No Savings? Go Fish!

Nayism 34: Every year our company sets unreasonable Six Sigma financial goals and we have to scurry around to find projects to meet them. It’s just too much for our organization to cope with.

This is a common nayism heard in organizations with a culture of “business as usual.” Should they back off a bit and give these naysayers some relief? Here’s what I say . . .

Organizations that have a culture of “business as usual” are most likely accustomed to setting what they call “achievable goals” meaning that if they run their business as usual, they will meet their goals. Calling these ‘goals’ is a misnomer and only serves to strengthen the status quo.

Real “goals” are targets that will drive the organization to work and stretch to meet them. Many times, when set, they seem unattainable but with focused effort, innovation and drive, they can be met. Not an easy task and it usually means a lot of ‘moaning and groaning’ to get there but after achieving the goal it becomes obvious that all that ‘moaning and groaning’ was actually growing pains as the organization stretched its potential to accomplish the unachievable.

Six Sigma financial goals are no different. Setting aggressive goals sends a clear message that the company is looking for cost reduction and/or revenue growth by changing their business processes instead of the old fashioned way of slash and burn. It will challenge the organization to look deep within their processes to identify cost and revenue drivers and then modify their processes to provide positive financial impact.

Handpicked Content:   Stephen Turnipseed, Chevron

The real leaders will approach this challenge and come back with the “catch of the day.” As for the naysayers, tell them to “go fish.”

Comments 2

  1. Mike Carnell

    I see a couple issues with this. First the initial goal is specified as reduce cost. It is a comfortable target because the Finance and Accounting people are comfortable with tracking it. It is a metric they know and understand so that is what they drive and consequently it is the metric that the CEO ends up driving.

    When a target is set around increasing EBIT it creates a whole different scenario. Now you can maintain the cut and slash mentality and then wonder why you have a morale issue or you can sell, break bottlenecks loose, etc still positively impact EBIT and the atmosphere is more positive.

    When you are operating in something such as a mining environment, have a high market price, constrained market and finite reserves where would the logic be in driving cost?

    The interesting issue is the effect of project cycle times. If you have the option of driving cost or revenue and you are in a market such as we were with copper when it flipped from a low price to a high price the short project cycle times allowed us to change the focus and respond to that market.

    Goals need to be aggressive. Motorola began with a 10X improvement every 2 years. It looked big when we began. After couple years it was a way of life. I am told that it is currently at 10X every year (no data to back that up) but after this amount of time it should be achievable.

    Today’s competitive market isn’t for the faint hearted. Goals need to stretch the organization.

  2. David

    I think goals are necessary to stretch and improve an organization. Unfortunately, goals are often used as measuring sticks.

    Senior management often holds its people to these goals. “You said we could save $X, we didn’t, hit the road.” Internally, when goals are set most people have this in the back of their mind. You never want to be the one to fall short of your goal.

    How many times have you seen a situation where someone “thinks” they can hit X but they actually set their goal for Y.

    Many organizations senior management needs to recognize goals are set to improve the company. Targets are what people should be held accountable for.

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