GOAL SETTING

GOAL DEFINITION

Two terms that are often used interchangeably are "objective" and "goal." There is, of course, no one correct definition. As long as the terms are used consistently within an organization, it does not really matter. For our purposes, however, objectives are broad areas where something is to be accomplished, such as sales and marketing or customer service. Goals, on the other hand, are specific and measurable and have a time frame. For example, "Answer all inquiries within 2 hours by the 3rd quarter of 2002."

GOAL CHARACTERISTICS

For best results, goals should be (a) tough (you need to stretch to attain them) and (b) attainable (realistic).

When evaluating these two characteristics, always take into consideration the current capabilities of the company versus the benchmark candidate now and projected . A good way to monitor progress towards attainment is through trend charting.

RESULT VERSUS EFFORT GOALS

Result goals define the specific performance measure to be achieved. For example, "Sell $4 million of product x to company y in 2003."

Effort goals define specific accomplishments that are completely under the control of the goal setter. They are necessary to achieve the result goals. They can be thought of as action plans. For example, an effort goal would be, "Make x cold calls a week to new departments of x company".

GOAL SETTING PHILOSOPHY

Best of the Best versus Optimization

There can be a clear difference between implementing an inventory control system that ensures that a company never runs out of stock and an inventory control system that optimizes the level of inventory. The optimum inventory balances off the cost of holding the inventory and the cost of carrying the inventory.

A similar consideration is that of determining the optimum feature set for a product, taking into consideration what specific market segments value and will pay for. Differentiation that is not valued by the market could result in an unnecessary expenditure of funds. The determination of value has to be based on the underlying need of the customer. If this had not been done, there would be no need to have produced a ballpoint pen, only a better fountain pen. Who asked for electricity, the camera, or the copy machine before they existed? No one by name , but many in terms of desire and underlying need.

There is a fundamental difference between working within the constraints facing a business and removing the constraints. For example, a company can either (a) optimize production given the setup time for a job or (b) reduce the setup time. Optimization within the constraints leads to larger lots, higher inventory, perhaps poorer quality, and delays. It is much more effective to remove the constraint. The key to manufacturing excellence is to remove the constraints that cause the tradeoffs between cost and customer satisfaction.

Kaizen versus Breakthrough Strategies

The Kaizen philosophy of management stresses making small, constant improvements as opposed to looking for the one magic silver bullet that will lead to success.

Which company is likely to be more innovative: (a) a company that is looking for the one big idea or (b) a company that is constantly making small improvements? Both are appropriate strategies depending on the specific situation. However, if a company is in dire need of improvement there is no better way than to look at benchmarking. The benchmarking in this case will be a true breakthrough. On the other hand, the Kaizen approach tells us that we should not relax in our effort to be the best. There is always something that we can do better.

GUIDING PRINCIPLE IMPLICATIONS

The decisions made regarding goals can have a profound interaction with the mission statement of the company and/or the values as defined in the statement of guiding principles. The statement of guiding principles generally consists of:

1. Mission statement ” a description of the product and markets served or who, what, and how

2. Values ” those human and ethical principles that guide the conduct of the business

GOAL STRUCTURE

Cascading Goal Structure

A consistent goal structure can provide focus and direction to the entire organization. In order to create this, start with the most important goal, as viewed by the president or chief executive officer, and decompose each of these by functional area working from one management level to the next . For example, starting with a return on equity goal, what does this mean each department has to do? What does this suggest in the way of specific benchmarking goals?

Interdepartmental Goals

One of the most elusive tasks of management is to get all departments to work together toward a common set of goals. One way to manage this is to have each department indicate its goals and what it requires in the way of performance from other departments to reach those goals. A cross tabulation can then be used to develop the total goals for a department or function.