Paul Tiffany - Business Plans For Dummies

Objectives are the statements that fill in the details, specifying exactly how you plan to reach each of your company’s goals. As much as possible, you should tie your objectives to cold, hard numbers: the market share percentage you want to achieve or number of new customers you want to serve, the quantified volume of products you want to sell, or the number of revenue dollars you want to generate.

This set of guidelines provides a useful template when your company starts to develop business objectives:

Determine who should set business objectives in your company. While overall firm profit objectives might best be reserved for senior management to make, you don’t want these same folks alone determining the optimal level of product quality metrics on the shop floor.

Develop a system for reviewing and managing business objectives throughout your company.

Make sure that objectives are achievable and verifiable by including numbers and dates where appropriate.

Create business objectives that can clearly advance and achieve larger company goals.

Confirm that your company’s objectives, taken together, result in an efficient use of resources — money and people — in pursuit of broader business intentions.

Consider using a formal method, such as management by objectives (MBO), to involve everyone in your company in the continuous process of setting, reviewing, and meeting business objectives. (For more on the ins and outs of MBO, see the nearby sidebar “Management by objectives.”)

Repetition builds muscle memory for athletes, which is advantageous when decisions must be instantaneous and wrong ones can result in defeat. Accordingly, we might be saying this over and over, but it’s so important that it deserves repeating one more time: Your company’s goals and objectives must be intimately bound to your mission and vision statements.

In 1954, management guru Peter Drucker came up with a novel way to generate and communicate a company’s intentions (its mission, goals, and objectives): You simply involve all the employees who have to actually carry them out, giving each her or his own specific list. Not surprisingly, he also coined a term for his method, calling it management by objectives (MBO).

MBO turned out to be a wildly successful idea when it was introduced. By the mid-1970s, more than half of the U.S. Fortune 500 companies were using the technique. Granted, not everybody was happy with the process. Some companies balked at the time and effort that it took to set MBO goals and related objectives. Other companies failed to carry out the paperwork that the system requires. Still other companies, basking in an authoritarian regime lodged at the top, found the entire concept of shared decision-making to be just plain weird and the new culture to be too alien. Pity them.

For companies that commit to using it correctly, however, MBO has proven to be a valuable management tool — a process capable of generating new ideas, communicating business intentions, and focusing the company’s energy on an agreed-upon set of goals and objectives. Management by objectives works because it involves people themselves fashioning the company’s future. Employees commit more to that future because they have a greater stake in the process that gets them there. As you begin to work on your company’s goals and objectives, invest some well-spent hours in figuring out ways to bring the spirit of MBO into your collaborative process.

Too many companies simply forget their broad business intentions when they go about the detailed work of setting goals and tying them to measurable objectives. Managers start with what’s close at hand. They look at employee activities and behavior, and they come up with incentives and rewards that seem to do the right thing at the time, motivating workers toward specific objectives. But these types of goals and objectives tend to be nearsighted and may be totally out of sync with the larger aims of the company. So yet again, don’t let the trees shield the forest in which they reside.

What’s the proper time frame for you to reach your goals and objectives? How far out should your planning horizon be — one year, three years, maybe five? The answer is … it depends on the pace and dynamics of your industry. We live today in a world of constant change and disruption; definitely, it can be confusing out there, so do your homework before blindly setting a timeframe for goal achievement.

A recent poll by Gallup found that 74 percent of company employees felt they weren’t getting enough information and news about their firms, and 40 percent couldn’t explain just what it was that their organization did (and as far as we can tell, no spooks from the CIA were surveyed). This is clearly not a good thing — except within our clandestine corps, of course. If your employees feel they’re operating in the dark, then there’s a good chance that their day-to-day work routines can veer from the broader goals that the firm is pursuing. Let’s go back in history for a moment and revisit Cisco Systems in the first decade of this century. As a provider of switches and routers, the network software and hardware “plumbing” used for the booming Internet industry, Cisco rose to the top of the pack and raked in nearly $20 billion in annual revenues by 2000, making it one of the biggest and most successful companies in the world. But in spite of several major advantages, including proprietary products, success was not a slam dunk. In the huge downturn following the dot-com crash in the spring of 2000, Cisco saw many of the customers it served simply disappear. The company managed to stay afloat through rough times by keeping its goals and objectives closely aligned to the company mission statement. Back then Cisco described its mission this way:

To shape the future of the Internet by creating unprecedented value and opportunity for our customers, employees, investors, and ecosystem partners.

Fine words, of course. The challenge, however, was in making progress when budgets tightened and markets shrunk. So to keep everyone’s eyes on the prize, the company’s CEO offered specifics in the form of strategic business goals:

To seek out profitable growth opportunities with a target of 20 percent pro forma profit after tax

To improve productivity, as measured in terms of operating expense as a percentage of revenue

To maintain a healthy and conservative balance sheet

The language of these goals and objectives may not be as stirring as the mission statement phrases. But they represent the nuts and bolts that made the company’s mission a reality. By 2010 Cisco’s revenue more than doubled to just a shade less than $40 billion and head count expanded to nearly 70,000. By 2020 the top line was $50 billion and the mission now read:

To inspire new possibilities for our customers by reimagining their applications, securing their data, transforming their infrastructure, and empowering their teams.

While the heady growth trajectory of the past slowed as the industry matured and powerful new competitors like the China-based Huawei began to poach customers away (by using pirated Cisco product source code in some cases), Cisco didn’t just fade away as market turbulence grew. It stuck to its guns. In its most recent (2020) Annual Report, the CEO said: