Deploying Top-Line Objectives into Actionable Goals

Jan.01.2018 Leadership

One of the common difficulties we face as senior business leaders is that most of the
numbers we deal with are given to us in a form, and for purposes, that are disconnected
from our leading, managing, or growing the business. That is, most of us receive
numbers from accountants for traditional accounting or tax-paying purposes. For many
small to mid-sized businesses, these numbers focus on the prior month, quarter, or year,
and are already “old news.” This historical record of what has already happened is often
unrelated to the projections or strategies we need today to grow and drive the business
forward in a healthy way. Leading a business based purely on historical numbers is like
driving a car using only the rear view mirror – essential in some ways but of limited help
in guiding forward motion. Effective leadership requires more than historical data and
trailing averages. It requires a present awareness of the relationship between what’s
being done today and the likely impact on the results we’re targeting. Our metrics also
provide a basis for healthy accountability as our team pursues company objectives.

Therefore, the first step in developing relevant operating reports involves defining what
we want to accomplish. The next step is identifying critical metrics and then cascading
them down into the specific activities that will generate these results (captured by
Key Performance Indicators). This requires thoughtfully and proactively considering
“causality,” not just being content to record the apparent “effect” after-the-fact! In the
best-selling book, Good to Great, this process is described as determining the key drivers
of your “economic engine.”2

Critical metrics are those that must be at proper levels, ratios, or ranges in order for the
business to meet its plan, survive over the long haul, and/or achieve robust good health. In
extreme situations, critical metrics that trend in the wrong direction can threaten the very
survival of the company. More typically, critical metrics simply drive a business toward its
desired operating goals and strategic objectives. These are the performance indicators that
must move in the right direction if the business is to succeed, both now and in the future.

For many small to mid-sized companies, inexpensive web-based financial benchmarking
and planning tools and databases represent a real breakthrough in better understanding
the cause and effect of such key metrics.3 Such tools can help us to conduct more
purposeful planning, analysis, and target setting based on better industry information and
proactive, forward-looking projections.

Consider your own current management reports. What percentage of this data set looks
backward (i.e., rearview mirror), as opposed to predictive, rolling data tied to forwardlooking
annual goals and strategic objectives? Be honest… and share any forward-looking
metrics you use to pursue your plan and address problem areas.