Optimize Your Strategic Financial Objectives

Entrepreneur lives and dies by the numbers. Financial numbers, that is. So does your company CEO as well as other managers and professionals in your company. True, to become the best of the best your company must maximize its aggregate value (financial, functional and spiritual) to all of its key stakeholders, but still your company must focus on financial needs of owners (shareholders) of your company first. First among the equals, so to speak.

Therefore, although to become the best of the best your company must define all strategic objectives – financial and non-financial (functional and emotional); you must start with defining your strategic financial objectives (SFO).

For any for-profit entity (whether government- or privately owned), these objectives essentially boil down to three:

  1. Amount of financial value that you company intends to create
  2. Time period for creating the desired amount of financial value
  3. Financial value monetization method (dividends, IPO, or a strategic sale)

Government entities, NGO, academic institutions and military organizations have a totally different strategic financial objective: perform all their key functions to the highest customer satisfaction at the lowest possible cost. Hence, while the key strategic financial objective (SFO) for a business entity is financial value maximization, for a government or non-profit entity it is cost minimization.

To maximize your corporate performance and to make your organization the best of the best, you must first optimize your strategic financial objectives and your corporate process for setting and revising these objectives.

Optimal SFO must exhibit just the right degree of stretch (not too easy & not unrealistically tough) and the maximum ‘quality of match’ with other key components of your strategic management system: needs & wants of your corporate stakeholders (first and foremost, corporate shareholders); key external factors; your declaration of corporate identity; your corporate mission and vision statement and your corporate financial strategy.

To be valuable for your company, your strategic financial objectives must be effectively and efficiently used on a regular basis in making and executing your strategic and operational decisions.

Therefore, to analyze and optimize your strategic financial objectives (as well as your corporate process for defining and monitoring these objectives), you will need to answer the following key questions:

  1. How comprehensive is the list of your strategic financial objectives?
  2. How adequate is the list of your strategic financial objectives?
  3. How optimal is your ‘SFO stretch’?
  4. How efficient is your business process for SFO management?
  5. How well do your SFO match your key external factors?
  6. How well do your SFO match the needs of your company owners?
  7. How well do your SFO match the wants of your company owners?
  8. How well do your SFO match your declaration of corporate identity?
  9. How well do your SFO match your corporate mission statement?
  10. How well do your SFO match your corporate vision statement?
  11. How well do your SFO match your corporate strategies?
  12. How well are your SFO used for strategic decision-making?
  13. How well are your SFO used for strategic decision-making?

Using answers to these five questions, you will need to (1) optimize values of your strategic non-financial objectives; (2) develop and implement the most efficient corporate process for setting and revising your SFO and (3) develop and implement the most efficient corporate process for using your SNFO in making and executing your strategic and operational decisions.

Define Your Strategic Non-Financial Objectives

Management researchers long ego found out that to be the best of the best (and even to achieve its purely financial objectives), you need to achieve not only strategic financial objectives, but also strategic non-financial objectives (SNFO) – functional and emotional.

You have to do it because you do not always know the exact cause-and-effect relationship between some strategic non-financial objectives and strategic financial objectives. It is just empirically known (from enormous accumulated collective experience) that in order to achieve certain financial objectives (e.g. financial value of the company in question), you need to achieve certain non-financial objectives – functional (e.g., certain market share) and emotional (e.g. a certain level of customer satisfaction).

The company that pretends to be the best of the best, needs to be the leader, the ‘number one’ in something. At least in its target market or market niche. Hence, typical strategic functional objectives for a business entity are:

  • Become the top company on the market in terms of market share
  • Offering functionally superior product and/or service

An aggregate strategic emotional objective is building a ‘happy company’. By definition, a happy company is the one that makes happy (in a very literal sense) all of its stakeholders: owners, clients/customers, partners, suppliers, relevant government entities, community, etc.

To make these stakeholders happy, your company has to satisfy their needs and desires to the fullest possible extent or to create the maximum amount of aggregate value for all of your stakeholders.

Optimal SNFO must exhibit just the right degree of stretch (not too easy & not unrealistically tough) and the maximum ‘quality of match’ with other key components of your strategic management system: needs & wants of your corporate stakeholders (first and foremost, corporate shareholders); key external factors; your declaration of corporate identity; your corporate mission and vision statement and your corporate financial strategy. And, naturally, with your strategic financial objectives.

To be valuable for your company, your strategic non-financial objectives must be effectively and efficiently used on a regular basis in making and executing your strategic and operational decisions.

Therefore, to analyze and optimize your strategic non-financial objectives (as well as your corporate process for defining and monitoring these objectives), you will need to answer the following key questions:

  1. How comprehensive is the list of your strategic non-financial objectives?
  2. How adequate is the list of your strategic non-financial objectives?
  3. How optimal is your ‘SNFO stretch’?
  4. How efficient is your business process for SNFO management?
  5. How well do your SNFO match your key external factors?
  6. How well do your SNFO match the needs of your company owners?
  7. How well do your SNFO match the wants of your company owners?
  8. How well do your SNFO match your declaration of corporate identity?
  9. How well do your SNFO match your corporate mission statement?
  10. How well do your SNFO match your corporate vision statement?
  11. How well do your SNFO match your corporate strategies?
  12. How well are your SNFO used for strategic decision-making?
  13. How well are your SNFO used for strategic decision-making?

Using answers to these five questions, you will need to (1) optimize values of your strategic non-financial objectives; (2) develop and implement the most efficient corporate process for setting and revising your SNFO and (3) develop and implement the most efficient corporate process for using your SNFO in making and executing your strategic and operational decisions.

