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1 CHAPTER 5, SETTING GOALS AND MANAGING CHANGE My goal was to be perfect, and now I am.

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CHAPTER 5, SETTING GOALS AND MANAGING CHANGE

My goal was to be perfect, and now I am.

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Introduction to Chapter 5 figure 5.1, The planning Model

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Goals and Objectives

Goal: A target for achievement that has a measure and a timeline

Objective: An outcome that will be achieved when goals are met.

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Cascading Goals A well designed model of “Cascading

Goals” will work effectively.

A poorly designed model will waste resources and the desired outcome will not be met.

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The path of cascading goals

Figure 5.2, Cascading Goals

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Grand Strategies, the Foundation of Goals

Recall from chapter 4 that at the Grand Strategy level, the SWOT analysis proposed four possible strategic paths coming from each of the cells in the SWOT analysis:

Cell “A”, Re-design Practices Cell “B”, Be Aggressive Cell “C”, Be Defensive Cell “D”, Use Strengths in New Places

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Goals and measures Goals define in specific measurable

terms, what end result will be delivered from efficient and effective operations.

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Characteristics of all Goals, Corporate or Functional

Goals must be S.M.A.R.T. Specific Measurable Achievable Result oriented Time limited

Goals must also be understood and remain flexible

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Figure 5.4, Corporate Long-range Strategic Goals

Strategic issues

Objective Strategic Goal

Financial Returns

Maximize financial returns to stockholders

Maintain an average return on investment of a minimum of 15% for the next five years.

Improve market share

Increasing the level of awareness of our product in world markets by 15% over the next two years

Reduce unit manufacturing costs

Reduce the % of cost to selling price by 10% within 2 years.

Improve product quality

Reduce the reject rate by 5% during the next year

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Corporate Long-range Strategic Goals

Sustainability of the organization In The Economic

System

Maximize the impact of the

organization on the regional economy

Maintain continuous employment for our 1,600 people for next five years.

Contribute 20% of the local Chamber of Commerce operating budget for

the next five years

Safety Of the Public And Employees,

(including the Motivation and Retention of employees)

Minimize the probability and

severity of employee and public injury

Maintain an injury rate less than the national average for the next five

years.

Maximize the motivation and

retention of employees

Maintain a 90% satisfaction level of employees and have a retention rate 5% higher than the industry average

for the next five years.

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Corporate Long-range Strategic Goals

Stewardship Of The Natural

Environment

Minimize the impact of

operations on the natural

environment

Reduce the level of solid particulate emissions to the landfill to 3 parts per million by June 2007.

Satisfaction Of Customers At

All Levels

Maximize the satisfaction of

customers at all levels

Achieve and maintain a 90% customer satisfaction level

regarding service, product quality and perceived value by April 2004

and for the next five years.

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Functional level goals (Cascaded)

Figure 5.5, Long range corporate financial goal

Corporate Long-range Goal Measurement Concept

Maximize financial returns to stockholders

Maintaining an average return on investment of a minimum of 15% for the next five years.

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Figure 5.6 operating financial goal

Operating Short-range goals by department Measurement concept

Sales Department

Maximize revenues

Increase total sales by 5% this year by introducing a new pricing structure which includes quantity discounts and an easy payment plan.

Production Department

Minimize production costs

Reduce materials, labour and overhead production costs per unit by 5% this year by automating the packaging step in the manufacturing process.

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Another example… safety Figure 5.7 long range corporate safety goal

Corporate Long-range Goal Measurement Concept

Minimize the probability and severity of employee and public injury

Maintaining an injury rate less than the national average for the next five years.

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Action plans … operating departments

Figure 5.8, operating safety goal

Operating Short-range goals by department Measurement and tactic

Human Resource Department

Increase awareness of safety procedures

by training all 150 shop personnel in the effective use of safety equipment by November 15th, 2000.

