Planning and goal setting for Dollar Store and Small Business

Return To Dollar Store Help

Friday April 30, 2010

                   PLANNING AND GOAL SETTING

                      FOR DOLLAR STORE AND SMALL BUSINESS 

TABLE OF CONTENTS 

INTRODUCTION

MANAGEMENT BY OBJECTIVES  

PREPARING FOR THE MBO PROGRAM

Understanding the Requirements of an MBO Program

Defining Your Business

Setting Goals

Devising a Work Plan 

Reporting Progress

Evaluating Performance

INSTALLING THE MBO PROGRAM 

THREATS TO AN MBO PROGRAM  

SUMMARY 

INTRODUCTION

 Many authorities on business management identify the five major 

functions of management as 

  *  Planning. 

  *  Organizing. 

  *  Directing.

  *  Controlling.

  *  Coordinating.

 

 The planning and controlling functions of management often receive less attention from the small business owner-manager than they should. One way to more effectively fulfill these two functions is through effective goal setting. The success of a business will depend on its long-range goals for sales, profits, competitive position, development of personnel and industrial relations. To accomplish these goals, the company will need to identify intermediate goals that it can work toward each year. MANAGEMENT BY OBJECTIVES 

 

 

Traditionally, people have worked according to descriptions that list the activities or functions of the job. The management by objectives (MBO) approach, on the other hand, stresses results. Let's look at two examples. *Suppose a credit manager's job description states that he or she will supervise the credit operations of the company.This description simply lists the functions of the credit manager. Under the MBO approach, the owner-manager and the credit manager would identify five or six goals covering important aspects of the manager's work. For example, one goal might be to increase credit sales enough to support the 15 percent increase in sales expected by the sales department. *The traditional job description for a personnel specialist may include conducting a recruiting program for the company.Under the MBO approach, the personnel specialist would identify five or six appropriate goals, one of which could be, Recruit ten new employees in specified categories by July 1. With MBO, jobs are viewed in terms of achievements rather than simply functions. Activity alone is not enough; each activity must bring the worker closer to achieving his or her goals. PREPARING FOR THE MBO PROGRAM 

