Most MBO processes have lots of problems. First, typically they result from a negotiation process; never a formula for crispness. Second, they are done yearly while today's business environment is much more dynamic. Third, because of their individual nature, the sum of the objectives probably doesn't reflect the driving motivations of the organization as a whole.
I've stepped into situations where the individual objectives, when i reviewed them in, say, the middle of the year, made no sense: yet they were viewed by the managers as the basis for their bonuses and therefore their driving motivation. So clear the decks from these old processes, think much more crisply and effectively, and get real results.
First determine the critical problems and opportunities your organization faces. Your list should have three to five top priorities that require major change within your selected time-frame. Force rank them. As you work, remember:
• They must be written. Robert Cialdini’s Influence Science and Practice, acknowledged by Tom Peters as “The best and best researched book…ever” on how behavior patterns are influenced, states: "Set a goal and write it down. Whatever the goal, the important thing is that you set it, so you’ve got something for which to aim—and that you write it down. There is something magical about writing things down."
• They must be specific…even when your knowledge base is insufficient. There will never be enough information to ensure that your target is perfect. I'll describe how to do that next week.
• They must become the key element of your learning process. That is, adjustments should occur as you move forward. The further you travel, the more feedback you’ll get, the more you'll learn. This creates an upward spiral of intelligence on how the business truly functions. Learning is imperative to the process, and is also what makes the process so powerful.
Here are some examples of the headlines only (just for illustration purposes; without specifics):
• Remove distractions! This is always the first priority. Specific distractions will vary but will be easily identifiable. Just list whatever dominates operating management and board discussions that also is not a mainstream issue.
• Make a step-function, permanent change in operating cash flow.
• Make a step-function, permanent change in operating expense levels.
• Eliminate slow-moving sku’s. For example, the bottom 30% might account for 10% of the revenue and 40% of your administrative expense and chaos.
• Drive out low-margin sku’s (e.g., those below 20%) by pricing to the 50% margin.
• Renegotiate loan.
• Create design wins mentality.
• Rebuild sales force.
• Change distribution strategy, remove a layer, or replace with a more efficient system.
• Reinvent the organization structure; return it to its effective level of two years ago.
• Convert critical business processes to information- and rule-oriented procedures.
• Retarget business development activity to concentrate on a few key markets.
• Prune product lines.
• Gain work-rule changes in the union contract.
• Gain attention and respect from the workforce to prepare for systemic cultural changes.
These short headers are only for illustration. In actual practice, make each of these priorities as clear and unambiguous and detailed as possible. Write, rewrite and test the statements with directors or managers or whomever. Next week we'll put meat on the bones of the second above; make a stpe-function, permanent change in operating cash flow.
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