leadership incorporated blog

July 10, 2011

Managing Growth: Why financial goals undermine financial results

I met this week with a leader in a digital media publishing company that is poised for growth. They have a powerful and connected new board driving them to grow the business. They have a strong platform to build on. They have a devoted following who believes in what they have done in the past.

I began, as I usually do, by asking, “What’s your Point B? What will successful growth look like for you?”

His answer was all about the financials.

I hear this a lot. We are measured by our financial success (both internally and externally) so we start to see the financials as our objectives.

This is an enormous trap that snaps the legs off many businesses. And here’s why:

Your financials are the results of organizational strategy and execution. As organizational goals, financials are generally not actionable. Other than putting money into passive financial investments, there are no direct actions we can take to achieve financial goals. And if goals aren’t actionable, they are nothing more than wishes. Very distracting wishes.

As many business leaders have learned the hard way, we cannot directly control our financial results. Sure, we can influence them — but we are ineffective when we put our focus on trying to control them. Setting financial goals is an attempt to control what we can’t control and results in tremendous squandering of focus, energy, time, good will and much more.

So, if we can’t control the financial results, what can we control?  We can create the conditions that will produce the results we want to see. This may seem at first like semantics, but we all frequently see leaders who by focusing on trying to create the money overlook the very strategies and actions that would otherwise lead to the money.

No matter what your mission statement says, setting financial objectives makes money the purpose of your organization. The primary goals and objectives of any organization inform its decision-making, interactions and everything else. When your primary objectives are financial, your people can’t help but make decisions that communicate to customers and prospective customers that money is what you care about. As your customers are an important player in your growth, the effort to focus on money as a goal actually undermines its own achievement.

Making the bottom line your main purpose in this way robs you of the opportunity to capture the hearts, minds and energy of your customers, your staff, your vendors, and the public. Focusing on the money keeps you from having a higher purpose that people can really get behind, talk about, and want to work hard for.

Growth is not a one-sided event that is all on your company to create. Growth is always a collaboration between an organization and its customers, staff, vendors and others. Focusing on the money, which is only of interest to one party in the collaboration, actually denies and sabotages the existence of that crucial partnership.

So, what do I coach my clients to do instead?

  1. Develop a clear picture of the purpose of your organization. What business are you in? What is the meaning of your products and/or services to your various audiences?
  2. Know your desired financial results. Revenues are a critical guide and measure of organizational health and progress, but should never be your primary objective. Even (as in the case of banks, investment companies, etc.) when growing money is your product and service!
  3. Set objectives that create the conditions for the financial results you want to see. Set objectives based on actions, behaviors, or things your organization can create that support both your organizational purpose and your desired financial results. Use the results as a measure rather than as the objectives themselves.

The most successful companies already know this: Focus on creating the conditions that lead to the results you want to see and the results will take care of themselves.

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2 Comments »

  1. This is a really good article and I particulary liked the 3 suggestions at the end. It is a poignant reminder as this applies in business as well in life, but i think it is getting the balance right.

    Comment by Morton — July 10, 2011 @ 5:36 pm | Reply

  2. Of course we can’t control our financial results, but it is helpful to have goals. I don’t think reaching for realistic strong expectations would really be a hindrance but I can see where your line of thinking really does make sense. Thank you for expressing this point of view. I will be reposting this on our Twitter feed @jpatrickjobs

    Comment by J. Patrick & Assoc. — August 3, 2011 @ 4:47 pm | Reply


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