6 Key Business Management Terms You Should Know

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Vision, mission, values, goals, objectives, strategies, and actions are aims, targets or standards that a business sets to undertake to reach the desired end. These factors form the backbone of a business plan. Mission, vision, and values define the business and its aims while goals, objectives, strategies, and actions are smart tools that are used to achieve those aims. Without these, a business will beat about the bush and cannot hope to achieve much.

A business that eventually becomes successful starts with a picture (vision) in mind of how the business will look like in the end once it is completed. It then defines the sort of things that such a business ought to be doing on a day to day basis to act as and to become a successful business. And then engages in a strategic planning exercise to create information for preparing a business plan to set a mission, values, goals, objectives, strategies, and actions in all areas of the business.

These tools are the ones that will keep the business focused and on track doing the things that a successful business should be doing even before it becomes successful. Faithful implementation of properly set mission, vision, values, goals, objectives, strategies, and actions helps to propel the business to success.  Below is a discussion of what these factors are and how to identify and create them.

1. Mission

A mission statement is a brief description of a company’s fundamental purpose of being in the business. It answers the question, “Who are we and why do we exist or why the business is being brought into existence in the first place?” The mission is derived from what you want to do. This is where you define your customers and your products and services, why you offer them and how you offer them.

The mission or purpose of the business is defined by how it is serving or meeting customer needs and not by the industry or business name. The purpose of the theatre business, for example, is to make people happy and not to provide a great platform and stage plays. To give another example, the purpose of an amusement park is to please people and not to provide the best amusement facilities in the world.

The purpose of a pharmaceutical company should be to create healing medicine through continuous research using the best medical research facilities. The mission is usually presented as a broad statement of intent but it dictates the shape and form of all aspects of the business including the location, premises, array and nature of the products, services, pricing, customer service, marketplace position, competitors, growth potential, marketing aspects, technology and processing systems to be employed, office structure, type of employees, objectives, strategies, actions, plans, policies, procedures to be put in place, suppliers, service providers, and the relations with the community. In a nutshell, a mission can be seen as what people are presently doing or ought to do in the business to achieve the vision.

The main purpose of a mission statement is to clarify to the employees and other stakeholders the primary purpose and other measurable objectives of the organization. The mission statement articulates the company’s purpose both for those in the organization and for the public. It expresses the organization’s purpose in a manner that sets the tone for employees and inspires their support and ongoing commitment to the goals of the organization.

Everybody in the business should be able to verbally express this mission. The main purpose of a business is captured by a mission statement and is delivered through vision, objectives, strategies and action plans. The mission gives rise to objectives or goals that must be attained to achieve the mission as envisioned. A mission can be stated simply as “To provide the best service possible within the microfinance sector for our clients.”

To come up with a good mission statement, you need to engage in strategic thinking and planning around your business idea so that you can be sure about your value proposition.

To succeed, you better target a mission with a noble intention and not one that directly targets money or personal benefit. Jim Collins and Jerry Porras (1994) in their book: Built To Last talks of how the fortunes of Merck, the pharmaceutical company were negatively affected when they changed their mission from focusing on “medicine is for the people” to “being a top-tier growth company”.

The book also restates the mission of Johnson & Johnson written in 1943 which begins by “We believe our first responsibility is to doctors, nurses, and patients, to mothers and fathers, and all others who use our products and services”. In the end, the credo states “when we operate according to these principles, the stakeholders should realize a fair return”.

John Kay (2010) makes the same argument in his book: Obliquity: Why Our Goals Are Best Achieved Indirectly. He observed that ICI, a chemicals company, suffered poor performance when it changed its mission from “to serve customers internationally through responsible application of chemistry” to “to be the best leader in creating value for customers and shareholders through market leadership, technological edge, and world competitive cost base”.

2. Vision

A vision is a statement about what the organization wants to become. It is a vivid imagination of a future attractive position worth striving for. The vision articulates your dreams, aspirations, and hopes for you and your business. It answers the question “Where are we and where do we ought to be going and what should the result look like?” Another way of looking at vision comes from Burt Nanus (1995), a well-known expert on visionary leadership. Nanus defines a vision as an imagined or visualized realistic, credible, attractive future for an organization.

