CHAPTER 5, SETTING GOALS AND MANAGING CHANGE

1. CHAPTER 5, SETTING GOALS AND MANAGING CHANGE • My goal was to be perfect, • and now I am.

2. Vision, Mission and Values Long-Term View of Success Phase 1 What is Desired? Defining Challenges and Opportunities Examining the Company Profile Defining the Industry Situation What is Possible? Define Critical Success Factors Make a choice of Long and Short-Range Strategies High-Level Corporate Long-Range Goals Operating and Functional Level Short-Range Goals Introduction to Chapter 5 • figure 5.1, The planning Model

3. Goals and Objectives • Goal: A target for achievement that has a measure and a timeline • Objective:An outcome that will be achieved when goals are met.

4. Cascading Goals • A well designed model of “Cascading Goals” will work effectively. • A poorly designed model will waste resources and the desired outcome will not be met.

5. - Re-design Practices - Be Agressive - Be Defensive - Use strengths in new places One Grand Strategy A Few Corporate Goals - Profit - Sustainability - Stewardship - Safety - Satisfaction ManyFunctional Goals Finance Production Human Resources Marketing - Quality of work - Delivering on time - Doing enough for demand - keeping costs in control The path of cascading goals • Figure 5.2, • Cascading Goals

6. Grand Strategies, the Foundation of Goals • Recall from chapter 4 that at the Grand Strategy level, the SWOT analysis proposed four possible strategic paths coming from each of the cells in the SWOT analysis: • Cell “A”, Re-design Practices • Cell “B”, Be Aggressive • Cell “C”, Be Defensive • Cell “D”, Use Strengths in New Places

7. Goals and measures • Goals define in specific measurable terms, what end result will be delivered from efficient and effective operations.

8. Characteristics of all Goals, Corporate or Functional • Goals must be S.M.A.R.T. • Specific • Measurable • Achievable • Result oriented • Time limited Goals must also be understood and remain flexible

9. Strategic issues Objective Strategic Goal Financial Returns Maximize financial returns to stockholders Maintain an average return on investment of a minimum of 15% for the next five years. Improve market share Increasing the level of awareness of our product in world markets by 15% over the next two years Reduce unit manufacturing costs Reduce the % of cost to selling price by 10% within 2 years. Improve product quality Reduce the reject rate by 5% during the next year Figure 5.4, Corporate Long-range Strategic Goals

10. Sustainability of the organization In The Economic System Maximize the impact of the organization on the regional economy Maintain continuous employment for our 1,600 people for next five years. Contribute 20% of the local Chamber of Commerce operating budget for the next five years Safety Of the Public And Employees, (including the Motivation and Retention of employees) Minimize the probability and severity of employee and public injury Maintain an injury rate less than the national average for the next five years. Maximize the motivation and retention of employees Maintain a 90% satisfaction level of employees and have a retention rate 5% higher than the industry average for the next five years. Corporate Long-range Strategic Goals

11. Stewardship Of The Natural Environment Minimize the impact of operations on the natural environment Reduce the level of solid particulate emissions to the landfill to 3 parts per million by June 2007. Satisfaction Of Customers At All Levels Maximize the satisfaction of customers at all levels Achieve and maintain a 90% customer satisfaction level regarding service, product quality and perceived value by April 2004 and for the next five years. Corporate Long-range Strategic Goals

12. Corporate Long-range Goal Measurement Concept Maximize financial returns to stockholders Maintaining an average return on investment of a minimum of 15% for the next five years. Functional level goals (Cascaded) • Figure 5.5, Long range corporate financial goal

13. Operating Short-range goals by department Measurement concept Sales Department Maximize revenues Increase total sales by 5% this year by introducing a new pricing structure which includes quantity discounts and an easy payment plan. Production Department Minimize production costs Reduce materials, labour and overhead production costs per unit by 5% this year by automating the packaging step in the manufacturing process. Figure 5.6 operating financial goal

14. Corporate Long-range Goal Measurement Concept Minimize the probability and severity of employee and public injury Maintaining an injury rate less than the national average for the next five years. Another example… safety • Figure 5.7 long range corporate safety goal

15. Operating Short-range goals by department Measurement and tactic Human Resource Department Increase awareness of safety procedures by training all 150 shop personnel in the effective use of safety equipment by November 15th, 2000. Production Department Reduce the probability of injury on the assembly line by correcting the 17 shortfalls cited by the recent Workers Compensation Board safety audit by September 1, 2000, at the least possible cost. Action plans … operating departments • Figure 5.8, operating safety goal

16. Target Key Result Area Strategies What are we looking for? Where will we find the results? What will we do? Goals have three primary elements: • The target for achievement, • The strategies or tactics to be used, • The Key result area where the benefits of the activity will be felt.

