Setting the corporate target comes in the second stage of strategic planning. The target is for the performance of the organization.
Most businesses are clear about their purpose. They know, usually with great precision, what they are trying to do for whom. This will take different forms. It may refer to profits. Return on investment is another.
Setting targets for achieving this is not without its challenges. There may be quite a few different ways to define and measure profits.
Different treatments may apply to each type of enterprise — private, public, or partnership.
This is corporate strategic planning. We are talking about multiyear planning horizons. It is possible to come up with sensible Corporate Performance Indicators. I rather speak of Beneficiaries Performance Indicators (BPI). These measure company performances as the benefit delivered to owners or shareholders. These are the Intended Beneficiaries. A typical BPI would be return on capital. Others could be growth of profits, or Earnings per Share (EpS).
Review recent past performance of the business. Compare these results with those of competitors. Check results against those with its parent company if it has one.
It is important to set two figures.
The first is the lowest results acceptable to the investors. They would see results lower than this as failure. I call this level Tmin. We then set a level above this. Within this range, shareholders would see results as 'satisfactory’, or Tsat. Setting a single figure target is unrealistic.
This insight comes from the Argenti approach to strategic planning.
Target setting is more challenging for strategic planning teams in most non-profit-making organizations.
The reason is that few NPOs clarify the fundamental purpose of the organization. They do not clearly identify Intended Beneficiaries. They are vague about the nature of the benefit. Without a clear statement of purpose, it is almost impossible to select a BPI. They need to sharpen up the definition of corporate purpose. Then they can measure results with figures.
I have explained this at non-profit organizations and their purposes.
The concept of the minimum target for corporate performance is a powerful one. Setting a Tmin level of performance shows what the organization absolutely must achieve.
Tmin is also the key trigger to for major action.
What if an organization cannot identify Tmin? Identify means in figures, in terms that are verifiable in the real world. This may mean that the organization has more than one purpose. These 'purposes' can cause confusion. This may be a sign that the organization needs reorganizing. Reform the entity into one of more bodies, each with its own clear purpose.
What if the performance of the organization falls below Tmin? In this case, the management is failing to do its job. The governing body should be looking to replace the management.
Many attempts to measure the performance of NPOs are completely off the beam. They are not corporate performance indicators. They do not focus on measuring the benefits delivered to the Intended Beneficiaries. Often they are not quantifiable or even verifiable in the real world.
Return from Corporate Target to Corporate Objectives.
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