As I have previously stated in this blog, I regularly attend small business networking groups. At one such group, there is a lady who attends and presents her ‘business’. I put the word business in parenthesis because she doesn’t have a business. She has an idea for a business and she appears to be extremely muddled about how to turn that idea into a business.
When she speaks about her business idea, certain words stand out. These are words like “maybe”, “might”, “perhaps”, “possibly” and “could”. There appears to be little certainty in her plans and there is little evidence that she has done the necessary research to assess the workability and viability of her business idea. This might be excusable for some one in the first few weeks of developing a business idea but this particular individual has, to my knowledge, been pushing this ‘business’ for at least three years, if not longer.
So, how do you develop business objectives?
The first stage is to do your research, you must analyse the prospects for the business AND the environment within which you business will exist. This means examining the necessary resources required for the business to operate; what competitors are doing; what wider economic and social effects are doing to the market; and what market factors are doing to the business.
With many small businesses, this process is carried out in a haphazard manner. All too often, objectives are set on the basis of personal perception and ‘hunches’. It is not carried out in a structured way. This means small businesses can miss market opportunities, ignore threats and not make the most of their existing skills base.
After researching the business opportunity and the market environment, the next part of the planning process is to develop a robust mission statement for the business. A mission statement sets out the vision for the business. A robust mission statement is the starting point of corporate and marketing planning.
A mission statement sets out your long-term business rational. It describes the business you are in and what business you should be in. for example, John Menzies was for many decades Scotland’s leading newsagent chain. However, the managers of that business analysed their market place. They decided to change their business mission. Menzies got out of the newsagent business and is now one of the major distributors of computer peripherals. This wasn’t dome on a whim. It was a carefully researched and meticulously planned transfer of the businesses priorities. Most importantly, a mission statement must be understandable to all those involved in the business, from the shop floor to the board room.
A mission statement needs to identify:
- The customer groups that need to be served,
- The customer needs that are to be served, and
- The technology and resources required to meet those needs
A mission statement should be specific enough to impact on the behaviour of staff throughout the organisation. It should reflect the organisation’s core skills. It should identify key opportunities and prominent threats. It must be attainable and flexible.
One a robust mission statement is produced, its aspects should be broken down into detailed objectives. These objectives should be SMART (Specific, Measurable, Attainable, Realistic and Time Bound). This is where the lady mentioned above is deficient. Her objectives are uncertain, they are not set within a time frame with set monitoring dates and increasingly they appear unattainable.
Objectives must be framed within the nature of the business and the organisation’s culture. It is important to remember that business process belongs to management but the organisational culture belongs to everyone within the organisation. Many business transitions fail because the management try to impose a new culture on employees, resulting in industrial strife.
Objectives should take into account the effect external stakeholders, such as suppliers and shareholders. It should also take into account the power that certain individuals and groups have over an organisation. For example, if you run a taxi firm, you will have to consider the local council’s licensing policies.
Within any organisation, there will be primary and secondary objectives. The primary objective of most corporations has been profit maximisation. Secondary objectives are not inferior to primary objectives and they are needed to plan effectively for the future. Secondary objectives could include market position, innovation, productivity, resource development, management development, work attitude, and social responsibility.
Peter Drucker has proposed that organisations should move away from a single primary objectives based on profit. He proposes a ‘triple bottom line’ of People, Planet and Profit. That companies should include social and environmental responsibility alongside profit growth. An example would be The Body Shop which looked to address social justice, environmentalism and human rights as a core concept of their business.
Objectives should address general issues affecting all organisations in a market together with issues which are specific to the organisation. General issues could be the scope of the business, its orientation, how it is organised, how it evaluates performance and its policy on public responsibility.
Specific objectives could include how a business classifies its customers, how it is to deal with competitors, the way it distributes production, the technology it uses and its production capabilities. Specific objectives could relate to financing and the business environment.
For the lady mentioned at the start of this blog, She needs to sit down with a consultancy like Philmus Consulting. She needs to write her business objectives in a structured document which give clarity and certainty to her plans.