Wednesday, April 09, 2008

Why are Goals and Objectives Important?

You see it, hear it, read it, and often repeat it, “…the economy is doing down the drain, … competition is fiercer than ever and cutting into our profits, … lay offs are eminent, … you need to do more with less, and blah, blah, blah!”

So what are you doing to ensure your organization’s survival! Are you just complaining about the situation you got yourself into or have you decided to take a logical rational approach to improve your survival?

Why previous post about productivity resulted a flurry of emails to me asking me, “why I felt understanding productivity and goals and objectives are so important?” You have to be kidding me.

A frequently referred to set of statistics from Kaplan and Norton state;

  1. 9 of 10 companies fail to execute strategy
  2. Only 25% of managers have incentives linked to strategy
  3. Only 5% of the work force understand the strategy
  4. 85% of executive teams spend less than one hour/ month discussing strategy
  5. 60% of organization don’t link budgets to strategy

If these facts are remotely representative of most organizations, what the hell is everyone in your organization working on? You don’t need more resources, you just need to have them stop working on unimportant, non strategic activities and start working on the tasks that support your strategy.

According to Barney and Griffin, organizational goals serve four basic functions;

  1. they provide guidance and direction,
  2. facilitate planning,
  3. motivate and inspire employees,
  4. and help organizations evaluate and control performance.

Organizational goals inform employees where the organization is going and how it plans to get there. When employees need to make difficult decisions, they can refer to the organization's goals for guidance.

Goals promote planning to determine how goals will be achieved. Employees often set goals in order to satisfy a need; thus, goals can be motivational and increase performance.

Evaluation and control allows an organization to compare its actual performance to its goals and then make any necessary adjustments.

How many of you honestly know your organization’s goals and objectives? How many of you know where to find the organization’s goals and objectives? What criteria are you using to ensure you’re making the right decision and subsequently, optimally allocating your scarce resources?

For organizations, managers, and employees to be successful more emphasis needs to be placed on making sure every employee and every manager knows what he or she needs to accomplish in the present and future. When employees understand needs to be done to succeed, it's much easier for them to contribute. It's also tremendously easier for managers to do their jobs, to improve productivity, and to manage proactively, rather than waste their time stamping out small fires after the fact. Clear purpose helps everyone succeed and, bottom line, that's what we all want.

Organizations need to coordinate the work of individual employees and work units, ensuring that everyone is pulling in the same direction. Individual performance goals provide the fabric that allows this kind of coordination to occur.

According to Locke and Latham, goals affect individual performance through four mechanisms;

  1. goals direct action and effort toward goal-related activities and away from unrelated activities.
  2. goals energize employees. Challenging goals lead to higher employee effort than easy goals.
  3. goals affect persistence. Employees exert more effort to achieve high goals.
  4. goals motivate employees to use their existing knowledge to attain a goal or to acquire the knowledge needed to do so.

Setting individual performance goals provides a framework for translating the goals of the organization into smaller chunks that are then assigned or delegated to individual employees. This needs to be done for an organization achieve their overall goals to the extent that each employee does his or her part in completing the right job tasks in effective ways.

When an employee knows what needs to accomplished and what is expected, it's a lot easier for that employee to work without constant supervision. Also, by helping employees understand how their individual work contributes to the overall goals of the organization, we enable them to make their own decisions about how to spend their work time so that their work is consistent with the priorities of the organization. The consequences are employees know what they must do, how well they must do it, and why they are doing it. Resulting in a team that is knowledgeable and therefore empowered, to do the right things with much less supervision/oversight. The teams can make decisions relevant to their work without having to consult the manager on every little question.

Clear goals and objectives allow employees to monitor their own progress all year 'round and correct their efforts as necessary. If employees know what they need to accomplish, they can look at their results as they go and identify barriers to achieving those goals.

Believe it or not, most employees want and need to know four things about their work so they can contribute and feel comfortable about where they are in the organization:

  • What do I need to accomplish?
  • Why am I doing what I'm doing?
  • How well must I do it?
  • How am I doing?

If you want to know how to get started, give me a buzz.

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Sunday, March 30, 2008

Do you know the difference between a goal and an objective?

