“If you want a virtue, act as if you already have it and then it will be yours”, Aristotle
The ultimate goal of public and private companies is to increase shareholder wealth. To this end, companies must remain competitive and continuously attempt to out-perform its competitors and increase market share. In order to do so, companies must develop a plan, a roadmap, that will guide them to achieve this objective.
To develop a plan, companies must first identify the objectives for the coming period or project. Without a clear vision of where the company needs to go, managers may develop their own goals that may not aligned with the company’s objectives. This situation can, and in most cases will, create a dysfunctional company with resources being depleted rapidly, stagnant growth and potentially resulting in financial and market share loss.
In the planning process, it’s extremely important to prioritize the company’s objectives. Once they’ve been prioritized, the second key step is to communicate them to the entire organization. This will provide a clear vision and direction to all employees of the company, which will allow each business unit to develop their own goals that will support the overall objective of the company. Its management’s responsibility to ensure that all the goals from each business unit are in line the overall objectives of the company.
Efficiency vs Effectiveness
Efficiency refers to the least amount of resources a company uses to attempt to reach its goals and objectives. Effectiveness refers to the company’s ability to reach its objectives. Ultimately, effectiveness is the most important. I say this because if a company is only efficient but it’s not effective at reaching its objectives, all the resources employed would be a waste because no goals would have been achieved.
Establishing goals, ensuring that they are aligned with Corporate objectives, and that they are communicated to everyone are key steps in the planning process of any company. This process is tied to budgeting, but that’s a subject for a future post.
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Until next time,