It’s never a bad time to set goals but in the world of corporate and financial planning a lot of it happens in the last few months of the calendar year that is winding down and the first month of the new year. But whether you are setting company or personal goals, there is an art and psychology to goal setting.
Setting the bar so low that you can trip over it does little to propel yourself or the organization forward. Sure, it may feel good at the end of the year when you can look back and say you’ve met your goals, but to me, that’s a shallow victory.
On the other hand, setting a goal so high that there is little hope of obtaining it or it can only be achieved if everything goes your way (that almost never happens) is also of little value. A goal set too high may cause people to give up before they even begin. Or they may try during the initial months of the year but give up before the first half is over realizing that they just can’t get there.
Generally, I believe goals should be set with the philosophy that they are obtainable but it’s going to require some hard work intelligence and creativity to get there. If you’re setting the bar in such a way that it’s achieved year after year then it’s probably too low. If you’ve never achieved your corporate goals, then they’re probably too high. I think a good balance is achieved when the goals are met about seven out of ten times.
Note that goal setting may be different than profit planning or forecasting where the objective is to drive for accuracy. I’ve seen companies that always make their forecast or budget. They’re sandbagging; setting the profit plan so low they are virtually assured of achieving it. For profit planning, I want a number to which we can manage while knowing it’s not necessarily a slam dunk. Looking back over time, I want half of my years to be bit under and half to be a bit over and I want the average error to be right around zero.
Now, some might balk at it being acceptable to miss a profit target, but if a company is properly capitalized then it has room to miss a target by a reasonable amount without having major ramifications on the long term. Further, it will be balanced by years when the company exceeds the profit by a like amount.
There is also the concept of BHAGs (Big Hairy Audacious Goals). These are big ideas that generally need step changes to achieve as opposed to incremental changes. They are an important element of goal setting as well and at times can be a rallying point
Finally, there are times when goal setting even needs to be tailored at the individual level. A goal that motivates one person may overwhelm another.
It can be a lot to think about . . . how do you set goals?
If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to [email protected]
your cash is flowing. know where.®
Copyright @ 2020 Homza Consulting, Inc.