As a consultant, I have the fortunate opportunity, or misfortune depending on your perspective, to review many organizations’ goals, objectives, and supporting initiatives. Despite the size of the organization, it’s obvious that most organizations large and small, public or private don’t understand the difference between a goal and an objective.

For some reason, unknown to me, this drives me crazy. I expect most business people, especially senior level executives to use the terms goal and objective correctly. Perhaps it’s my deeply held belief that in order for organizations to achieve success they have to be able to effectively communicate their goals and objectives and that these goals and objectives will be cascaded down through the organization. Silly me.

A goal is a brief, clear statement of an outcome to be reached within a timeframe such as 3-5 years. A goal is a broad, general, tangible, and descriptive statement. It does not say how to do something, but rather what the results will look like. It is measurable both in terms of quality and quantity. It is time based. It is achievable. It is a stretch from where we are now. Above all, it is singular.

Goals can be described or defined as “Outcome statements that define what an organization is trying to accomplish both programmatically and organizationally.”

Some common business goals are, grow profitability, maximize net income, improve customer loyalty and etc. Notice the brevity of these statements.

In comparison, an objective is a specific, measurable, actionable, realistic, and time-bound condition that must be attained in order to accomplish a particular goal. Objectives define the actions must be taken within a year to reach the strategic goals. For example, if an organization has a goal to “grow revenues”. An objective to achieve the goal may be “introduce 2 new products by 20XX Q3.” Other examples of common objectives are, increase revenue by x% in 20XX, reduce overhead costs by X% by 20XX, and etc. Notice how the objectives are more specific and provide more detail.

A goal is where you want to be and objectives are the steps taken to reach the goal.

As I write this blog, 2008 Q1 has come to end and I bet many of you don't have any idea of your organization's goals and objectives. If don't know them, how do you know if you have been working on the right projects/things?

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Saturday, March 22, 2008

What the heck does "Productivity" mean?

I'm often asked to define productivity and its algorithm. Also, I often hear productivity, production, and capacity used interchangeable. For some reason this drives me nuts because they all have different meanings.
I hope my write up below helps you understand what productivity means.

What is productivity?

Productivity is the ratio of outputs (goods and services) divided by one or more inputs (labor hours, FTEs, capital, expenses).

Improvements in productivity can be achieved by either increasing output without increasing the inputs, decreasing inputs without decreasing output, or increasing output and decreasing inputs.

Output implies production (quantity) of goods and services while input means land, labor, capital, management etc. Productivity measures the efficiency of the production system. Higher productivity means producing more from a given amount of input or producing a given amount with minimum level of inputs.
In other words, the more the output from one worker, one machine, or a piece of equipment per day per shift, the higher is the productivity (producing more output with the same resources).

In strategic operations management, productivity and production are two different terms. Productivity is the ratio between total output and the total inputs used in the production process. Production is an absolute; it refers to the volume (quantity) of output. Production volume may increase but productivity may decline as a result of inefficient use of resources. More efficient use of inputs may increase productivity but the volume of production may not increase. Production refers to the end result of production system whereas productivity reflects its efficiency.

Some of the potential benefits derived from higher productivity are as follows:
1. It helps to cut down cost per unit and thereby improve the profits.
2. Gains from productivity can be transferred to the consumers in from of lower priced products or better quality products.
3. These gains can also be shared with workers or employees by paying them at higher rate.

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Monday, July 03, 2006

Six Sigma Black Belt vs. Homicidal Bomber

What have you done to ensure the success of your Black Belts?
What are the things (fundamental elements) that need to be in place to ensure their success and their projects' success.
Or, are you using your Black Belts as suicidal bomber driving projects with poor strategic alignment, poor commitment, and little resources?
The latter is probable the answer.

Saturday, June 24, 2006

Six Sigma vs. Lean

Why is it that Lean is seeing a resurrection and Six Sigma is fading in popularity?
What has swayed corporate perceptions of these philosophies?

Thursday, September 15, 2005

Is Six Sigma really as successful as people claim?

What do you think?

Saturday, September 03, 2005

Has Six Sigma become commoditized?

How is it a Six Sigma Black Belt can become certified in a week? How is it a person can become certified as a Six Sigma Master Black Belt without knowing what what design of experiments are?