17. minimize the probability and severity of employee and public injury by maintaining an injury rate less than the national average for the next five years, For example, the corporate level goal, • has the target, to “Minimize the probability and severity”, the strategy or tactic “by maintaining an injuryrate less than the national average for the next five years, and the results will be felt by “employee and public”.

18. The Basics of Measuring Goals • Those who develop effective measures recite two major benefits. • show senior management that investment is paying off, therefore acquiring more investment becomes easier. • show everyone on the team that progress is being made, therefore acquiring more effort is easier

19. Why Measure Goals? • The “Key Result Area” defines where results will be found, now we need to know “how those results will be found?”. • Measurement is the only way you can show evidence that progress is being made, and evidence is the only way you can justify continuing down a path of trying to realize a goal.

20. The bottom line … deliver goods and services: • when customers want them (speed), • the goods and services meet the customers quality needs (accuracy), • do enough to satisfy all customers, (volume) • do it at the least possible cost, (investment), then you have an efficient and effective system.

21. Perform at the right speed 'speed' is on time, not fast. Speed tm SAVI Meet the quality needs of all customers Accuracy Meet the quantity needs of all customers Volume Do all of the above at the lowest cost Investment Satisfaction of Stakeholders Figure 5.10 , A measurement framework

22. Division Primary objectives Finance and Accounting Make as much money as we can while making business risks of all types as low as possible. Invest profits in improving the security and returns of stockholders Marketing and sales Create a massive awareness of the product and sell as many products as we can to world wide markets by meeting every single customers needs by giving them what they want, when they want it. Invest profits in expanding the market size, moving to new regions and markets, developing new products and increasing customer awareness through advertising and promotion. Production and distribution Simplify the production process to maximize efficiency and reduce the risk of warehousing inventories. Standardize production to focus on a few products that are produced efficiently. Invest profits in improving the efficiency of the production process, reducing distribution costs and improving product quality. Competing goals and trade-offs among goals • Figure 5.11, Primary Objectives of Business Divisions

23. Operational Goals Focus of operational goals Finance and accounting Marketing and sales Production and distribution Order processing Cheap Order processing Fast order processing Slow order processing Product variants and new designs Reduced variants to reduce investment Very frequent variants to meet changing customer preferences Standardized production of one product to increase efficiency Warehousing No warehousing because there should be no inventory. Huge regional warehouses serving local markets by providing fast delivery to local customers One warehouse at the factory to take care of production cycles, customers can pick up from there Credit and collections Cash only, paid in advance, to reduce business risk Liberal credit and extended payment terms to make buying easy N/A Use of financial returns Pay down the debt, provide a return to stockholders, invest in sound growth opportunities by acquiring risk free assets. Increase advertising and promotion to maximize product awareness in existing and new markets Alter the configuration of the plant and replace worn out assets so that product quality and cost efficiency is improved. Figure 5.12, Operational goals in Business Divisions

24. What information is needed to set a goal? • Benchmarking the past practices of your own organization. • Benchmarking the practices of competing organizations. • Benchmarking the practices of all organizations.

25. Linking Goals to Managing Change • There are two basic strategies for managing change:

26. Paradigm Shift • Figure 5.13, Performance Improvement Through Paradigm Shift. New performance level Old performance level Time

27. Shaping • Figure 5.14 “Shaping” as a strategy for change. Target performance Early goals with small changes Perfection goals with small changes Intermediate goals with big changes Present performance Time

28. Summary of chapter 5 • A goal is a contract between an employee and their organization. • Stakeholders need Added Value from their Investment

29. Summary of Section 1 • The plans are set, the targets are identified, and there are great expectations about what the future will bring. Now it is time to do something about it. • Goals are not realized by writing them. Goals are realized my making decisions and then doing something about the decisions that have been made. • The next section of the book will deal with the process used to make the necessary decisions to ensure that goals are met.