Friday, August 6, 2010

Goals and Problems

"Everybody talks about the weather, but nobody does anything about it." Charles Dudley Warner – Hartford Courant of Connecticut – August 27, 1897

The analysis of goals and problems is probably the most exciting and fulfilling exercise in business reconstruction. Goals are a basic element of the human psyche and we simply cannot get along without them.

When you and I started our businesses, we each embarked on a quest to reach a goal that we felt capable of accomplishing. It might have started as a small spark or it might have been a bonfire, but the majority of goals never turn out quite as we expect. Why? Because the brother of 'goals' is 'problems' and we seldom find one without the other.

I learned the hard way there are three rules for goals: The first one is obvious —it must be attainable. I will never walk on the moon, so it would be ridiculous for me reach for it. I will never be rich beyond my wildest dreams because it's too generalized. Therefore the second rule of goals is that they must be specific. The third and final rule is that everyone involved in reaching the goal
must understand it thoroughly. So there you have it — attainable, specific and understandable.

You can't operate a business without goals. They are the control mechanism for an enterprise. An enterprise that has lost sight of its goals will spin out of control and commit suicide. Goals should focus on results, be associated with departments of a business, and be decomposable into work that has to be done.

Objectives are generalized statements about where we want to go. Goals are specific targets that have a time-fuse built into them and may be composed of multiple objectives. A mission is a high level statement of objectives, and strategy identifies a pattern of goals, policies, and plans that determine how a business should function over a specified period of time.

One strategy in a convenience store environment might be to enhance the shopping experience of its customers. An objective might be to increase overall profitability, and a goal might be to eliminate slow moving stock and replace it by the end of the year with items having a higher turn-rate.

Goals should be categorized as short term and long term, with short term being two years or less and long term extending out to a lengthier period.

Short term plans might include: What is our targeted gross sales for the next fiscal year? How can we eliminate the errors on purchase orders by July 20th, 2011? How do we implement price books and scanning in all stores by December 17th? All the while, creating budgets and quotas and building these into financial models. Short term planning tracks sales and expenses, comparing them to targets, and provides for adjustments required to achieve target revenues and profits.

Long-term planning addresses such questions as: What will our revenues be five years down the road? How will we achieve that growth? To what policies must we adhere to prevent suppliers from sneaking inventory in through the back doors of our stores? How can we insure our shelves remain full without opening the door to supplier abuse? How can we work with suppliers to help them live up to their contracts of removing unsellable or spoiled stock?

The highest level objectives must address the following questions:

  • What is our business?
  • What will our business be?
  • What should our business be?

The above are questions top-level managers should be asking constantly. This is vital. And don't forget about your customers.

  • Who are they?
  • Where do they live?
  • What are their needs?
  • What will they buy, and why?
  • At what price?
  • How do we go about attracting them?

An enterprise must translate its customer's needs directly into a hierarchy of goals. Else it may develop forms of internal politics that serve no purpose.

In most convenience store operations, goals (if they exist at all) are generally not found in written documents. Rather, they are being carried around in someone's head and may change from day to day. This is why most businesses fall prey to rumors and views from so-called experts that end up being nothing more than sale's pitches to buy something — get a discount, a rebate, or a free trip to play golf in Hawaii. Without a well-documented list of goals that are shared and fully understood by management, management is subject to being taken in by everybody and anything. An enterprise that operates in this fashion is simply an accident waiting to happen. Each manager should set their own goals and insure they are conducive to those of the enterprise. This is where assumptions come into play.

Assumptions are a belief or thought that guides us through our day-to-day activities. In the convenience store industry we might assume that customers are turned away from stores that have bare shelves, so we are much more agreeable to ordering a shipper with 2,000 new candy bars that no one has ever heard of, because it agrees with our assumption that it will make our gondolas more attractive.

Assumptions may guide us into believing that all employees steal after the first six months and lead to the enforcement of a policy aimed at treating all employees as thieves from day one. An assumption that vendors are gods who know what's best for us, helps us to look the other way when they cram a nine month supply of an unpopular brand of beer in our cooler. An assumption that a specific software product is best because 'everybody' else uses it, may guide us into haphazardly reorganizing our company to function like the competitors we want to be better than.

Assumptions are by far the most dangerous element that exist in the minds of top management. Let me give you an example: While attending a seminar at a meeting hosted by a national association the CEO of a twenty-unit convenience store operation is convinced, if his company is going to survive, he must grow his operation. On the plane coming home from the soirée, the CEO decides building a brand new store in a new and up-scale section of his city will attract more revenues and conform to his newly formed assumption that 'a business must expand or die'.

Being a small company, the lone operation's manager feels the investment necessary to meet the codes of the new area is too high, he already has more stores under his control than he can manage, and he doesn't have the employee resources necessary to staff the new, remote location with employees who will need to make a forty mile-a-day round trip to and from work. His assumption is 'the boss may not always be right, but he's always the boss'.

What do you suppose will be the outcome of this scenario?

The assumptions held by the boss, top-management and employees must be constantly under scrutiny. Else the enterprise may be working against itself, causing friction and fueling internal politics.

Every business has problems that impede its progress toward reaching its goals. A matrix should be created to associate goals with problems. Goals and problems should then be mapped against departments. Then, management must sit down and hash out what problems exist that prevent them from reaching their goals, what the possible solutions to these problems are, what departments could be used to assist in reaching these solutions, and what their part should be.

Goals and Problems should be ranked according to their importance: Are they so critical they should be assigned a rigid timetable? Is solving them critical to supporting the enterprise? How critical? Do they simply fall within the category of 'wouldn't it be nice if'?

A meeting should be held with the owner or CEO, the managers that answer directly to him or her, and a third level (if applicable) that answers to the second tier. The event should be announced beforehand, providing each manager time to think about the goals and problems he or she would like to bring to the meeting.

Be sure the group understands the purpose of the meeting and the tools that will be used. A member from the IT department should be present to answer questions and field suggestions as to a timetable for creating the tools necessary to track the charts and matrices that will be used in the study.

There are several good books available to assist in this effort. One of my favorites is James Martin's Information Engineering trilogy. Many of the ideas in this blog have come from twenty years of research including excerpts and ideas appearing in Martin's books.

Goals and Problems should be revisited annually to see if they still exist, are still in the process of being solved, or need to be completely removed from the list. Interviews with selected managers should be held periodically so they may report on progress made on the solution of goals and problems that were assigned to them specifically. You might consider incentives and compensation for solving problems and reaching milestones in a timely fashion.

On the other hand, if you are happy with the way things are going in your business, think again. Things are not always as they seem to be.

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