NAB senior leaders discuss the economy and why there’s good news ahead for business.
Setting goals is an important part of business growth. And that means having a clearly defined strategy that embraces all levels of your business.
You have a grand business vision; an idea that you’d love to get off the ground to help your business expand or to ramp up cash flow. But how do you make it a reality? Goal setting and breaking your idea down into manageable chunks can help it come to fruition.
Strategic goal setting is crucial to a business, says Kwanghui Lim, Associate Professor, Strategic Management, Melbourne Business School, because without it, a CEO would be running a company like the captain of a rudderless ship.
“The CEO has to set the direction, as well as the expectations of employees and shareholders,” he says. “He or she must be able to communicate clearly and concisely to employees what the business’s objectives are in the long term and what short term steps are needed to achieve these longer term goals.”
In order to translate vision into reality, a CEO needs to be very clear about the difference between ‘mission’, ‘vision’ and ‘strategy’. The following comes from Can you say what your strategy is? Harvard Business Review, April 2008:
A company’s mission answers the question of why it exists. It’s a big-picture view of things (for example, how to provide customers with the best-possible banking experience).
The vision is a statement about what the company wants to be (in the case of Apple, for instance, to be the first company to sell a tablet computer to the masses).
A strategy statement needs to be more tangible, specifying how the company will get there, articulating the company’s value proposition (how it can create value in a way that other companies cannot), as well as which customers it plans to target.
Small businesses tend to be highly resource constrained and many don’t have a formal strategic formulation process, such as the one above, in place. Bad call, says Lim.
“Senior management at small businesses often think that they can’t afford to take their eyes off the ball even for a minute because they don’t have the scale and the deep pockets of large firms,” he says. “This is a mistake. I highly encourage managers at small businesses to consider annual retreats during which they can step back, take time away from routine work, and think hard about where to focus their energies and how to align activities within the business to its broader mission and vision.
“I conducted a retreat session for managers of a small organisation. They were initially cynical but once they got going, they were amazed to realise a number of opportunities that they had failed to earlier recognise, including forming a relationship with an external partner they hadn’t initially thought of as a potential collaborator.”
Another common stumbling point for businesses is viewing strategy as the result of analysis, rather than as part of a process, observes Lim.
“If you work for a business where the CEO and his team write down tidy little strategy statements that get printed and hung on the walls but not followed through, then you should be worried. These usually end up being ignored by employees and don’t get updated in response to changes in the market and competitive environment.”
By viewing strategy as a process, the CEO, senior executives (sometimes with external consultants) and employees at various levels within the business can all work towards clarifying how the business can achieve its objectives: what it should do, what it shouldn’t do, what choices it faces as it moves forward, what trade-offs need to be made between often difficult choices and so on.
As Lim sums it up, “having a good strategy process in place can energise an organisation’s workforce and help it to adapt to changes in the competitive environment.”
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