Understanding the Requirements of an MBO Program Management by objectives has been used by all kinds of organizations, but not every business has had the same degree of success. From examining MBO programs that have worked, it is clear that all met the following minimum requirements :Goals were expressed in specific and measurable terms. Each employee proposed 5 to 10 goals to cover those aspects of his or her job crucial to successful performance. A final written statement of each goal was prepared,i ncluding a statement of the goal, method of evaluating the goal, work steps needed to complete the goal and an estimated time needed to complete the steps. Progress was evaluated at regular intervals (at least quarterly) and compared with the original goals. Problems that hindered progress were identified and corrected.Goals were related to each level of management, both those above and those below.Defining Your Business The first step in developing an effective MBO program is to define your business. Ask yourself the following questions: What business am I in? *Is my definition right for today's market? *Do I need to change my business to meet emerging customer needs? A clear vision of your business is crucial for planning your marketing, product development, buildings and equipment, and financial and staff needs. For example, a drop in sales caused a small business manufacturer of metal trash cans to reexamine its product. To regain lost sales, the owner decided to redefine the product as metal containers and to develop a new marketing plan. Setting Goals Long-range business goals will be the cornerstone of your company's MBO program. To achieve these goals, you must have a method to communicate them to your managers and employees. One way is to bring managers and employees into the process by asking them to help formulate the company's short- and long-range goals. If they have a role in establishing the goals, they will be more committed to achieving them. All goals should relate to and support the long-range objectives for the company. In this way, you can ensure that the goals of all levels of management are consistent. If goals are incompatible, you may find that employees feel like the middle manager of a research and development company who exclaimed in a seminar, How can I set my goals when I don't know where top management wants to go? Types of Goals What areas of your managers' work are suitable for goal setting? Ask managers to identify the most important aspects of their work. In each area, they should set both short- and long-term goals. Carefully developed goals, if attained, should give the manager better control of the job. Each manager should define one or two goals in each of the following categories:Regular work goals. Problem-solving goals. *Innovative goals.Development goals. By asking your managers to set at least one goal in each of these four areas, you may open their eyes to new possibilities they had not seen before. The goal-setting process can be a very useful educational step.Regular Work Goals These include the major part of the manager's responsibilities. For example, the head of production should focus on the quantity, quality and efficiency of production and the head of marketing should concentrate on developing and conducting the market research and sales programs. In defining their regular work goals, employees should include ways of *Operating more efficiently. *Improving the quality of the product or service.Expanding the total amount produced or marketed Problem-Solving Goals These provide managers an opportunity to define their major problems and to set a goal to solve each one. There is no danger of ever running out of problems; new problems or new versions of old problems are always present.Innovative Goals Because of the push for new products and new methods in today's marketplace, innovation now gets much attention in seminars and publications for top managers. Managers and workers should seek new and better production methods, explore better ways to serve customers and propose new products for the company. Managers will need to use innovative approaches to make the company competitive in a fast-changing national and international economic Development Goals In setting development goals, you and your managers recognize the importance of acquiring new skills. Managers should plan for the continued growth of each employee, both in technical areas and in work relations with fellow employees.Devising a Work Plan You and your managers should use a miniature work plan to develop goals that are complete and useful (see Exhibit 1). In developing the plan, the following five areas should be addressed: *Goal -- Be specific and concise. *Measurement -- What benchmarks will you use to measure whether you have achieved your goals? These usually can be expressed in quantitative terms. * Major problems anticipated. *Work steps -- List three or four of the most essential steps. Give completion dates for each. *Supervisor's goals -- Employees should identify which of their manager's goals relate to their own goals. On the work plan, managers can show each of the major work steps (sub goals) necessary to reach a goal. If the work steps are completed by the indicated date, the goal is reached. Use the form in Exhibit 1 to discuss goals with your managers. By looking at the form, you can see not only the goal but also the plan for reaching that goal. This will allow you to (1) ask questions about the work steps and any potential problems; (2) decide the best way to evaluate progress on the goals and (3) help each of your managers understand how his or her goals relate to those of the company. All problems listed on the work plan should include a solution. For example, suppose the head of a supply department sets a goal to deliver all packages within one day after they are received. Because employees may have difficulty meeting the new deadlines, the work plan should include necessary steps to teach them the new procedures before the program goes into effect. Exhibit 1 Plan to Achieve Objectives SUPERVISOR: ____________________________________ OBJECTIVE #1: Increase gross sales margin of my area by 12 percent by 9-1-92 and maintain at that level for remainder of 1992.Major Action Steps January - December J F M A M J J A S O N D 1. Decrease cost of serving small accounts.a. Identify all customers not purchasing $5000 per month.X Determine sales potential of each target customer. c. If potential is less than $5000,, transfer to jobber d. Inform customer and schedule jobber visit with customer.X e. If potential is $5000, develop cooperative sales promotion program.X f. Implement program. g. Evaluate report results.X 2. Increase minimum calls per salesperson to 10 per day. a. Analyze work methods of high call salespersons.X b. Identify salespersons with fewer than 10 calls placed.X c. Analyze territory and order of calls. d. Determine best routing of calls.X e. Determine most effective realigning of all territories.X f. Implement plans.X g. Evaluate report results.X Reporting Progress An MBO program must include a provision for regular progress reports. For this reason, the MBO concept is sometimes called MBO/R, where the R refers to results. You and your managers will only accomplish your goals or objectives if the MBO program calls for a regular review of progress. For example, one large organization issued nearly 100 pages of well-developed goals prepared by many of its managers. The document was very impressive, but it lacked a reporting system of any kind. You can imagine the skeptical reaction of those who set goals for the first year when they were asked the following year to draw up new goals. A monthly or quarterly review of progress toward goals will help you determine where progress is below expectations. For example, suppose that one of your goals is to reduce overtime work by 50 percent in one year, but you only reduce it by 15 percent in the first quarter. Based on this information, you can exert a special effort in the succeeding quarters to regain the lost ground. When progress is below expectations, you should identify the problems holding back progress and assign someone to resolve them. Failure to reach goals can result from *The wrong objectives being established at the outset. Organizational restrictions being overlooked. *Personal failure or a combination of factors. In order to solve problems and meet a goal, managers may have to adjust their time line or change the goal itself. All changes should be written as new goals and included in the MBO files. Evaluating Performance In contrast to traditional methods, which evaluate performance based on personal qualities such as leadership ability, the MBO method evaluates performance based on objective results. Such evaluation is a complex task that must be undertaken with care by someone who fully understands MBO. (See Exhibit 2 for a comparison of traditional and MBO evaluation methods.) Exhibit 2

 

       Comparison of Traditional and MBO Evaluation Methods

 

     Characteristic   Traditional method      MBO method

 

     Frequency        Usually annually     Usually quarterly.

 

                      (if at all).   

 

     Emphasis         Traits.              Results versus

 

                                           objectives.

  

     Subordinate's    Mental block.        Positive (feedback

 

     frame of mind    (doesn't know how    has told employee

 

                      traits will be       how well he or

 

                      evaluated).          she is doing).

 

     Suggestions for  Poor receptivity     Positive (much

 

     improvement      (much has been       has been based

 

                      based on employee's  on employee's job

 

                      traits).             performance).

