Numerical Targets | The Numbers That Measure Progress Toward Your BHAG

Numerical Targets: Numbers That Measure Progress Toward Your BHAG

Business is filled with numbers. There are accounting numbers and numbers that measure operating results, and then there are the ratios and other numbers you can derive from the original ones. You’ve got lots of choices. This chapter is about the numbers you want everyone in your company to be aware of, understand, and talk about.

Let’s start with the numbers that track the execution of your long-term, 3 to 5 Year Strategic Moves, and chart your progress toward your BHAG (Big Hairy Audacious Goal). I call these your Numerical Targets to distinguish them from your Metrics (Key Performance Indicators), which are the critical success factors that drive your current operating model – the things you do every day to drive “business as usual”.

Let’s start with the example of fictional company A (see image below).

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This company chose “Number of Software License Sales,” “Number of Branch Offices,” and “Number of Hosting Clients” as the Numerical Targets it wanted everyone to be aware of. You might be asking yourself why it didn’t choose a financial measure like sales or revenue per employee?

Not everyone understands or is motivated by hitting financial targets and accounting ratios. However, everyone, from the most junior employee through to the CEO understands what a branch office looks like. They also know what a Software Licence Sale and a Hosting Client looks like. Those are tangible things that people can imagine and count for themselves if they wanted to.

When choosing your Numerical Targets I urge you to use the following format: “The number of …”

Everyone in the company knows that the goal is to have a total of 1 branch office by the end of the year. They know that the goal is to have a total of 3 offices by the end of next year. And they can see that, by the end of the following year, the company expects to have 6 offices.

Now the employees have something tangible they can visualize and grasp. They know how the company intends to grow and evolve as they implement their strategy. They can also see that the company intends to open more branch offices to serve these customers, which no doubt means it will be hiring more staff as well. Wow! This company is going places! The future is bright!

Using numbers like this helps employees visualize how their own personal careers could fit into this picture. Perhaps there are future opportunities for them to grow and develop with the company as the company achieves each milestone and makes progress toward these Numerical Targets.

Let’s consider the principles. You may want to refer back to the chart above.

Everyone should understand exactly what the number means. You can track financial results as Numerical Targets, and some companies do. But most employees understand visible, concrete things, things they could count if they chose to. I strongly urge you to use the format: “The number of …”

You’re going to track these numbers publicly, so select measures that you don’t mind sharing. Remember that you want the people in your company to be aware of these numbers and discuss them. Inevitably, the competition will learn what you’re tracking, so make sure you don’t mind.

Numerical Targets should be aligned with your strategy. The rule is simple: strategy first, then numbers. Select numbers that are based on your BHAG3 to 5 Year Strategic Moves, and Strategic Projects (big rocks). These numbers will be the basis for your budgets, financial forecasts, human resource planning, and more. Budgets and forecasts should not be done until you have created your strategy, and they must be aligned to the strategic choices you have made.

Display the targets over different time periods. The targets for this financial year are important. They give your team clear goals to aim for, but you need to provide some additional context. Based on your Strategic Projects and what you know to be true right now (your current reality), what do you expect to achieve by the end of the following financial year? What about the year after that?

The further you project into the future, the less certain you can be, because, as we know, your current reality (SWOT Analysis) is always changing. Thus, you need to review and update your Numerical Targets at the end of every quarter to ensure your stated numerical targets for the financial year always reflect the changing reality. Nothing is more demoralizing or pointless to your people than keeping annual targets in place that bear no resemblance to the current reality.

Someone must be accountable. There must be a single person who is accountable for achieving every goal.

Now it’s time to get your team together and do the following:

Choose at least one, but no more than three, Numerical Targets. Make sure they are numbers that have meaning for all your people and are tangible things you could physically count if you chose to do so. Project the targets over three time periods e.g. the current financial year, and the following two financial years. Identify the person who’s accountable for making those numbers.

Decide how you will make the targets visible. These targets and your progress should be a regular topic of interest and conversation. Make them noticeable and provide frequent progress updates. Some companies use technology to help. I’ve seen companies use giant computer screens in their offices to display the current numbers and highlight progress in real-time.

Each target also has the name of the person responsible for hitting it. For those people, the Numerical Target is not simply something to be aware of; for them, the target is probably the end result of achieving their Metrics (Key Performance Indicators) every day and every week. That’s what we’ll discuss in the next chapter….”

Excerpted from the book: Business Execution for RESULTS, by Stephen Lynch

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Until next time…
Stephen

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