Develop the Right Corporate Mission Statement

In general terms, the mission of every organization (and yours, too) is the same. To satisfy the aggregate needs (financial, functional and emotional) of your corporate stakeholders – owners, clients, employees, suppliers, partners, etc. to the fullest possible extent. In other words, to create the maximum amount of aggregate value – financial, functional and emotional – for your stakeholders.

However, every organization must find its unique ‘universe of stakeholders’ and its own unique way to carry out this general mission. The way that makes the best fit to its history, corporate identity, key external factors and your strategic objectives – financial and non-financial. And to follow this unique way, to stay on track no matter what.

To stay on this all-important track, you need to know exactly what this track is. Therefore, you need your own unique mission statement – just the right one for you. Ideally, you will need not one, but three mission statement – one-liner (corporate slogan); brief one-paragraph mission statement and a detailed mission statement (half-page or so).

To maximize your corporate performance and to make your organization the best of the best, you have to optimize your corporate mission statement. In other words, to make it one of the solid and reliable pillars of your corporate management systems.

An optimal corporate mission statement must (1) be comprehensive and well-structured; (2) be based on hard facts, solid logic and common sense (and not on ‘wishful thinking’ or your perception of your organization and its environment) and (3) become a powerful inspirational force for corporate employees top to bottom – executive, managers, professionals, support personnel, etc.

Naturally, your corporate mission statement must match your key external factors; needs and desires of your corporate stakeholders (business owners, NGO founders, managers, clients, employees, suppliers, etc.); your corporate history and your declaration of corporate identity.

And, finally, to make your corporate mission statement valuable to your organization, you must make sure that it is used on regular basis in making and executing strategic and operational decisions at all levels of your corporate hierarchy. In other words, you must make sure that decisions and actions in organization match your corporate mission statement.

Hence, whether you already have a corporate mission statement (CMS) or not, to develop an optimal mission statement for your company you will need to answer the following questions:

  1. How comprehensive is your corporate mission statement?
  2. How well-structured is your corporate mission statement?
  3. How solid is the logic of your corporate mission statement?
  4. How motivational is the emotional impact of your corporate mission statement?
  5. How well does your CMS match the corporate reality?
  6. How well does your CMS match the needs of company owners?
  7. How well does your CMS match the wants of company owners?
  8. How well does your CMS match the needs of other stakeholders?
  9. How well does your CMS match the wants of other stakeholders?
  10. How well does your CMS match the corporate history?
  11. How well does your CMS match your key external factors?
  12. How well does your CMS match your declaration of corporate identity?
  13. How well is your CMS used for strategic decision-making?
  14. How well is your CMS used for operational decision-making?

Using answers to these five questions, you will need to (1) develop an optimal corporate mission statement; (2) develop and implement the most efficient corporate process for setting and revising your CMS and (3) develop and implement the most efficient corporate process for using your CMS in making and executing your strategic and operational decisions.

Develop the Right Corporate Vision Statement

To maximize your corporate performance and to make your organization the best of the best, you need to develop a detailed description of a desired (‘TO BE’) state of your company. The most fundamental component of this description is your unique corporate vision statement (CVS).

In your corporate vision statement, you need to visualize in general, but highly motivational terms (your CVS, like your corporate mission statement, must be a highly motivational document) describe how your company must look like; what it must do; whom and how to serve; how to behave, etc.

Generally, your corporate vision statement must be about one page long (single-spaced).

To maximize your corporate performance and to make your organization the best of the best, you have to optimize your corporate vision statement. In other words, to make it one of the solid and reliable pillars of your corporate management systems.

An optimal corporate vision statement must (1) be comprehensive and well-structured; (2) be based on hard facts, solid logic and common sense (and not on ‘wishful thinking’ or your perception of your organization and its environment) and (3) become a powerful inspirational force for corporate employees top to bottom – executive, managers, professionals, support personnel, etc.

Naturally, your corporate vision statement must match your key external factors; needs and desires of your corporate stakeholders (business owners, NGO founders, managers, clients, employees, suppliers, etc.); your corporate history; your declaration of corporate identity; your strategic corporate objectives (financial and non-financial) and your corporate mission statement.

And, finally, to make your corporate vision statement valuable to your organization, you must make sure that it is used on regular basis in making and executing strategic and operational decisions at all levels of your corporate hierarchy. In other words, you must make sure that decisions and actions in organization match your corporate vision statement.

Hence, whether you already have a corporate vision statement (CVS) or not, to develop an optimal vision statement for your company you will need to answer the following questions:

  1. How comprehensive is your corporate vision statement?
  2. How well-structured is your corporate vision statement?
  3. How solid is the logic of your corporate vision statement?
  4. How motivational is the emotional impact of your corporate vision statement?
  5. How well does your CVS match the corporate reality?
  6. How well does your CVS match the needs of your company owners?
  7. How well does your CVS match the wants of your company owners?
  8. How well does your CVS match the needs of your other stakeholders?
  9. How well does your CVS match the wants of your other stakeholders?
  10. How well does your CVS match your corporate history?
  11. How well does your CVS match your key external factors?
  12. How well does your CVS match your declaration of corporate identity?
  13. How well does your CVS match your strategic financial objectives?
  14. How well does your CVS match your strategic non-financial objectives?
  15. How well does your CVS match your corporate mission statement?
  16. How well is your CVS used for strategic decision-making?
  17. How well is your CVS used for operational decision-making?

Using answers to these five questions, you will need to (1) develop an optimal corporate vision statement; (2) develop and implement the most efficient corporate process for setting and revising your CVS and (3) develop and implement the most efficient corporate process for using your CVS in making and executing your strategic and operational decisions.



Source by Oleg S Cheremnykh

Leave a Reply

Your email address will not be published.

Instagram

This error message is only visible to WordPress admins

Error: No feed found.

Please go to the Instagram Feed settings page to create a feed.