 

     Tie in to        Rewards usually not  Rewards usually

 

     rewards          directly tied in.    tied directly to

 

                                           results.

 

     Summary          Little connection    Results oriented.

 

                      to results.

 

Under the MBO program, you evaluate your managers' performance

 

based on whether they have achieved their five to eight goals.

 

You also must determine how well they have performed the

 

secondary duties that do not fall under goals. (See Exhibits 3

 

and 4 for examples of traditional and MBO performance evaluation

 

forms, respectively.)

                            Exhibit 3

 

       Example of Traditional Performance Evaluation Form

 

     Factor            Excellent Above   Average Below  Poor

 

                                 average         average

 

 

      Degree of cost-              

 

      consciousness                X

 

     Grasp of function      X

 

     Initiative                    X

 

     Decision-making

 

      ability               X

 

     Application            X

 

     Judgment                      X

 

     Health                 X

 

     Appearance             X

 

     Loyalty                X

 

     Relationship with

 

      people                       X

 

     Ability to develop

 

      subordinates                            X

 

     Work habits                   X

 

     Contribution to

 

      company's progress    X

 

     Potential for

 

      advancement                  X

 

                      ___________________________

 

 

 

     Employee:_________________ Rated by: __________________

 

 

 

     Date:_____________ Reviewed by: _______________________

 

                         _____________________  

 

     Acknowledgment:

 

     I acknowledge his performance appraisal has been

 

     discussed with me. This acknowledgment does not

 

     constitute agreement with the findings.

 

 

 

               Signed:____________________  Date: __________

 

_

 

          Exhibit 4 -- Results-Oriented Evaluation Form

 

 

 

                                          Results achieved

 

                                      Quarters    Total year

 

     Objectives      Measure        1st 2nd 3rd 

 

  

     1. Improve by   1. At least     T   O   T   Achieved in 97

 

      10% number of  three qualified             percent of

 

      qualified      candidates                  cases.

 

      applicants     referred for

 

      referred for   each job

 

      job openings.  opening. 

 

 

 

    2. Increase by   2. Number of    O   T   T   17 completed

 

     12% number of    persons com-               course.

 

     qualified        pleting basic

 

     welders during   welding course

 

     19xx.            #5.

 

 

 

    Note: T = On target. No action necessary. O = Off target.

 

    Action necessary.

 

 

INSTALLING THE MBO PROGRAM

 

 

 

When installing an MBO program, start by asking your managers to

 

define their jobs, including their major responsibilities. Then,

 

for each responsibility, you and your managers must decide the

 

most effective way to measure performance in terms of results.

 

The outcome of this exercise may surprise you. You and your

 

managers may not agree on the major responsibilities of a certain

 

position. Also, you may find that no one is performing some

 

functions that you consider important. If the MBO system is to

 

succeed, you must show interest from the beginning and set the

 

example for your subordinate managers.

 

 

The education of your managers may be a formidable task. Until

 

this time, they have thought in terms of specific functions rather than in terms of goals that contribute to the organization. One way to introduce the MBO system to your managers is in a seminar conducted by you or a consultant. However, if you choose a consultant, be sure that you are present for the entire seminar. In this way, you will communicate to your managers that the MBO system is a management priority. During the seminar, ask each participant to prepare an actual goal. Also, in small group sessions, have your managers review each other's work plans and offer suggestions to improve them. The experience of setting and reviewing goals makes MBO a learning experience for all employees. Encourage your managers to express their doubts, reservations or opposition to MBO. They should get their feelings out in the open as soon as possible. You, the consultant or other participants can help to ease their concerns. In the beginning of your MBO program, your managers will have to learn to measure their own performance accurately, anticipate real problems that will thwart their progress and take steps to solve delays and other problems. During this learning period, your managers should set fewer goals than would usually be expected, perhaps three or four. After they develop and achieve these goals, they can extend the number and area covered by each goal. MBO may look simple on the surface, but it requires experience and skill to make it work effectively. If managers set annual goals, it may take three to four years before good results from this new system appear. THREATS TO AN MBO PROGRAM Not all MBO programs are successful. Some of the reasons why programs fail to reach their potential are Top management does not become involved. *  Corporate objectives are inadequate. 

   *  MBO is installed as a crash program. 

   *  It is difficult to learn the system because the nature of

      MBO is not taught.

 

SUMMARY

  

It is hard to get people to think in terms of results rather than the functions of their job; however, it can be done. The sequence of steps you use may not work for someone else. It is often an individual matter. No matter what steps you use, the final results are what count. If you feel that you are ready to introduce MBO to your company, why not set it as a goal for yourself? Turn back and follow through with the work plan. List your goals, method of measurement, anticipated problems and the work steps necessary to get your company managing by objectives.