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Objectives and Goals

July 2009

The vision and mission statement I shared with you last time were pretty easy for me to create. I didn't have to have a three-day retreat to pull it off (who would I retreat with anyway!?!).

The next step of the strategic planning process is to develop objectives. And this is where folks get a little hung up—and rightfully so. It is hard to decide on the next level of concepts for the strategic plan. This is the first time we have to break our dream down into parts—and it can be plenty challenging to do.

I love how the Balanced Scorecard model can do most of the work for us at this juncture. We don't have to reinvent the wheel—all we have to do is customize the wheel! I have written about the balanced scorecard before in previous newsletters. Check out an introduction to it from October 2005.

The balanced scorecard is a planning model introduced by two Harvard professors in the 1990s. Kaplan and Norton (the two Harvard professors) argued that an organizations success cannot be measured by financial achievements alone—and that financial health is the result of doing a other things well—pleasing the customer, implementing smooth processes, and maintaining a strong workforce and technology infrastructure.

So instead of rating an organization on its profit alone—an organization should be rated with a more holistic, balanced view taking four quadrants into account:

• Financial (money make the world go around!)
• Customer (happy customers generate happy money!)
• Internal business processes (smooth processes make for happy customers!)
• Learning and growth (a strong infrastructure that includes good people and technology makes for smooth processes)

As the balanced scorecard was used more and more, Kaplan and Norton realized that these four quadrants could be stacked and viewed as having a dependent relationship that goes like this:

In order to have good financial results,

You have to have happy customers.

And in order to have happy customers,

You have to have smooth internal business processes.

And in order to have smooth internal business processes,

You have to have the people and the technology to pull the processes off.

Right—I can go for that. And typical of fancy-pants, Ivy League professors, they gave this relationship a fancy title: strategy maps.

But I can so appreciate how Kaplan and Norton, through the creation of the balanced scorecard and the subsequent development of the strategy map have given me and the rest of us a great gift. Thanks, guys! Now I don't have to make something up on the fly—the framework helps me walk through the pieces of my strategic plan logically.

And, before I begin using the strategy map/balanced scorecard model, I'd like to point out that the first time I used it in application to my business, Yellowbook-cpe.com, I was chagrined at how shoddy my plan and concept were. Kaplan and Norton helped point out all my blind spots and caused me to think through a wider array of issues than I had previously considered.

That is one of the key benefits of a model—don't you agree? Models are invented by someone smart who has been there before you and can guide you to think through problems completely and thoroughly.

So here goes the beginning of my confession of how weak my initial thought processes were. Let's start with the big-picture desire for any business—MONEY!

The financial quadrant

Few of us are in business just so we can have fun and spend our money. I am in business to make money—but even though I am a CPA, I wasn't thinking through this aspect of my business thoroughly. I was instead thinking about my improved lifestyle—that more of my money would come from passive sources (books and self studies)—not from traveling to teach seminars. I am still not looking to get rich—I am just looking to earn more of my living from home—not from traveling to faraway and not-so-exotic places which shall go unnamed.

Kaplan and Norton have even been nice enough to break down financial goals into two main categories. But they didn't stop there; they broke those categories down into even more categories, etc. etc. They are so thorough! I like that, because I don't want to have to come up with my own structure. I teach a class on financial statement analysis and my course materials contain 70 metrics. Come on! I need to simplify that a bit. We can run financial ratios until we are blue in the face.

So here is how they break it out:

Productivity Strategy

• Improve cost structure
  • Reduce cash expenses
  • Eliminate deficits: improve yields
• Increase asset utilization
  • Management capacity from existing assets
  • Make incremental investments to eliminate bottlenecks

Growth Strategy

• Expand revenue opportunities
  • New sources of revenue (new products, markets, partners)
• Enhance customer value
  • Improve profitability of existing customers

Strangely—or stupidly enough—I hadn't even thought about financial goals before Kaplan and Norton prompted me to. And honestly, I don't want my whole business to be focused on money anyway. I am, as I said, not in it to become Microsoft. I just want to make a living and pay for an occasional trip to Disney for my kids.

So, again, with my just get it done attitude regarding strategic plans—let me pick and choose from our list:

Productivity Strategy

• Improve cost structure
  • Reduce cash expenses—OK—that doesn't sound like me. I am not looking to do my work cheaper—it is not costs that are driving me nuts—it is the amount of time I spend sitting on airplanes, hauling baggage, and driving around in stinky rent-a-cars.
  • Eliminate deficits: improve yields—OK—I am not in debt in my business currently. So this doesn't sound like me either.
• Increase asset utilization
  • Management capacity from existing assets—a-ha! This does sound like me. If you consider me an asset—and that my tiny little brain contains only so much information and that this information can be shared verbally once and at great expense or through a book multiple times without me having to go anywhere… I love it! I can see a few metrics for this: percent of time spent traveling vs. writing, and percent of revenue from writing vs. speaking.
  • Make incremental investments to eliminate bottlenecks—Right, I am planning on letting technology take care of the grunt work—and, of course, I have to pay for that! I teach a program for Texas State where I and another administrator are way too involved in every step of the process from payment to passwords to mailings to grading to certificates. Wow. A lot of work! So, something that measures how much time I am involved in the processes would be great. All of the processes from product creation and editing to question writing, to marketing, etc. Have you read that book called "The Four Hour Workweek?" I couldn't resist that title—and it is a very inspiring book about how to use technology to do the majority of the work for you. I recommend it to everyone.

Growth Strategy

• Expand revenue opportunities
  • New sources of revenue (new products, markets, partners)—another a-ha! I like this one. Books and videos and online CPE are new sources of revenue for me. I'll latch on to this. For years, I have been saying that I piece together a living. Checks come at me from a variety of sources—and I like it that way because I was downsized in my very first job. I learned early not to rely on any one entity for my income. A colleague of mine put a more positive spin on my approach—saying that I had a "portfolio"career. Interesting. That does sound a little more professional than "piecing together a living".
• Enhance customer value
  • Improve profitability of existing customers—this is an interesting one that I really didn't consider before this model—but it does have some application to me. The customers who can't afford to fly me out to see them, can still experience my humorous take on auditing by buying my books. Interesting.

The next question is how am I going to pull this off? It is all very nice to think that I will diversify my revenue stream and make more money from each customer relationship. But unless I have happy, willing customers, it ain't going to happen.

So Kaplan and Norton have again given us a structure for thinking about the customer. And that structure I will cover in next month's newsletter.

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Leita Hart-Fanta, CPA, CGFM
Resides in Austin, Texas and can be reached at www.happycashflow.com