Upfront: Good Companies, Bad Planning

Setting goals should be the initial phase of your long-term planning process -- but be sure to seek input from all areas of the company.

Even businesses that enjoy revenue growth and bottom-line profitability sometimes confuse planning with budgeting, a process performed by individual business units that takes a short-term view and does not consider the goals of the entire organization or the achievement of objectives beyond the current year. Too often it's only after some calamity occurs that organizations recognize the importance of long-term goals and begin implementing the planning processes intended to help them reach their objectives.

A recent survey by The Financial Executives Consulting Group LLC, based in Darien, Conn., may convince companies to broaden their planning horizons before trouble rears its head. The study, which focuses on companies' long-term planning processes, pinpoints factors that impede these efforts.

Successful goal-setting is an important part of planning, according to Bruce Lynn, managing partner, treasury and financial systems, at The Financial Executives Consulting Group and David Rudofsky, president of consulting firm Rudofsky Associates in Sleepy Hollow, N.Y., who conducted the research. They point out that survey participants who believe their planning process has enhanced the value of their business rate the factor "identifying common goals across the company" highest among elements contributing to this enhancement. Infrequent communication of goals is the most frequently cited factor in reducing the effectiveness of the planning process (75 percent of respondents).

When senior managers proactively identify appropriate goals and communicate them throughout the organization, the authors say, they provide the focus and impetus the organization needs to find ways to deliver improved results. Once employees understand the objectives, they develop a sense of ownership and feel excited about achieving them. When confronted with the gap between its goals and actual results, an organization that might otherwise be willing to live with past results usually thinks of entirely new ways of doing business.

Given this definition and communication of goals, "line managers cannot wish away gaps by simply substituting more aggressive plans and assumptions, [for example about] higher volume growth, higher pricing, improved cost structure; they must take responsibility for developing real goals and underlying actions or programs designed to meet those goals," say Lynn and Rudofsky in the report.