When an organisation’s controlling body, referred to here as it’s “Board”, wants to develop that organisation, it typically sets goals or targets to identify where it is trying to reach. The usual problem is that setting goals and achieving goals have a great many steps between them and ensuring that the one leads to the other is a long and painstaking task.
The usual problem is trying to determine whether the work to date is actually making a difference when considering whether that work has moved the organisation forward towards the goals that have been set. For this reason, the ability to track progress in the attainment level of those goals is key.
Historically, this was carried out by either requiring one-off analysis of different data sets to track changes or relying on “management intuition” (basically a gut feel for how things were going). Neither was particularly satisfying or valid.
The automated systems now can use an alternate approach. By breaking down the goals into component parts, the changes that are to be expected en route to, and having attained those goals, can be tracked – across several parallel comparators. The automated systems can be set to monitor those comparators and, by attributing relative strength values to each, the duly balanced “ingredients” to the desired change can be combined to generate a definitive measure of how much progress towards the goal has been made. The viewer of this definitive measure can interrogate the components making up the figure to see what is holding things back or driving things forwards so as to know where to focus future effort to ensure ultimate goal attainment.
Say there was a Board Goal to improve Profit by 10% in the year. The absolute measure would be profits made during the year – namely monthly profits accumulating to the final figure for the annual period. But this takes no account of whether profits are expected mostly at the front end or during holiday periods, or whether there are other factors interacting to cause rises/falls in the monthly figures.
By breaking down “profit” to its contributory factors allows the organisation to better determine how close it is to attaining its goal. The contributory factors might be determined to be:
- price level attained through the year
- numbers sold
- production costs
- labour costs
- depreciation applied
- marketing spend
- … and so forth.
Any/all of these could be manipulated to impact the profit even if the actual number of sales remains more or less the same. The automated system can track all of these and by breaking down the increase in profit to incremental improvements in each of these (with different weightings to be determined by the Board), the measures can be combined to identify how far along the organisation’s progress to the goal has achieved.
Thus after the 4th month, it might be that:
- sales are up 1%,
- production costs down 0.5%,
- depreciation has been maintained at the same level
These may or may not be “good” as it depends what the Board determined the optimum way of attaining the profit goal was. If the optimum was decided to be maintaining sales at the same level but increasing the margin by 3% while reducing depreciation by 5%, then it is clear that the organisation has not moved towards its goal – even if profits may be up. If the reaction to the last point is: “well, so long as the profits are up, who cares why?” then this means that the Board have no control over the organisation and are simply reacting to circumstance.
What a Board needs is to have the opposite situation – where, on hearing that their planned changes were going astray, even if at the time the net results seemed beneficial, they ought to be unhappy and want to make changes to bring things to where they want them to be.
So if, by the 9th month, the automated systems now show:
- profit was running 8% higher
- sales up 12% (ahead of target),
- depreciation down 2% (on target)
- labour costs down 1% (below target)
this is going to sound a great deal better and allows the Board to focus on the labour costs while trying to find out why they have done better than expected even given that the labour costs were not as good as hoped for.
This whole process allows far better controls to be applied to the management of the business, allows the build up of a better model for how the interactive parameters fit together which, in turn, improves the Board’s ability to plan for the future.
Thus the organisation can not only track its Goal attainment now, but also use this process to further develop its understanding of what makes the organisation work best going forward – which in turn, allows the setting of more realistic goals going forwards in the future. By being realistic, they will more likely be attained and thus planning for the future becomes less variable.
Note that “realistic” goals do not necessarily mean “more extreme” – and there is nothing stopping the Board using this process to map more extreme goals – but now it can do so with the understanding of how realistic those more extreme goals are likely to be.
Simply attaining goals on a regular basis will move an organisation forward progressively more over time than a haphazard stance is likely to do.
(Imagine two different scenarios:
|Low regular return||Higher but erratic return|
|Total||27% (compounded not added)||21% (compounded not added)|
The better result comes from the regular low returns rather than the erratic but higher returns. The added bonus for the Board is that the regular low return will be better for their blood pressure too as without the erratic swings, the organisations progress is neat, strong and clearly shows control.
Historically this sort of tool has been available only on large and expensive systems. This means that this offering can now be attained by considerably smaller operations at minimal costs – not least as the capabilities are built in to the systems so that their ability to run ISO systems already mean they can develop this Goal tracking and analysis data as well without much additional change.
This opens up the ability to interrogate the development parameters of a business in far more depth and with far more understanding than ever before especially when considering the smaller companies that can now take advantage of this sort of product.
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