Sunday, March 30, 2008

Do you know the difference between a goal and an objective?

As a consultant, I have the fortunate opportunity, or misfortune depending on your perspective, to review many organizations’ goals, objectives, and supporting initiatives. Despite the size of the organization, it’s obvious that most organizations large and small, public or private don’t understand the difference between a goal and an objective.

For some reason, unknown to me, this drives me crazy. I expect most business people, especially senior level executives to use the terms goal and objective correctly. Perhaps it’s my deeply held belief that in order for organizations to achieve success they have to be able to effectively communicate their goals and objectives and that these goals and objectives will be cascaded down through the organization. Silly me.

A goal is a brief, clear statement of an outcome to be reached within a timeframe such as 3-5 years. A goal is a broad, general, tangible, and descriptive statement. It does not say how to do something, but rather what the results will look like. It is measurable both in terms of quality and quantity. It is time based. It is achievable. It is a stretch from where we are now. Above all, it is singular.

Goals can be described or defined as “Outcome statements that define what an organization is trying to accomplish both programmatically and organizationally.”

As an illustration, some common business goals are, grow profitability, maximize net income, improve customer loyalty and etc. Notice the brevity of these statements.

In comparison, an objective is a specific, measurable, actionable, realistic, and time-bound condition that must be attained in order to accomplish a particular goal. Objectives define the actions must be taken within a year to reach the strategic goals. For example, if an organization has a goal to “grow revenues”. An objective to achieve the goal may be “introduce 2 new products by 20XX Q3.” Other examples of common objectives are, increase revenue by x% in 20XX, reduce overhead costs by X% by 20XX, and etc. In contrast to a goal, notice how the objectives are more specific and provide more detail.

A goal is where you want to be and objectives are the steps taken to reach the goal.

As I write this blog, 2008 Q1 has come to end and I bet many of you don't have any idea of your organization's goals and objectives. If don't know them, how do you know if you have been working on the right projects/things?

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Friday, March 21, 2008

What the heck does "Productivity" mean?

I'm often asked to define productivity and its algorithm. Also, I often hear productivity, production, and capacity used interchangeable. For some reason this drives me nuts because they all have different meanings.
I hope my write up below helps you understand what productivity means.

What is productivity?

Productivity is the ratio of outputs (goods and services) divided by one or more inputs (labor hours, FTEs, capital, expenses).

Improvements in productivity can be achieved by either increasing output without increasing the inputs, decreasing inputs without decreasing output, or increasing output and decreasing inputs.

Output implies production (quantity) of goods and services while input means land, labor, capital, management etc. Productivity measures the efficiency of the production system. Higher productivity means producing more from a given amount of input or producing a given amount with minimum level of inputs.
In other words, the more the output from one worker, one machine, or a piece of equipment per day per shift, the higher is the productivity (producing more output with the same resources).

In strategic operations management, productivity and production are two different terms. Productivity is the ratio between total output and the total inputs used in the production process. Production is an absolute; it refers to the volume (quantity) of output. Production volume may increase but productivity may decline as a result of inefficient use of resources. More efficient use of inputs may increase productivity but the volume of production may not increase. Production refers to the end result of production system whereas productivity reflects its efficiency.

Some of the potential benefits derived from higher productivity are as follows:
1. It helps to cut down cost per unit and thereby improve the profits.
2. Gains from productivity can be transferred to the consumers in from of lower priced products or better quality products.
3. These gains can also be shared with workers or employees by paying them at higher rate.

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Wednesday, March 19, 2008

Cost for Six Sigma program for Erie County climbs to more than $1 million

The Buffalo News is reporting that "The price of Erie County’s efficiency effort — the much-touted Lean Six Sigma program — is mushrooming to more than $1 million."
Come on, you don't have to spend a million bucks to get a good Lean Six Sigma program up and running.
Alfred Hammonds Jr., Six Sigma Director, wants train hundreds of employees over the next two and a half years. Come on, you don't need to train hundreds of people to have a successful six sigma program. I would start with a few well trained, coached, and mentored Black Belts to see if the culture can sustain and accept the discipline of six sigma. Six Sigma isn't for everyone.

Achieving Double-Digit Growth

In his blockbuster book "Double-Digit Growth How Great Companies Achieve It – No Matter What", Michael Treacy claims companies can achieve double-digit growth by applying the following five disciplines.
• The first discipline - keep your existing customer base
• The second discipline is - take customers away from your competitors
• The third discipline is - establish a position in growth markets or segments
• The fourth discipline is - enter adjacent markets
• The fifth discipline is - invest in unrelated businesses

What have you done to keep your existing customers, especially the profitable ones? Do you even know who are your profitable customers?

What have you done to differentiate yourself from your competitors? Hopefully you haven't commoditized your products by competing on price.

80 percent of the organizations that regularly use the ‘Balanced Scorecard’ (BSC) reported improvements in operating performance

Al Bawaba ( recently ran a story indicating, "According to recent survey of more than 1,000 organizations, 80 percent of the organizations that regularly use the ‘Balanced Scorecard’ (BSC) reported improvements in operating performance and 66 percent of them also reported an increase in profits. Correspondingly, a significant majority, 61 percent, reported improvements in bottom-line financial results."

My question to you is, how many of you have a balanced scorecard for 2008? Probably not many.

More importantly, now that we're a quarter into the fiscal year, how many of you still don't have goals and objectives. Once again, probably most of you.