Introduction

It’s very easy to list your business goals, especially when those goals reach far into the future … but are you going to achieve your goals? Do you know how to achieve them? Do you even know if your current goals are achievable? Well, read on and I will try and help.

In the relentless pursuit of business success, companies have long relied on financial metrics to gauge their performance, but what if I told you that the true heartbeat of your organisation lies long before the Financial Statements are reconciled.

Imagine harnessing a set of tools that not only map out the route to future financial success but also illuminate the hidden pathways to sustained growth and innovation. Intrigued?

Dive into the world of non-financial metrics, discover the art of crafting SMART objectives, and unlock the power of Peter Drucker’s Management By Objectives (MBO) framework.

Drucker’s Management by Objectives (MBO): 5 Steps for Effective Management 

Let’s start at the beginning by bringing Peter Drucker’s Management by Objectives back to the table.

Peter Drucker is a renowned management guru who developed the Management By Objectives (MBO); a framework designed to align and propel your organisation towards achieving its goals.

Here is where you can start, with this incredibly brief breakdown of the 5 key steps:

1. Set Organisational Goals: Define your company’s overall objectives. Where do you want to be in the next year or five years? 
2. Cascade Goals Downward: Break down organisational goals into departmental and individual objectives. How does each team contribute to the overall vision? 
3. Develop Action Plans: Create a roadmap for achieving departmental and individual objectives. What specific actions will be taken? 
4. Monitor Progress Regularly: Track progress towards goals through regular reviews and metric analysis. Are you on track? 
5. Performance Evaluation & Feedback: Evaluate performance based on pre-defined metrics. Celebrate successes and provide constructive feedback for improvement. 

I’m sure you have a good idea of which goals you need to acheive by now, but before issuing these to your department heads, please read on …

Setting SMART Objectives to Achieve your Goals

Meet SMART objectives, standing for being Specific, Measurable, Achievable, Relevant and Timely.

If Peter Drucker’s Management by Objectives is the Road Map then SMART objectives provides your team with the post code to know when they have reached successville; ensuring your goals are clear and attainable by all. Here’s the checklist for how you can supercharge your goal-setting: 

• Specific: Clearly define your goal. “Increase customer satisfaction” is vague, but “Improve NPS by 10%” is specific. 
• Measurable: Track progress towards your goal. How will you know if you’ve achieved the 10% NPS increase? Through regular surveys? 
• Achievable: Set a goal that’s challenging but attainable. A 100% NPS increase for example could be unrealistic. 
• Relevant: Ensure your goal aligns with your overall business strategy. Does improving customer satisfaction directly impact your revenue goals, for instance? 
• Timely (or Time Based): Set a deadline for achieving your goal. The NPS improvement target should have a specific timeframe. “Improve NPS by 10% by the end of the next Quarter”. 

Business objectives which do not meet the checklist above can be so difficult to achieve that you may not know when you achieved them.

Non-Financial Metrics: The Invisible Building Blocks to Achieve your Goals

And then finally, it may be heart-wrenching for a Finance Director to confess this but, the key to achieving business performance begins with achieving the Non-Financial Metrics which are the building blocks to success. This is a bit like saving the penny’s so that the pound’s save themselves.

So forget the dollar signs for a moment, Non-financial Metrics are the ingredients that bake the cake. These are the performance indicators that paint a vivid picture of aspects often overlooked yet crucial to long-term success. Think Number of Customers, Retention, Churn, Customer Satisfaction, Employee Engagement, Brand Loyalty, and Operational Efficiency, to name but a few.

These metrics are your crystal ball, offering insights that make up your financial performance and not the other way around.  

Financial vs. Non-Financial Metrics: Understanding the Difference 

Financial metrics provide a clear picture of your financial well-being, while non-financial metrics offer insights into the drivers of that success.  

Think about a game of football. The goals and the final result would be considered the Financial Metric, but without Shots, Shots on Target, Touches inside the Opposition Penalty Area, et cetera, you won’t achieve any.

So the Non-Financial Metrics focus on the qualitative aspects that directly influence financial performance. These can include: 

• Number of new customers or number of customers in the month 

• Average Customer spend per basket or per month 

• Customer Satisfaction: How happy are your customers? This can be measured through surveys, Net Promoter Score (NPS), or customer churn rate. 

• Employee Engagement: Are your employees motivated and productive? Track employee satisfaction surveys, absenteeism rates, and internal promotion rates. 

• Brand Awareness: How well-known is your brand? Track social media engagement, website traffic, and brand mentions. 

• Process Efficiency: How smoothly are your internal processes running? Measure cycle times, rework rates, and inventory turnover.

It’s really only addressing some of these figures that will allow you to increase Revenue or decrease monthly costs.

Wrap up

Ready to transform your business? Embrace the power of non-financial metrics to complement your financial data when working to achieve your goals. Set SMART objectives to ensure clarity and achievability. Implement Drucker’s Management By Objectives framework to align and engage your team.  

Balancing these elements will pave the way for sustainable success and unprecedented growth. It’s time to redefine what success means for your organisation.  

Are you ready to slow down before you can speed up?

This post was written by Christopher Grubb. You can find out more about me here.

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I hope the above has helped.

The role of the Finance Director does not need to be a full-time overhead for someone to be committed and make a difference to your business. My aim is to simplify the financial performance, planning and strategic positioning for SaaS and Tech businesses who just want their world to be uncomplicated and thrive.

Please feel free to message me with any comments or questions. Or find me on LinkedIn here.