Paul Tiffany - Business Plans For Dummies

Simply setting a general goal for your company isn’t the end of the story; you also need to spend time thinking about how to get there. So, your company must follow up its goal with a series of objectives: operational statements that specify exactly what you must do to reach the goal. You should attach numbers and dates to objectives, which may involve weeks, months, or sometimes even years of effort. Example: We will achieve sales revenue of $10 million by 2024. They help you realize when you reach a given objective.

Objectives never stand alone. They flow directly from your mission and your values and vision (see Chapter 3), and outside the context of their larger goals, they have little meaning. In fact, objectives can be downright confusing.

The goal “Improve employee morale,” for example, is much too general without specific objectives to back it up. And you can misinterpret the objective “Reduce employee grievances by 35 percent over the coming year” if you state it by itself. (One way to achieve this objective is to terminate some employees and terrorize the rest of the workforce.) When you take the goal and objective together, however, their meanings become clear.

Want an easy way to keep the difference between goals and objectives straight? Remember the acronym GOWN: G for goals, O for objectives, W for words, and N for numbers. For goals, we use words — sketching in the broad picture. For objectives, we use numbers — filling in the specific details. For example, your firm might set a goal of becoming “the perceived quality leader” in its space. But to get there, it might want to define an objective of “reducing errors in the shipping department to less than 1 percent during the next six months.” The latter gives specificity to the generic statement of the prior and, as such, provides a concrete guide for action to those charged with getting the job done.

If you already use different definitions for goals and objectives, don’t worry; you’re not going crazy. What we do find crazy is the lack of any standard definition of terms when it comes to business planning in all its areas and topics (some firms out there are still trying to differentiate between vision, values, and mission). The important task is to settle on the definitions that you want to use and stick with them in a consistent manner, communicating these clearly to everyone in the organization. You may even want to add in a glossary at the end of your business plan that specifies the key terms used. That way you prevent any unnecessary confusion within your company.

Talking about goals and objectives provides us with the perfect opportunity to bring up another pair of business terms that people have bandied back and forth for years: efficiency and effectiveness. The terms were first thrown together in an absolutely captivating business classic, Functions of the Executive, written by Chester Barnard back in 1939 (why are you snoring?). Old Chester was president of the New York Telephone Company, and perhaps he had a bit too much time on his hands (monopolies, you know, can lead to that). But he did come up with one useful notion for working with your company’s goals and objectives: efficiency versus effectiveness.

We all strive to be both efficient and effective in our individual work, of course. Effectiveness is often described as “doing the right thing,” whereas efficiency is described as “doing things right.” President Barnard came up with the idea that you can apply these concepts to a company and its activities.

In this context, effectiveness — doing the right thing — has a great deal to do with choosing the right goals to pursue. For example, consider an imaginary company we’ll call Global Gadgets. Its mission statement may emphasize becoming customer-focused and market-driven in all product areas. If Global Gadgets is to be effective, management must set goals that encourage product designers and engineers to be in touch with their customers first and to be aware of market demands before they start designing and creating new products.

Efficiency — doing things right — is concerned more with how well the company applies resources in pursuit of its goals. To be efficient, Global Gadgets’ employees must have objectives that ensure the company can achieve its goals of becoming customer-focused and market-driven. Among other results, these objectives should lead to a proper allocation of the research budget among design, product development, and market testing. Resources are always scarce, and Global Gadgets can’t afford to squander them.

Successful organizations aren’t just effective or just efficient. The best companies are both efficient and effective on a consistent basis. They achieve both efficiency and effectiveness by taking goal-setting and the development of clear, measurable objectives seriously in the relentless pursuit of the company’s mission. Achieving one without the other is like wearing an attention-getting gorgeous new designer outfit to the company’s annual New Year’s bash while keeping your bathroom slippers on: The shoes might have been an efficiently quick-and-easy way to dress, but … OMG, what?

Your company’s goals and objectives reflect your primary business intentions, and they determine both the itinerary and timetable for getting you there. In other words, your goals and objectives focus the company on the important work at hand and provide a mechanism for measuring your progress.

Goals and objectives are ultimately meant to make your company more efficient and effective. How can you see to it that setting them is also as efficient and effective as it can be? Here are some guidelines to get you started.

Goals serve as the broad business results that your company commits to achieving. To jump-start the process of setting your company’s goals, follow this useful set of guidelines:

Determine who to involve in setting your company’s goals. Because goals are the core of your company’s business, the group members should include the people who are responsible for all your major business activities. If you’re going it alone in business, try to develop a core group of advisers who can meet with you periodically to confirm your goals.

Develop a procedure for monitoring your company’s goals on a routine basis, revising or reworking them as business circumstances change.

Create individual goals that clarify your company’s business activities without limiting flexibility and creativity.

Confirm that your company’s goals, taken together, provide an effective blueprint for achieving your broad business intentions.

Make sure that your company’s stated goals closely comport with your company’s mission and vision statements (see both Chapter 3and the earlier section “ Creating Your Company’s Mission Statement” for more info). If you spot a contradiction, it’s time to revisit one or the other and undertake appropriate action.