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JessicaLi
Individual.docxManagement Team Case Project
Exercise 4A
Setting Financial and Strategic Objectives
Defining success for a business is an important management activity. Often success is described in the long-term goals an organization establishes. These goals or objectives generally are of two types, financial and strategic.
Financial objectives describe goals in monetary terms. Examples include achieving a certain return on invested capital, or a dollar amount of positive cash flow or profit.
Strategic objectives describe non-monetary goals for the business. Examples include achievement of a certain market share, number of new customers acquired, number of returning customers, number of locations opened, number of products being sold, number of employees hired, number of new products introduced, and so forth. Essentially, strategic objectives are any other significant goal for the organization besides financial objectives.
Well-crafted objectives meet the “SMART” test. They are S ignificant, M easurable, A ctionable, R ealistic, and T ime-Bound. You should research examples of “SMART” financial and strategic goals to make sure you understand how to properly prepare financial and strategic objectives in a “SMART” format.
NOTE: Not all authors use the same descriptors for the SMART acronym
Why are we using these specific SMART descriptors for this exercise?
Significant – There is no point in pursuing an objective that isn’t important or won’t have a major impact on the business. Researchers have claimed that organizations that pursue too many objectives are less likely to achieve any of them (a dilution of focus effect). Good objective setting is picking a few “Significant” objectives that are the most important for the business to achieve.
Measurable – If there is no practical way to measure the organization’s performance against an objective it becomes difficult to evaluate whether the objective is being achieved. Picking an objective that can be measured effectively increases the likelihood the organization will focus attention on achieving that objective as it routinely tracks its progress against the goal. “Measurable” also means that you are specifying what performance is to be achieved. Without being specific about the objective, you cannot easily measure it.
Actionable – It does not make sense to pick objectives that the organization cannot directly impact. Actionable means the actions of the organization will directly affect the performance against that objective.
Realistic – There has been much debate on whether organizations do better by setting stretch goals that require extraordinary effort to achieve vs. setting more realistic goals and then trying to exceed those goals. Fundamentally the goals should define success for the organization. If the goal is not achievable (not realistic) then the organization may need to rethink its business model. If the organization cannot realistically achieve the goal, then the organization is essentially admitting that it cannot be successful. In addition, managers are less likely to focus attention and effort on goals that are not realistically achievable.
Time-Bound – Objectives with no date for achievement make planning for achievement difficult. These objectives are easily pushed to lower priority vs. those with definitive due dates. Further, success is generally seen as a combination of accomplishing a goal AND doing so by some point in time. Objectives without due dates are less compelling or definitive descriptions of success.
The following page has examples of SMART financial and strategic objectives.
Examples of SMART Objectives
SMART Financial Objectives:
1. Achieve an annual net income of $1 million by the end of the calendar year 2024
2. Achieve a Return on Invested Capital (ROIC) of >10% by the end of the calendar year 2025
3. Achieve a positive net cash flow by the end of the second year of operation
4. Raise $1 million in equity financing by the end of the first year of operation
5. Pay off all borrowed debt by end of year 3 of operation
6. Reduce cost of sales by 5% points each year for the next 3 years following the first full year of operation
7. Achieve a full year net income after tax of 10% of gross sales by year end 2024
SMART Strategic Objectives:
1. Gain at least 50 new customers every month for the first year of operation
2. Increase the number of returning customers by at least 50 customers every month for the first year of operation
3. Achieve the highest market share for the business in the primary area served by our business by the end of the third year of operation
4. Introduce at least one new product every year that achieves at least $100,000 in net profitable sales within 12 months of introduction
5. Reach at least 10,000 local customers through social media with at least 5% of those customers visiting our website within our first year of operation
6. Have at least 25% of customers who visit our website make at least a $25 or more purchase within the first year of operation
Individual Activity for Exercise 4A
On the following worksheets, identify 3 “SMART” financial objectives and 3 “SMART” strategic objectives for the business your team selected.
Financial Objectives
Exercise 4A.1 - Individual Worksheet (Submit)
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Strategic Objectives
Exercise 4A.2 - Individual Worksheet (Submit)
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3. …
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Management Team Case Project
Exercise 4 B
Values Based Management – Corporate Social Responsibility (CSR)
Now that you and your team have created a successful business you find that you are receiving more and more scrutiny on social media and in the public press. Some critiques even suggest that you have become greedy entrepreneurs seeking only fame and fortune. Regardless of your views about your responsibility to serve the interests of others, you realize this increased scrutiny is not a positive development.
You have called a critical meeting and asked each team member to come prepared with recommendations on what should be done to address this growing negative publicity.
You have read and heard recently of the importance of businesses becoming “better global citizens”. Some advocates argue it is the “Right” thing to do. Successful business leaders like Bill Gates (founder of Microsoft) have given substantial sums of money through their foundations to address social concerns. Other pundits have suggested that even if you do not have a philanthropic mindset it is still wise to embrace these broader, social responsibilities from a public relations perspective.
Individual Activity for Exercise 4 B
Your first task is to identify the various stakeholders or constituents who have an interest and expectations regarding the actions of your business. Examples of stakeholders include: stockholders, customers, employees, suppliers, communities, governments/regulators, distributors, business partners, etc. Do some research on this stakeholder view of business accountability and list the categories of your business’s stakeholders in the worksheet on the next page along with their expectations of your business.
Business Stakeholder Analysis
Individual Worksheet (Submit)
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Expectations |
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Individual Activity for Exercise 4 B – Continued
Given the competing expectations of the stakeholders you identified in the previous worksheet, consider your business’s responsibility for addressing those expectations. Do you believe your business should try to be responsive to all your stakeholder’s expectations? Or, is your view that you cannot please everyone so why bother? Do you believe there are other ways to address negative public sentiment besides becoming more socially responsible in your actions?
With these questions in mind consider the advantages and disadvantages of undertaking a proactive initiative of Corporate Social Responsibility (CSR):
1. Briefly define what it means for a business to be considered “exercising CSR”. Consider that adopting a “Pro CSR” perspective for your business may require fundamental changes to your organization’s culture.
2. List the advantages and disadvantages of pursuing a CSR initiative.
3. Decide on what your recommendation would be to your team members.
List your analysis and recommendations on the worksheets on the next pages.
Corporate Social Responsibility (CSR) Analysis
Individual Worksheet (Submit)
CSR Oriented Business – Defined/Described
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Advantages of Adopting a CSR Culture/Initiatives
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Disadvantages of Adopting a CSR Culture/Initiatives
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Recommendation
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Rationale
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Individual Activity for Exercise 4 B – Continued
Assume your team decides to adopt a CSR culture. What are the top 3 specific initiatives you would recommend that your business pursue in support of this decision? Consider the type of business you have, who are the most important stakeholders for the business, and how you can best address the critical expectations of your stakeholders in order to produce the biggest impact from your initiatives. If you are not sure what a CSR initiative is, do some research on examples of what businesses currently do to be responsible corporate citizens. List your 3 recommended initiatives and rationale in the Worksheet on the next page. Be prepared to advocate and defend your recommendations in the team meeting this week.
CSR Recommended Initiatives
Individual Worksheet (Submit)
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CSR Initiative |
Rationale |
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