Yet another way of looking at this is to view it as a vivid imagination of an attractive goal that is worth striving for. Vision is the capability to perceive the end goal while still at the starting point. It is the ability to see something that is not visible. Having a vision is more important than having capital and in starting a business, vision precedes capital. Capital is, in fact, synonymous with the provision (read pro-vision where pro means in favor of).

In this sense, provision can be seen as that which is provided for or in favor of the vision, as in to support the vision. Those who read the Bible might have seen that Proverbs 29:18 says that “where there is no vision, the people perish”.

The main purposes of stating and documenting a vision are:

  • A clear vision serves as a means of communicating the aspirations of the business to all stakeholders (internal and external).
  • It also functions as an anchor that constantly reminds, motivates and inspires people in the organization to continue working towards the desired goals.
  • It assures and holds positive promises to customers and stakeholders. Vision expounds the mission in the sense that vision states that given the mission that has been espoused, this is what we want to become in the process of achieving that mission and this is the direction that the business will take to attain that mission in the best possible way.

A vision statement may apply to an entire company or to a single division of that company. Whether for all or part of an organization, the vision statement should answer the questions, “Where do we want to go and what do we want to become?” Vision expounds the mission in the sense that vision states that given the mission that has been espoused, this is what we want to become in the process of achieving that mission and this is the direction that the business will take to attain that mission in the best possible way.

Vision boils down to what the business wants to achieve ultimately after the mission is completed or implemented. It describes an end goal and as such, it should be a short visionary and inspiring statement. To come up with a good vision, it is necessary how could be great, how could we grow the business, what can excel in,

Vision is realized by setting goals that are then implemented using strategies and actions. An example of a good vision is a statement like “Five years from now, Computer Services Ltd. will have annual revenues of over US$1 million by consistently providing timely, reasonably priced repair and instructional services”. Another example of a vision statement is that of Alzheimer’s Association which simply reads: A world without Alzheimer’s disease”- www.alz.org/about/strategic-plan

3. Values

Values are the moral cornerstones that the business pays special attention to and abides by in day to day operation of the business. They are, if you like, the code of conduct within the business. The sole purpose of having and stating values is to guide behavior within the business and relationships with customers, the planet, and people (society). There are no right or wrong values so long as they are understandable and inspire the internal people and are not repugnant.

Some values that would not hurt to espouse include integrity, responsibility, reliability, innovativeness, customer care, respect and fair-mindedness, and care for the planet and people or society.

4. Goals/Objectives

A goal or an objective is a description of the destination where a business wants to be or a target that needs to be achieved for a specified purpose. Having set the mission and vision for the business, goals, and objectives need to be set too as the next logical step. Goal or objectives are often used interchangeably but they are somewhat different.

Both terms state desired outcomes an organization is trying to achieve to be of service to customers and to meet the expectations and profit goals of the owner. However, a goal is a broad direction where a business wants to go. It is often general, intangible, conceptual, and strategic.  Objectives, on the other hand, are components of a strategic plan that can be assigned to a department, units, and individuals in an entity.

They are in fact goals that are turned into specific, measurable, attainable, relevant, time-bound (SMART) milestones. Objectives are often referred to as strategic objectives. A goal tends to be descriptive while an objective usually contains elements of measurements and targets in them. For example, a goal may be to increase net sales and the objective for this may be to increase sales in two specified areas by 7.5% in each area by December 2010.

Objectives are tactical tools while goals are strategic moves. See table 1 below which compare goals, objectives, strategies, and actions. Goals or objectives or goals are usually set when one wants to start, upgrade, expand, renew, or energize a business.

Goals are usually high-impact 5 or so priority things that you must do in the first year and the same number that you must do in the next 3 to 5 years for the overall mission and vision to be successfully attained. Objectives are smart targets to aim for and achieve to accomplish the mission and attain the vision.

