Understanding corporate collapse helps in setting targets for corporate performance.
A target is what one wants to see; a forecast is what one expects to see. What one wants to see is organizational success. What one does not want to see is corporate failure!
Many managers want their organizations to move from Good to Great: Why Some Companies Make the Leap...And Others Don't!
However, too often managers set excessively ambitious targets. This may risk corporate decline or collapse.
If it is so risky to set overly ambitious targets, ought we to set timid ones? Of course not!
What am I saying?
Too many ‘management experts’ do not face the risks in target setting and forecasting. The usual single point targets and forecasts are quite unrealistic.
Think of our own personal lives.
Does it make sense to set single point targets and beat ourselves up if we miss them?
Who would set a target of earning $150,000 per annum by the time they are 40. What they may say is - I would like to be earning $150,000 before I am 40. Also, they may say - I will be upset with myself if I am not earning above $50,000. Of course, it would be marvellous if . . . ‘.
People entertain a great range of ambitions. These range from what they consider a personal tragedy, through to the almost miraculous. This is not only for them. It may also be for their families. Also for the organizations that they manage.
There are two salient points on this spectrum of possible outcomes. One is at the level of ‘corporate failure’ or perhaps just above it. The other is the level that represents ‘satisfactory corporate performance’. These are the Minimum Target and the Satisfactory Target. In shorthand, Tmin, and Tsat.
The first, Tmin is the threshold of failure. Results below this limit would warrant dismissing the managers. This level raises the possibility of winding up the organization as a failure. Note I say possibility, because they may not have reached that point yet. If they have, corporate performance has been bumping close to Tmin for a while. The governing body may have been asleep at the wheel!
The second more desirable level of corporate results is Tsat. This is performance worthy of congratulations to the managers. The managers and governors can look to the future with some confidence. Perhaps they could expand their activities into new areas.
Of course, we could define other significant points on the performance scale. Think of Tfan for fantastic. Tmax could be an extreme level of profit. I mean profits high enough to invite unwelcome scrutiny from regulators or the media. Imagine Trec for the record level of performance ever achieved by any competitor.
I do not think any of these are as useful as Tmin and Tsat. ‘Satisfactory’ performance may not inspire. Having strategies that achieve a satisfactory performance does not prevent having more challenging ones.
Avoiding corporate collapse may not seem exciting. However, it is a part of governance and management accountability.
For a fuller coverage of the concept of corporate collapse, see organizational failure.
More information on corporate collapse, and how to avoid it by sound strategic planning, is in these publications -
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