When setting strategic goals, companies often have a list of worthy but vague aspirations. The secret to getting a list of clearly defined and measurable goals is to anchor them to what you, as company leaders, want to get from your stakeholders. This leads you to determine the desired behavioral outcomes, even the relatively obvious ones like buying more. The debate can then move to thinking about how to trigger that behavior, and the progress of these outcomes can be described in measures that are in dollars, such as income; quantity, such as units sold; or percentages, such as market share. Thinking this way seems like a fad. a trend a trend It’s a trend, although it’s obvious, but it’s an effective way to get a management team to think about what what they have to do.
Ann is the CEO of the largest independent, not-for-profit aged care provider in my country, offering residential aged care, retirement living, and at-home support. It was built more than a hundred years ago and is set up in many ways. One of them is how to conduct strategic goal-setting. But Ann was not happy with the process. I asked him, “Why?”
He explained. “When we get together to discuss our future direction as a business, we often get to the point where we have to write down our goals. When we use a facilitator, and we usually do, that person walks over to the flipchart or whiteboard and write ‘Goal’ at the top. Then everyone gets together to brainstorm to come up with a very long list.”
“And you narrowed down the list?” I asked.
“Yes,” Ann continued. “Discussion and arm wrestling begins with the goal of reducing the items to about half a dozen. After a few hours, my tired and frustrated colleagues are all too happy to move on to the next item on the agenda.
Ann explains how her team is often not satisfied with the results. “Neither do I,” he added, “because the list of ‘Goals’ consists of many activities, nice things, and vague statements of purpose.” Ann showed me her latest results:
- To be an employer of choice.
- To grow the business by opening more centers.
- To maintain consistency in resident and client care.
- To effectively manage risks and crises.
- To ensure compliance with regulatory authorities.
- To transform operations by adopting more technology.
Perhaps your own efforts have produced a similar list. You might be thinking: What’s wrong with this? The answer is: A lot.
Any strategy he creates should determine what the company can do to meet those needs every important stakeholder group: residents, clients, employees, suppliers, shareholders, and community. This means that his business must take a position of the factors important to each of the groups. For example, Ann’s management team should set a policy on working conditions, pay, organizational culture, etc. for employees. What should guide these decisions? And how does Ann know if the decisions are improving the organization? How will he measure it?
The answers should be his list of strategic objectives. But Ann’s hodgepodge does not provide a clear line of sight between business competition for each key stakeholder group and the results. How do you know if a strategy is working? It’s as if the list of goals is in a black hole.
Shift Your Thinking About Goal Setting
The trick to separation is to shift your perspective and ask what your organization wants from its main stakeholders. (This comes as an “aha” moment for most managers.) These are your strategic goals. For example, consider revenue from customers, innovation from employees, and support from the community. Your mindset must shift to be outside in if you want to create successful strategic goals. If you describe organizational goal setting this way, you can see how it breaks down into a stakeholder-by-stakeholder exercise.
Step 1: Identify behavioral outcomes for each stakeholder group.
To illustrate, let me share a story. A CEO I advise, Stuart, leads a bank with “members.” I conducted a workshop for him and his managers. We have identified key stakeholders in the credit union, one of which is, naturally, members. To break up the traditional brainstorming hodgepodge, I asked the group a seemingly simple question: “What do you want your members to do?”
This came as a strange new approach to the group and required them to think deeper. After some discussion, we came up with this: “So that members can lend and more will become members.” I explained how I called it a behavioral outcomes.
Step 2: Convert behavioral outcomes into organizational goals.
I then led Stuart’s team through the second step, which was to convert this behavioral outcome into a organizational goals. It usually starts with “increase” or “decrease.” After careful consideration and debate, the group agreed on: “To increase income from current and future members.” Note the “future.” This will be encouraged by positioning the strategic factors relevant to the members.
Why didn’t I start there with the second step? The reason is that often the process falls back into being a hodgepodge. Identifying behavioral outcomes for each key stakeholder group first anchors the organization’s goals, which then become clear and measurable..
Step 3: Identify the steps.
This brings me to the third step: identification steps, a short list commonly called key performance indicators or KPIs. This can be tricky, because all sorts of things are labeled as KPIs in exercises like this. In the past, Stuart’s organization marked the actions of individuals and program descriptions as KPIs. So, I must point out that a key performance indicator is a key performance measure.
The clincher for Stuart and his team came when I showed that there are only three ways to measure business results and that they can be neatly summarized in three symbols: $ (or the local currency ), # (number of), and % (percentage). No one has minimized the consequences for them in such a way before.
The advantage of this is that Stuart and his team already have stakeholder-oriented goals for members to measure. Stuart can measure the total revenue generated by new and existing members; the number of new and existing members; and the bank’s percentage of market share. Any strategies aimed at creating competitive advantage – around, for example, product range, customer service, and pricing – can be evaluated using hard results.
I do this for each of the main stakeholders in the organization: customers, employees, suppliers, etc. Always get a management team to check what exactly the organization is trying to achieve.
Your Goal-Setting Journey
If you want to develop a clearly focused strategy, you should avoid the usual practice of brainstorming to come up with a list of strategic objectives. This leads to a hodgepodge of hard-to-measure things, as Ann’s experience shows. Instead, rethink your journey by identifying who your key stakeholders are – and what you want from them.
This will provide you with clear and measurable results that will help you focus on your organization’s strategic positions for each of your key stakeholders. Strategic clarity is your result.