Needless to say, the formulation of goals and objectives is one of the main reasons for engaging in strategic planning and is also the main output of strategic thinking and business planning exercise. The main purpose of strategic thinking and planning is to identify smart pathways (goals and objectives) that can be implemented to achieve your mission and vision in the current market space or to get to a blue ocean. Goals are the main outputs of the strategic thinking and planning process.

The setting of goals is at the center of building and managing a business. To start anything, to create anything, to reform or improve anything, to implement anything, or to achieve anything in business, you need to set goals and objectives to aim at.  The main tool that is used to make any progress in business is the goals and objectives.

Without a little bit stretched goals and objectives that can be aimed at on a daily, weekly, monthly, and yearly basis, very little will be achieved. Goals and objectives drive the business.

In essence, objectives break down the mission and vision into several broad pillar or framework initiatives that must be undertaken and put in place to set the direction towards attaining the vision. Compared to actions, objectives are broad descriptive statements of aims and intentions.  Goal setting is very important in strategic planning.

Goals set the direction of the business and allow you to be in charge of this direction as well as offering yardsticks for evaluating progress and success or lack of it. Before you start to write your goals, you need to understand what goals to aim for to attain your vision. For business, for example, the business needs to know what areas it needs to improve in or could improve in.

This requires strategic thinking and is the reason why goal setting is part of strategic planning. Goal setting requires research, SWOT and benchmarking as explained above in the paragraph on strategic planning.

Objectives speak to the key aims that you have carefully selected to be implemented to start your business successfully or compete effectively with ongoing business in the current market space (red ocean) or move your new or ongoing business to a new market space (blue ocean). W. Chan Kim and Renée Mauborgne (2005) define, in their book “Blue Ocean Strategy”, a red ocean as an existing market space that has been bloodied by fierce competition and a blue ocean as a new market space that will not have competition for a good while.

They argue that the aim is to create a product or service that is so different that it creates a new market and owns that market. In formulating objectives for a red ocean, you have to focus on how to exploit gaps or shortages in the supply of the product or service you are targeting to supply in the market. Alternatively, you can identify competitive advantages or strengths that you possess and can leverage to allow you to gain or increase your market share.

In crafting objectives for a blue ocean, Chan and Mauborgne advise that your focus should be to eliminate factors that the industry you are operating in offers but which do not add value to the product, reduce other not so important factors well below industry standards, raise other factors way above industry standard and create others that the industry has never offered.

You need to figure out where customers are being under-served and create product features, whole products or services to fill this void to differentiate your business from those of rivals and their products. When you do this you will be able to create a road-map that will allow you to have a focused strategy that is divergent from that of the industry and has a compelling message (tagline) that you can express in a few words but still captures the superior value of your product.

A tagline that is quoted in Chan and Mauborgne’s book that I like a lot is one by Southern Airlines that at one time read: “The speed of a plane at the price of a car whenever you need it.” The airline had indeed introduced services that very well lived up to the tagline. The services involved hopping from city to city in many states in the USA just like road transport does only that the plane does it faster than road transport. The airlines had also removed unnecessary luxuries so that the price could be brought close to that of road transport.

The goals and objectives should be holistic and target to transform and create strategies for reforming all aspects of doing business including marketing, selling, delivery channels, customer service, business development, production and operating processes/systems, administration, and financial management. However, whatever is done in all these areas should be to support the objectives (road-map). A key component in setting goals is desired specific outcomes such as market share or rate of return on investment (ROI) to be achieved in the short-term to medium-term.  ROI is simply net profit after tax divided by capital invested or to be invested in the business. This is usually computed in an iterative process when preparing the budget until a budget position (sales units, prices, and costs) is arrived at that returns the desired profit.

Goals should, therefore, be established with the desired ROI or other targets in mind. For instance, to have sales of US$50,000 in the first year or grow sales by 25% and attain an ROI of 20% or a market share of 15% in the next two years are examples of goals. Strategies and action plans will then explain in detail how these goals are to be attained.  To achieve a vision, several goals may be required to outline the path to achieving the vision. Goals and objectives are identified and implemented (actualized) through the use of strategies and detailed actions to achieve a vision. In the end, several goals require to be achieved to realize the vision. The number of goals that are usually necessary can be anywhere from 3 to 5. Since goals are long-term and objectives are short-term, several objectives may be required to be achieved to realize one goal. One goal may normally require 3 to 5 objectives too.

