May 6, 2013 – Most strategic and operational plans ignore the definition of strategic objectives and are nothing more than an amalgamation of task lists submitted by various executives and managers. These lists are compiled, put into a three-ring binder, and updated on a monthly or quarterly basis. Because the task lists originated from a well-orchestrated and highly energetic planning retreat, during which the management team agreed on the company’s major initiatives, we fall into the trap of believing that our work actually has benefit.
Most of the time, it doesn’t.
The definition of strategic objectives is simple: It is a business need that can be defined in quantifiable and measurable terms, which, in turn, requires we answer two simple questions.
How much? By when?
As such, to fulfill the definition of strategic objectives, the business need must be bound by both a baseline and a target (how much?), as well as time (by when?). In order to conduct appropriate strategy development, we must know the level of improvement required and how much time we have to achieve the established target. If either of these elements is missing, the ability to construct an effective strategy diminishes.
Baselines and targets – which is critical to remaining pure to the definition of strategic objectives – provide current performance and desired future performance. Time provides an indication of how aggressive the strategy needs to be. If you are unable to establish baseline and target numbers for your plan’s objectives, it is an indication that your objectives are really strategies and tactics posing as objectives in disguise, and that the objectives fail to adhere to the true definition of strategic objectives.
Implementing strategies and tactics without knowing the specific quantifiable and measurable success requirements, or the time required for achievement, is a symptom of being busy. Executing an action plan designed to achieve a pre-determined, quantifiable, and measurable, performance outcome by a specific due date is a characteristic of being strategic and falls short of meeting the definition of strategic objectives.
For an objective to be quantifiable as required by the definition of strategic objectives, it must reflect an amount of something. Most commonly, the terms used for strategic and operational planning are time, dollars, percentages, and numerical counts. Some examples:
- Time: Decrease the time required to produce a product or provide a service. For instance, a mortgage company might want to reduce the time required to process a loan, a residential construction company might want to reduce the time required to frame a house, or a hospital might want to reduce the time an E.R. patient spends waiting to see a physician. This is, perhaps, the most common metric for meeting the definition of strategic objectives.
- Dollars: Decrease the cost of producing a product or service, or increase the revenue generated by delivering a product or service. For instance, a mortgage company might want to decrease its loan processing costs, a construction company might want to increase the average margin on new home construction, and a hospital might want to decrease average supply costs per E.R. patient.
- Percentages: Decrease or increase the rate of a process, activity, or desired outcome. For instance, the mortgage company might want to increase its market share percentage for total loans closed, the construction company may want to decrease the percent of lumber rejected for failing to meet its internal specification requirements, and the hospital might want to increase the percent of E.R. patients who pay their deductibles at the point of service.
- Numerical Counts: Decrease or increase the physical count of something. For instance, the mortgage company might want to increase the number of loans processed, the construction company might want to decrease the number of homes that do not pass first inspection, and the hospital might want to increase the number of E.R. patients.
There are many other units of measure, including length (inches or feet), mass (pounds), volume (gallon), temperature (degrees), area (square feet), heat (BTU), and pressure (pounds per square inch). Each of these can quantify and measure an objective, and thus fulfill the definition of strategic objectives, but regardless of how an objective is stated, it is important that the objective is an outcome measure, not the measure of a process designed to achieve the outcome itself.
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