Determining Where You Want To Go

 

The first four modules of this course set the foundation for the remaining modules. They were designed to get you thinking in broad terms about ideals and dreams, what you want, and where you want to go. Beginning with this section, you will begin to focus on what it will actually take to accomplish your mission.

If the mission statement declares your company’s destination, then developing strategic objectives draws the map to get you there. Objectives should be challenging, but within reach. A technique to use as you begin developing your business objectives is to envision your ideal business — one that would provide maximum results from the available market. Next, consider your company’s existing strengths and weaknesses, financial limitations, and any other restrictions you may have in attaining your ideal business environment.

There are five primary steps involved in developing your business strategy:

1. Define your critical success factors.
2. Determine your measurements, objectives, and goals.
3. Develop action plans.
4. Analyze resources and assigning tasks.
5. Track and review progress.

This section will review the first two steps: defining your critical success factors and developing your objectives and goals. In Module 8 you will determine how you will reach the objectives and goals you have set, what resources you have available to reach them, and how you will monitor your progress.

 

Defining Your Critical Success Factors

Critical success factors are broad areas of your business where exceptional performance is critical to the achievement of your overall mission. They are the factors most likely to determine the success of your business — areas where the failure to perform would harm your business or even lead to ultimate business failure.

Identifying your critical success factors will allow you to take the steps and allocate the resources necessary to ensure good performances. These areas are not the same in every company. Two different companies in the same field might have different critical success factors. Critical measures of success aren’t based on what industry you’re in, but rather, on your business. When identifying your critical success factors, you should do so in the context of your mission statement. Critical success categories will cover a wide variety of possibilities.

Think of your critical success factors as the vital signs of your business. What should you be measuring or watching to know if you are achieving success?

 

Examples of Critical Success Factors

Profitability Cash Flow Sales Volume Market Share Gross Margin Productivity Financial Management Superior Quality Out-of-stock Levels Technological Advantages Incoming Service Calls Cost of Goods SoldPhysical Facilities Research and Innovation Organization Qualified Employees Customer Satisfaction Fulfillment Operations Personnel Counts Overtime Hours Hours Billed Adaptability to Change Return Rates Accounts Receivable

 

If you were gone from your business for an extended period of time, what would be the most important things you would want to know were happening in your absence that would tell you your company was accomplishing its mission?

Recognizing your critical success factors is the first step in setting objectives and goals, although they will change as you meet objectives in one area and move on to others. You might identify a set of critical success factors for the upcoming year as:

Profitability. Perhaps you have only recently opened your doors and have not yet reached a level of profitable operations.

Product. Perhaps you started your business with a single product and need to expand your product line to provide a more stable base.

Out-of-stock levels. If product is frequently out-of-stock and customers are back-ordered, you may risk customers turning to a more reliable supplier.

Return rates. Perhaps product-return rates are high due to unmet expectations or poor quality.

Once you identify the areas that require special focus, you can then set objectives for each of those areas.

 

Determining Measurements

 

Once you define the critical success factors that require strategic focus in the current reality of your business, you will need to determine what you will measure in order to evaluate progress in each of those areas. To do this, you will need to define specific Measurements for each critical success factor. These measurements will serve as guideposts to help you develop the objectives and goals that are most likely to produce the desired outcome for your church. Two businesses could identify the exact same critical success factor but end up determining very different measurements depending on the philosophy, unique needs and desired outcomes of each business.

For example, if a business decides that a critical success factor for this strategic planning period is profitability, are are several possible ways to measure progress.

 

Critical Success Factor: Profitability

Possible Measurement Options:

• Amount of profit earned this year.
• Percent increase in profit over previous year.
• Same-store year over year increase in profit.
• Increase in gross product margin.
• Growth in net operating income.
• Increase in profit margin.
• Decrease in expense to income ratio.
• Net income after all operating expenses, loan payments and taxes.

Choosing the right measurement for each critical success factor is a process that forces you to carefully answer the question, “At this stage in the development of my business, how will we define improvement or effectiveness in this critical area?”

Determining the right measurements will also lay a foundation for goal setting and evaluation that will enable you to “manage by fact” rather than simply managing by intuition or subjective judgment. By clearly determining what you will measure to gauge your progress in each critical success factor, you will be able to set goals and evaluate results based on facts about your business and actual effectiveness. By definition, measurements must be something you can verify, quantify or objectively evaluate, and as a general rule this will require that you are able to take “before measures” – measures taken before the strategy is implemented, and “after measures” – measures taken after the strategy is implemented.