In formulating objectives, it is important to make them SMART-specific, measurable, attainable, relevant and time-bound. To set smart and SMART goals, you need to engage in SWOT, benchmarking and market research. See these under the strategic planning section above. SMART goals have the following characteristics:

  • Specific: A goal should be clear about what you want to achieve.
  • Measurable: This is about the ability to measure performance and the outcome that shows the goal has been achieved as planned or not. An objective yardstick for determining achievement should be stated.
  • Achievable: This is about ensuring that the goal is something for which you have the time, money, resources, and the will to implement it to the end. To be achievable, a goal needs to take into account the ability to achieve such as resources available and present and future or expected circumstances. In other words, cut goals according to present budget or means but stretched them a bit beyond foreseen ability to stimulate effort.
  • Relevant: Relevant means the goal is in line with the course of your vision such as buying a house by the fifth year of your being employed.
    Time-bound: Your goal should contain a realistic date for completion. Anything goal without a timeline for completion will go and on without being completed.

An example of the development of a SMART goal is as follows:

  • Overall goal: I want to increase the sales of my mushroom farming business to increase net income.
  • Objective: Increase sales by 15% to increase net income by 10% in two years hence.
  • Specific: I will increase mushroom production and contract five additional supermarkets to stock the additional products.
  • Measurable: I will measure the growth by maintaining records of additional output and how many new supermarkets I have contracted in addition to the existing shops and retail customers.
  • Achievable: I will be able to expand output by using existing spare resources. I will contract the five supermarkets by using my currently free afternoon time to find the supermarkets.
  • Relevant: By adding new outlets to my current customer list, I will be able to grow sales by 15% and increase net income by 10%.
    Timely: To increase the sales, I will be ready with additional outputs and will contract the additional supermarkets in the next three months.

SMART Goal statement: I will, within the next three months, contract five new supermarkets to stock my mushrooms in addition to the existing list of customers by expanding production using excess and my currently free afternoon time to find the customers. This expansion will lead to an increase in sales and net income as desired. Notice that this statement embodies strategies illustrating the point alluded to in the paragraph below that strategies are embodied in goal statements.

5. Strategies

Strategies are any thoughts, ideas, chosen methods, techniques or plans of action which if faithfully implemented yield specified desired results. A business planner will be looking for positive business results while a robber, for instance, will be seeking to steal and emerge unscathed but both use strategies and hope for their desired results.

In a business context, strategies are methods, techniques, ideas, activities, or pathways that are deemed smart, clever, competitive, or advantageous, which if applied will accomplish aims as planned or desired. They are a description of a carefully chosen or formulated set of key methods that if implemented faithfully are expected and should deliver a unique mix of value or desired results such as achieving a goal or solving a problem.

Strategies are similar to actions but are long-term in nature and have elements of creativity, competitiveness, cost-effectiveness, and logical cause-and-effect. They are nothing but smart steps that are deemed smarter, cleverer, superior or advantageous than other alternative methods for achieving an aim. Strategies should allow for things to be done first before anyone else, to be done differently or better than anyone else.

Goals, objectives and even actions have elements of strategy in them. When you choose a certain mission and vision over another alternative vision, that choice is a strategy. When you choose one marketing method over another method, the chosen method is your strategy. If one location is, for well-considered reasons, preferred over another possible location, the preferred location becomes the strategy.

If one format of an office structure is adopted instead of another format, the adopted format becomes the chosen strategy for the business. When, for instance, you state that we will target a market share of 20% in the next 12 months to achieve a return of 17%, the decision is a strategy that could be informed by market conditions, ability and the financial aims of the business.

