Rule 2: Towards a Common Goal - Align Business Goals
There are two main dangers in failing to align business goals:
So our second Golden Rule of corporate governance is that the business should be targeting an appropriate goal which properly reflects the expectations of the stakeholders. “Properly” in this context means that it has been arrived at after due consideration of all the interests concerned, and an appropriate weighting which recognises that the various stakeholders have different claims on the organisation. A misjudgement of the weighting may do serious damage to the totality of the business, and a lack of understanding of the need for congruence between the aims of the different stakeholders may make the business impossible to run at all. This article will help you identify these dangers and implement effective remedies to align business goals more successfully. It draws on our Applied Corporate Governance™ methodology developed over nearly twenty years of corporate governance training, authoring and consultancy. Failure to align business goals is one of the most frequent yet undiagnosed causes of corporate failures. As we repeat throughout this site, every stakeholder has a different perspective on where the business is and should be going. This makes establishing and maintaining a regular review of the business goals essential, not just using the conventional (though often still overlooked) strategic management approach, but employing stakeholder consultation. Without agreement from at least a majority of stakeholders, it is difficult to keep progress towards the goal on the rails. Indeed we would regard stakeholder consensus as the rails, without which the strategy cannot run smoothly if at all. Decades of strategic business experience and observation have proven to us time and time again the need to align business goals, or as we like to say, achieve congruence of goals. Congruence implies more than a linear, two dimensional alignment but a deeper level of cohesion brought about by effective systems of universal feedback. It should be a key objective of any business to have all interested parties buy in to its vision and mission and so help, rather than hinder achieving its goal. Regardless of how good, and even honourable, the board may feel the goal they established is, if others are ignorant of, misunderstand or disagree with it, problems are likely to arise. This could be as simple as customers misunderstanding the brand name or concept and so associated it with negative qualities. That is more likely to be picked up by primary research done by the marketing department. But it could be more buried. We once ran parallel corporate governance and strategy projects for a mutual retail client who had a large database of members. On closer inspection, while there were members who were fully aware and bought into the mutual ethic, the reason most people joined was to receive the higher rate on the savings account they offered. Clearly these were very different expectations and goals and identifying this enabled a different approach to be taken to encourage members to shop and retail customers to join. Most companies would argue that they align business goals instinctively through their relationships with key stakeholders, industry knowledge and management information systems. To an extent this is clearly true or most (well run) businesses would not survive. But history is littered with examples where it is not true and there are very few who achieve stakeholder satisfaction through purely intangible methods. Think about the following questions in relation to your own organisation - especially how well you are able to answer them:
If you had difficulty answering some or all of these questions, you are not alone. Few businesses spend sufficient time in defining and communicating a clear goal to their stakeholders. Sure, you will have a mission statement and perhaps an extended vision document designed to steer corporate culture. Your spend resources on developing and communicating your brand and associated values to customers. And you may even regularly poll customers and employees about what they think of these statements, values and culture. To fully align business goals, however, and therefore fully commit to good corporate governance, you need to have a formal, well planned and inclusive approach to setting, communicating and monitoring goals. We believe to achieve this requires:
Without this support and independence accurate results cannot be guaranteed. Good corporate governance demands that commitment or it is no more than the lip service paid by a significant proportion of annual reports and account documents we have read in the twenty years since such statements began to appear therein. If you do manage to align business goals, without proper planning it will likely be more down to co-incidence.
Return from Golden Rule No.2: Align Business Goals to Best Corporate Governance Practice Go to the Applied Corporate Governance homepage Our corporate governance seminar series and small group workshops are a great way of learning our unique methodology and how to apply it to your own organisation. This methodology is also explained in a series of upcoming ebooks to be published shortly on this website and we are working hard on an eLearning platform to deliver personalised corporate governance training to a wider audience at your convenience. If you would like to talk to us about implementing a corporate governance programme in your company please fill in the contact form.
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