Setting Goals and Measuring Progress

Why bother with goals? Appropriate goals and effective, efficient measurement systems ensure that you do not lose sight of your highest-priority external and internal needs. Furthermore, they help make certain that these needs dictate your decision-making agenda.

Goals and monitoring/feedback systems should be established at five levels:

1. Strategic goals. One of the outputs of strategy formulation is a set of goals that will tell you whether you are on the right path. Should you measure revenue and profit growth? Shareholder value? Market share? Customer retention rate? Product value? Market share? Customer retention rate? Product prices vis-à-vis competitors’ prices? Volume of business from outside the country? Percentage of revenue from new products? Having determined the metrics that are most meaningful, you can establish the target for each.
   
2. Business-wide operational goals. These goals are not strategic but are indicators of the overall health of your business. Should you measure revenue per professional? Days without a recordable safety incident? Employee retention rate? Number of days’ sales outstanding? For some companies, the metrics in these examples may be strategic, not operational; for others, they may be process-specific, not business-wide.
   
3. Process goals. At this, the most frequently overlooked of the five levels, end-of-the-line and upstream goals tell you whether your business processes (for example, business development, product development, order fulfillment) are making the necessary contribution to the business strategy. Should you measure proposals win rate? Number of products at various places in the development pipeline? Average order-to-receipt cycle time? Value of warranty claims?
   
4. Departmental goals. Most core business processes are cross functional. After you understand what constitutes success for those processes, you can identify the metrics and goals for the departments that contribute to those processes. For example, one of your measures for the cross-functional order-to-cash process may be "promise dates met." Based on that, you can establish cycle time goals for departments such as Inside Sales, Manufacturing, Distribution, and Finance. Similarly, you can establish quality and cost goals for each department based on the overall process goals in these areas.
   
5. Team/individual goals. Once your departmental goals are clear, you can develop the goals for the teams and individuals that work in those departments. Your Distribution Department’s goals may include: “100 percent of orders accurate and complete;” “72 hours from ‘pick order’ to customer receipt of product;” and “Distribution cost average<$600/order.” People within Distribution would have goals for product picking accuracy and cycle time, product breakage (which reflects on packaging quality and cost), address accuracy, packaging materials waste, on-time deliveries, and average shipping cost per order.

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