A Proven Recipe for Enduring Profits

Author: Ron Hiller l  Published Date: 5/13/2014

Blog Category: Goal Management

This is the story of two ten year old companies of about the same size and are steadfast competitors in the same industry vying for market share and profitability.  Both share best marketing practices and they use the latest technologies to produce quality products and services at roughly the same price points. These competitors are identical in every aspect except for profitability. One is consistently more profitable than the other, which begs the question “why”?


You could surmise that the more profitable company pays its employees less and therefore is more profitable but you would be wrong. You could theorize that the highly profitable company has fewer employees producing the same quantity of products and services as its less profitable competitor but once again you would be wrong.  


You may then speculate that the more profitable firm makes better hiring decisions, has tighter cost controls and superior leadership and you would be wrong once again.  And finally you may conclude that the poor performing company lacked a strategic plan and once again you would be wrong. The leadership teams of both companies always produced breakthrough strategic plans.  So why did one firm’s profits always exceed those of the other? Could the problem reside with execution of the plan and if yes why does one strategic plan crash and burn while the other takes flight? 


(Read More Starts Here)

Strategic Plan Deployment

Both companies broadcasted their new strategic plans to the rank and file in town hall meetings and followed up the meetings by publishing the new directions in the company’s monthly newsletters. The leadership teams underpinned their strategic plan with carefully crafted mission statements stressing the finer points of the plan. Posters containing inspirational slogans re-enforcing the desired outcomes of the plan wallpapered both companies’ walls. So what factor differentiated the two when it came to driving profit? The more profitable company had an edge because they had an automated Performance and Goal Management System.


Execution of the Strategic Plan

The strategic plan of the profit challenged company began to unravel within a few days after the plan’s announcement because their performance and goal management system lacked the flexibility to adapt to change. It didn’t have a nimble goal-setting and cascading process.  There was no real time line of site up and down the goal chain to see who was getting the job done and who wasn’t.  Managers relied on time consuming status meetings and employees didn’t see any relationship between what they were doing and how their contributions were a part of the master plan nor could they envision how their efforts flowed to the bottom line. Employee goals and competencies were identical to those of the previous years. In fact employees didn’t have job specific reviews and their review form hadn’t been updated for five years.  As the hype about the new direction waned employees saw no change in what was expected of them so it was business as usual.  At the end of the fiscal year the company that set sail in search of higher profits would arrive back at the familiar low profit port they had hoped to leave behind. They had great sailors on board but the vessel was flawed.

Making Change Your Advantage
The competitive advantage shifted in favor of the more profitable company the moment they put their strategic plan into play because they had a highly flexible performance and goal management system that allowed them to operationalize the plan immediately. They could execute quickly and turn strategy into results. Employee reviews were updated on the fly with cascaded goals that were intractably linked to the strategic plan. Everyone from the corner office to the shop floor understood their role in the scheme of things and how their efforts helped the bottom line.


The CEO had a line of site across and down the goal chain and knew what needed fixing immediately before problems could magnify.  Employee engagement and teamwork soared, the creative energies of each employee were amplified, problems and obstacles melted away, forecasting accuracy and timeliness improved and reliance on lengthy unproductive status meetings waned. Management spent more time fixing performance gaps and less time spent trying to identify them. Twelve months later their ship arrived once again at their familiar port of call known as higher profits. 


The above narrative is a fictional account of what happens every day in every business sector as leaders attempt to execute a carefully orchestrated strategic plan; but that does not make this imaginary scenario any less believable. Many more companies than not use antiquated and ineffective performance management practices leading one to ask why? Without doubt cost is a common yet shallow objection, since the cost value relationship between effective performance management and profitability is undeniable.   

Independent Studies

“The Workforce Intelligence Institute found that highly profitable companies do a good job aligning manager and employee goals with corporate goals, while employees from the weakest-performing companies did not clearly understand the connection between their individual efforts and the overall goals of their employers.”

A study by the Harvard Business School estimates that only 7% of employees today fully understand their company’s business strategies and what’s expected of them in order to help achieve company goals.  

Researchers found a strong correlation between a company's financial performance and an effective goal setting process. These and other findings about improved engagement and teamwork underscore the critical importance of effectively setting and closely aligning employee goals to drive the success of your company.  Automating the employee review and goal management process is a gift that an organization gives to itself, its shareholders, its customers, and oh yes its most important asset of all the company’s employees and managers.  Contact IFP to learn more about our Summit Goal Management System and how it can transform your company’s strategy into more profits. 



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