Production Department

Reduce the probability of injury on the assembly line

by correcting the 17 shortfalls cited by the recent Workers Compensation Board safety audit by September 1, 2000, at the least possible cost.

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Goals have three primary elements:

The target for achievement, The strategies or tactics to be used, The Key result area where the benefits

of the activity will be felt.

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For example, the corporate level goal,

has the target, to “Minimize the probability and severity”, the strategy or tactic “by maintaining an injury rate less than the national average for the next five years, and the results will be felt by “employee and public”.

minimize the probability and severity of employee and public injury

by maintaining an injury rate less than the national average for the next five years,

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The Basics of Measuring Goals

Those who develop effective measures recite two major benefits. show senior management that investment

is paying off, therefore acquiring more investment becomes easier.

show everyone on the team that progress is being made, therefore acquiring more effort is easier

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Why Measure Goals? The “Key Result Area” defines where

results will be found, now we need to know “how those results will be found?”.

Measurement is the only way you can show evidence that progress is being made, and evidence is the only way you can justify continuing down a path of trying to realize a goal.

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The bottom line … deliver goods and services:

when customers want them (speed), the goods and services meet the customers quality

needs (accuracy), do enough to satisfy all customers, (volume) do it at the least possible cost, (investment),

then you have an efficient and effective system.

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Figure 5.10 , A measurement framework

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Competing goals and trade-offs among goals

Figure 5.11, Primary Objectives of Business Divisions

Division Primary objectives

Finance and Accounting

Make as much money as we can while making business risks of all types as low as possible.Invest profits in improving the security and returns of stockholders

Marketing and sales

Create a massive awareness of the product and sell as many products as we can to world wide markets by meeting every single customers needs by giving them what they want, when they want it.Invest profits in expanding the market size, moving to new regions and markets, developing new products and increasing customer awareness through advertising and promotion.

Production and

distribution

Simplify the production process to maximize efficiency and reduce the risk of warehousing inventories.Standardize production to focus on a few products that are produced efficiently.Invest profits in improving the efficiency of the production process, reducing distribution costs and improving product quality.

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Figure 5.12, Operational goals in Business Divisions

  Operational Goals

Focus of operational

goals

Finance and accounting Marketing and sales Production and

distribution

Order processing Cheap Order processing Fast order processing Slow order processing

Product variants and new designs

Reduced variants to reduce investment

Very frequent variants to meet changing customer preferences

Standardized production of one product to increase efficiency

WarehousingNo warehousing because there should be no inventory.

Huge regional warehouses serving local markets by providing fast delivery to local customers

One warehouse at the factory to take care of production cycles, customers can pick up from there

Credit and collections

Cash only, paid in advance, to reduce business risk

Liberal credit and extended payment terms to make buying easy

N/A

Use of financial returns

Pay down the debt, provide a return to stockholders, invest in sound growth opportunities by acquiring risk free assets.

Increase advertising and promotion to maximize product awareness in existing and new markets

Alter the configuration of the plant and replace worn out assets so that product quality and cost efficiency is improved.

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What information is needed to set a goal?

Benchmarking the past practices of your own organization.

Benchmarking the practices of competing organizations.

Benchmarking the practices of all organizations.

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Linking Goals to Managing Change

There are two basic strategies for managing change:

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Paradigm Shift Figure 5.13, Performance Improvement

Through Paradigm Shift.

Time

Old performance level

New performance level

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Shaping Figure 5.14 “Shaping” as a strategy for

change.

Time

Early goals with small changes

Intermediate goals with big

changes

Perfection goals with small changes

Present performance

Target performance

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Summary of chapter 5 A goal is a contract between an

employee and their organization.

Stakeholders need Added Value from their Investment

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Summary of Section 1 The plans are set, the targets are identified,

and there are great expectations about what the future will bring. Now it is time to do something about it.

Goals are not realized by writing them. Goals are realized my making decisions and then doing something about the decisions that have been made.

The next section of the book will deal with the process used to make the necessary decisions to ensure that goals are met.