The failure to formally establish the direction of your company through business goals and objectives results in misaligned employees working to different priorities due to a lack of shared vision derived from documented goals and objectives.

You prevent employee misalignment by establishing a profit plan to reduce confusion, inefficiency, and high costs through waste and inefficiency.  Business owners who fail to plan for profits generate smaller profits with lower cash reserves than those who have set profit goals and objectives.

Overview

Goals are the results you intend to achieve, while objectives are the specific actions and measurable steps needed to achieve a goal.

Goals and objectives work in tandem to achieve success.  In the profit planning process, you start with goals followed by the objectives that outline each goal to be realized.

The “Big 4” outcome-based business goals involve targets for Net Sales, Gross Profit, Operating Income, and Net Income.  These goals can be daily, weekly, monthly, quarterly, and annual, depending on the line of sight you want to create for those accountable for achieving each company goal.

In most cases, your sales leader is accountable for achieving your Net Sales goal with operations owning the Gross Profit goal, Finance the Operating Income goal, and company ownership their Net Income goal.

Your objectives associated with realizing your “Big 4” goals will be process and performance-based.  Typical objective criteria include cost, quality, speed, dependability, flexibility, responsiveness, timeliness, and volume.

You improve your probability of realizing your goals by ensuring each goal is set according to the SMART criteria by being Specific, Measurable, Achievable, Relevant, and Time-Bound.  By articulating your goal according to SMART, you create “black and white” anchors on which to gauge progress.  I.e., either the goal is on track or realized, or it isn’t.  Removing any “gray areas” when assessing goal progress allows you to readily see where things are on track and where corrective intervention is needed.

For example, a business has the goal to grow Net Sales by 20% in 20XX.  An objective to achieve the goal may be for the owner to hire one new salesperson to cover a new territory by 20XX Q1.  The first measure of accomplishment is whether the new sales rep is hired by Q1, 20XX.  The second measure is whether the business is tracking to increase sales by 20% or not.