For example, if you decide that the way you will measure progress in profitability based on increase in gross product margin, you will need to decide how you can take before and after measurements. How can you most effectively determine what your actual margin is on each product you sell at the beginning of this strategic planning period? How can you periodically take this measurement after six months, a year, two years? If you aren’t able to effectively take before and after measurements, you may want to choose a different measurement.

 

TAKE ACTION!

Determining Measurements

 

Identifying Objectives

 

The process of identifying your objectives flows naturally out of the measurements you have defined. Once you have decided how you will measure progress in each critical success factor for your business, you are now in a position to identify the primary aims to which your business will commit its efforts and resources in order to create the results desired in each of these areas. Setting clear objectives will convert your intentions about the next steps toward your mission and vision into a picture of specific performance aims. Over time, the objectives you set will direct the attention and energy of everyone on your team toward the same objectives and goals. So the outcome of this next step of strategic planning is to identify one specific objective related to each measurement you’ve defined.

 

Developing Your Objectives and Goals

Objectives and goals are equally important, but have different purposes. Objectives are clear statements of intent — what the company wants to accomplish in a specific area. Objectives are broader in scope and are used to define long-term desires. They focus on end results. Objectives should be challenging, yet achievable within the resources available to you. They also should be verifiable. Anyone looking at the results should be able to agree that the objective was met or not met.

Goals are the strategies or tactics you take to achieve your objectives. Goals should be measurable in terms of both time and numbers. For instance, rather than a goal to “reduce return rates as much as possible, as soon as possible” your goal should be specific and measurable: “reduce return rate from 9% to 7%.” Usually when formulating your strategic plan it’s assumed the goals are for the current fiscal year. You only need to state the time frame if it is otherwise.

A football team’s desire to win a game is a good analogy to illustrate the difference between objectives and goals. The team’s objective is to win the game. A goal might be to score a touchdown on the team’s first possession of the ball. To score, the team takes action by running a series of plays. At the end of the game, it’s very clear whether or not the team has met it objective.

Developing Objectives

The objectives you set should relate directly back to your critical success factors and measurements. They should contain a single theme and focus on end results. Whenever possible, objectives should be measurable. For instance, number of units, rate of return, amount of dollars, and percentage of increase can all be measured. Measurable objectives allow you to monitor your progress and determine when you have succeeded. Five to eight objectives are usually enough for a company in a given period of time, although you may have multiple sets of objectives for different planning periods. For example, your five-year objectives will differ from your one-year or quarterly objectives.

You will want to look at your list of critical success factors and identify specific objectives for each measurement. Your objectives essentially turn your measurements into a specific statement of intent for this planning period.

Your one-year objectives might look something like this:

 

Critical Success Factor:	Product innovation
Measurement:	Number of new products introduced
Objective:	Introduce two new products this year

 

Critical Success Factor:	Customer satisfaction
Measurement:	Volume of customer returns
Objective:	Reduce customer returns by 25% this year

 

Critical Success Factor:	Profitability
Measurement:	Cost of goods sold
Objective:	Reduce cost of goods sold by 10% this year

 

Objectives will vary according to type. You may have innovation objectives —objectives which force you to look at things in a new way or to explore new directions. You may have problem-solving objectives — objectives which are directed at improving operations or fixing something that isn’t working right, or meeting an urgent need. You may occasionally have maintenance objectives — objectives which strive to maintain the high level of quality, sales or production you have already reached.

Developing Goals

Once objectives are identified they must be broken down into specific goals, or strategies, to reach them.

If an objective is to introduce two new products, your goals to accomplish this objective might be to research various product options from third-party suppliers, select at least one new product from a third-party supplier, and upgrade the current product to create a new commercial model.

The number of goals you set for each objective will vary. Set as many as you need to accomplish the objective.

 

Example of Critical Success Factor with Specific Objectives and Goals

Critical Success Factor	Product base
Objective	Introduce two new products
Goals	Research product options Select new product from 3rd party supplier Upgrade current product to create commercial unit

 

TAKE ACTION!

Determine Where You Want To Go