A policy that requires sales staff to wear a navy blue suit when they come before customers, such a policy is stating a chosen strategy. Strategies are, therefore, part and parcel of any vision, mission, values, goal, objective, and action statements.  The competitiveness of the chosen ideas in these statements is what makes the ideas to qualify as strategies.

When someone says it is not strategic to attempt to run all races in a sports season, that person is implying that such a move is not smart and will yield poor results. Not strategic implies lack of advantage or competitiveness and has the potential to yield sub-optimal results. A strategy is, therefore, an idea, a method, an action or a statement that carries in it an advantage, smartness or competitiveness, which are all factors that can yield desired positive results.

Strategies can be formulated for an area or all areas of the business that require creating or reforming to create and run a business that delivers what customers need or want and that satisfy the aims of the business. For this matter, the whole of the business plan can be regarded as nothing but a set of strategies. That is why a business plan is often referred to as a strategic plan.

Implicit in the above explanation of a strategy is that a strategy should be both cost-effective and competitive (advantageous). If these two elements are missing in the idea or method, the results, if the idea is faithfully executed as planned, will be costly and uncompetitive (or unattractive). Some results will be gotten but they will not be profitable for the businessman and may achieve costly victory for the robber.

Such an outcome means the “strategy” was indeed a bad strategy and therefore not a strategy in the first place. In this sense, a bad strategy, though it may be called or look likes a strategy at the planning stage, is not a strategy at all ab initio. Any thought, idea or method that does not advantageously achieve desired results is not a strategy or is a poor strategy at best.

Strategy formulation and analysis entails examining the power or the potential of the company’s strengths and opportunities and enquiring into the significant endogenous and exogenous forces such as weaknesses and threats that may affect the company’s position. As this is done, the aims of the business in terms of financial targets, mission, values and desired excellence in serving customers are taken into account.

This process of strategic analysis is the heart of strategic planning because this is where the key smart moves or methods to start or take a business to higher heights will be identified and formulated and the result is a master game plan. You use strategic planning (brainstorming exercise) to identify strategic issues that hinder your business from taking off and thriving. You then set goals and strategies (smart methods or moves) to resolve them.

This is where goals and strategies come to work together. Strategies explain how goals are to be achieved and goal statements almost always embody strategic moves or styles in them.

Having said all these about strategies, what then is the main difference between a goal/objective and a strategy? A goal is a broad main outcome that you want to target to achieve something like the mission and ultimate vision. A strategy, on the other hand, is the approach you take to achieve a goal. It is like a tool or tactic you use in pursuit of an objective or a goal.

Strategic planning is really about seeking to initiate change and transformation. Consequently, strategies that are developed, should be capable of solving a problem advantageously and competitively or transforming the business’s or an individual’s status from one position to a better and more profitable position. Ordinary ways of doing things in a business as usual mode without any particular superiority or competitiveness should not be counted as strategies unless they are actions to implement a strategy. Strategies should be transformative ideas.

Strategies can only be judged to have been truly smart strategies after they have been implemented and have produced the desired results. You can beforehand preview the possible success of the contemplated strategic actions by estimating sales, costs, and profit at the strategic planning stage to see if strategies are likely to produce desired results. You do this by preparing a trial budget that can be adopted once estimated realistic sales and costs that can deliver the desired profit are identified.

That is why budgeting and business planning are important when crafting a strategy. You then should have desired targets like profit or return on investment (ROI) of say 15% as you carry out your strategic planning. If your business is new, it may take a while before it can break-even and make a profit. If this is the case, your planning should take this into account and identify the break-even point that can then be targeted.

6. Actions

The actions, also known as initiatives are the specific concrete hierarchical (sequential) steps that need to be taken daily to achieve the objectives and the vision. They are in fact goals, objectives and strategies turned into actionable steps to be undertaken daily. If you like, they are objectives and strategies broken down into the detailed day to day tasks to be performed to implement the overall strategy to realize the mission and vision.

Actions too like goals should be SMART (specific, measurable, achievable, relevant, and time-bound) and identify specific actions, responsible action parties (department, sections, units, and individuals); resources needed for each action and expected outcomes of the actions together with yardsticks to be used to ascertain achievement.

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