Savi chapter5
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This chapter discusses setting goals and managing change through goal cascading. It emphasizes that goals must be specific, measurable, achievable, results-oriented and time-bound. Goals cascade from high-level strategic goals set at the corporate level down to functional objectives and action plans at the operating level. Effective goal measurement shows progress and justifies further investment. While goals across divisions may compete, balancing priorities is key to managing change through either paradigm shifts or incremental shaping toward goals over time.
Savi chapter5
- 1. CHAPTER 5, SETTING GOALS AND MANAGING CHANGE My goal was to be perfect, and now I am. 1
- 2. Introduction to Chapter 5 figure 5.1, The planning Model 2
- 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. 3
- 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. 4
- 5. The path of cascading goals Figure 5.2, Cascading Goals 5
- 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 6
- 7. Goals and measures Goals define in specific measurable terms, what end result will be delivered from efficient and effective operations. 7
- 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 8
- 9. Figure 5.4, Corporate Long-range Strategic Goals Strategic Objective Strategic Goal issues Maximize Maintain an average return on financial returns investment of a minimum of to stockholders 15% for the next five years. Increasing the level of Improve market awareness of our product in share world markets by 15% over the Financial next two years Returns Reduce unit Reduce the % of cost to selling manufacturing price by 10% within 2 years. costs Improve product Reduce the reject rate by 5% quality during the next year 9
- 10. Corporate Long-range Strategic Goals Maintain continuous employment for Sustainability of Maximize the our 1,600 people for next five years. the organization impact of the In The Economic organization on the Contribute 20% of the local Chamber System regional economy of Commerce operating budget for the next five years Minimize the probability and Maintain an injury rate less than the Safety Of the severity of national average for the next five Public And employee and years. Employees, public injury (including the Motivation and Maximize the Maintain a 90% satisfaction level of Retention of motivation and employees and have a retention rate employees) retention of 5% higher than the industry average employees for the next five years. 10
- 11. Corporate Long-range Strategic Goals Minimize the Stewardship Of impact of Reduce the level of solid The Natural operations on the particulate emissions to the landfill Environment natural to 3 parts per million by June 2007. environment Achieve and maintain a 90% Maximize the Satisfaction Of customer satisfaction level satisfaction of Customers At regarding service, product quality customers at all All Levels and perceived value by April 2004 levels and for the next five years. 11
- 12. Functional level goals (Cascaded) Figure 5.5, Long range corporate financial goal Corporate Long-range Goal Measurement Concept Maintaining an average return on Maximize financial returns to investment of a minimum of 15% for stockholders the next five years. 12
- 13. Figure 5.6 operating financial goal Operating Short-range goals by department Measurement concept Increase total sales by 5% this year Sales Maximize by introducing a new pricing structure Department revenues which includes quantity discounts and an easy payment plan. Reduce materials, labour and Minimize overhead production costs per unit by Production production 5% this year by automating the Department costs packaging step in the manufacturing process. 13
- 14. Another example… safety Figure 5.7 long range corporate safety goal Corporate Long-range Goal Measurement Concept Minimize the probability and Maintaining an injury rate less severity of employee and public than the national average for injury the next five years. 14
- 15. Action plans … operating departments Figure 5.8, operating safety goal Operating Short-range goals by Measurement and tactic department by training all 150 shop personnel in the Human Resource Increase awareness effective use of safety equipment by Department of safety procedures November 15th, 2000. by correcting the 17 shortfalls cited by the Reduce the Production recent Workers Compensation Board probability of injury Department safety audit by September 1, 2000, at the on the assembly line least possible cost. 15
- 16. 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. 16
- 17. For example, the corporate level goal, minimize the probability and by maintaining an injury rate severity of employee and less than the national average public injury for the next five years, has the target, to “Minimize the probability and severity”, the strategy or tactic “by maintaining an injury rate less than the national average for the next five years, and the results will be felt by “employee and public”. 17
- 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 18
- 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. 19
- 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. 20
- 21. Figure 5.10 , A measurement framework 21
- 22. Competing goals and trade- offs among goals Figure 5.11, Primary Objectives of Business Divisions Division Primary objectives Make as much money as we can while making business risks of all types as Finance and low as possible. Accounting Invest profits in improving the security and returns of stockholders 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 Marketing them what they want, when they want it. and sales Invest profits in expanding the market size, moving to new regions and markets, developing new products and increasing customer awareness through advertising and promotion. Simplify the production process to maximize efficiency and reduce the risk of Production warehousing inventories. Standardize production to focus on a few products that are produced and efficiently. distribution Invest profits in improving the efficiency of the production process, reducing distribution costs and improving product quality. 22
- 23. Figure 5.12, Operational goals in Business Divisions Operational Goals Focus of Finance and Production and operational Marketing and sales accounting distribution goals Order Cheap Order processing Fast order processing Slow order processing processing Product Very frequent variants to Standardized production of Reduced variants to reduce variants and investment meet changing customer one product to increase new designs preferences efficiency One warehouse at the Huge regional warehouses No warehousing because factory to take care of serving local markets by Warehousing there should be no providing fast delivery to production cycles, inventory. customers can pick up from local customers there Liberal credit and extended Credit and Cash only, paid in advance, payment terms to make N/A collections to reduce business risk buying easy Pay down the debt, provide Alter the configuration of Increase advertising and a return to stockholders, the plant and replace worn Use of financial promotion to maximize invest in sound growth out assets so that product returns product awareness in opportunities by acquiring quality and cost efficiency existing and new markets risk free assets. is improved. 23
- 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. 24
- 25. Linking Goals to Managing Change There are two basic strategies for managing change: 25
- 26. Paradigm Shift Figure 5.13, Performance Improvement Through Paradigm Shift. New performance level Old performance level Time 26
- 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 Present changes performance Time 27
- 28. Summary of chapter 5 A goal is a contract between an employee and their organization. Stakeholders need Added Value from their Investment 28
- 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. 29