGS & Operations.
• Selling & Marketing.
• General & Admin costs.
• Partnering & Alliances.
• Where is it all going? Planning for the end-game.
• The biggest ways things can go wrong.
• The most important things to get right.


Considerations for managing the business in its adulthood.
• Corporate strategy & retaining competitive differentiation.
• Maintaining corporate culture and maximizing team effectiveness.
• Refining the business model to maintain high growth while improving profitability
• Considerations related to capital structure - debt vs. equity and the different permutations.
• "Should I Stay or Should I Go" - considerations around executive staff and corporate evolution.
• Executing on the end-game.  Sale to a strategic buyer, a financial buyer, an IPO, other options, etc.

My goal is to post once a week.  I expect generally to follow the above, but there may be weeks when I write about something that I feel is particularly relevant at that time that doesn't completely fit in the outline above. 

I welcome broad feedback and questions.  Feel free to email me at bobpink1@comcast.net.

Thanks

-Bob