Are Quarterly Business Goals an Outdated Practice?
As we say goodbye to Q2, it’s time to rethink how we track and measure our success.
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Welcome to the second half of 2018. At this stage, the lofty goals you set at the beginning of the year should be 50 percent complete. Which means your company is on track to announce wild successes once January 2019 rolls around--right? Well, not so fast.
Even if you've accomplished all your Q2 goals, it might not mean your company is in the best shape.
"I've never seen a company whose performance has been improved by having some forecast out there by the CEO that says 'We're going to earn X this quarter,'" American business magnate Warren Buffet explained in a recent interview with CNBC and Jamie Dimon. "It's not only sending the wrong message and delivering the wrong results to the company...it's also teaching the people that work under him or her that quarterly performance is the end game."
Arguably, this is the type of mentality that may have lead to the Wells Fargo scandal. When your employees are creating fake accounts in order to meet unrealistic sales goals, it's time to re-think reporting and expectations (in addition to many other much-needed changes).
Not only does this type of goal-setting increase the potential for poor decision-making, but it can also stifle innovation. When you're too focused on the wrong outcomes, you may pass up an opportunity to make crucial changes or investments.
For example, let's say Company X needs to invest in digital technology that will revolutionize the customer shopping experience. The only downside is that the investment will put a big dent in Q2 profits. So, rather than not meet those second-quarter goals, Company X decides not to invest. This leads to a decline in sales as customers become increasingly frustrated with the poor online shopping experience. Over time, leaner, more agile competitors continue to steal market share, putting Company X out of business for good.
So, when looking at quarterly goals from a big-picture standpoint--do they still make sense? If not, it's time to rethink your strategies.
Does company size matter?
Relying too heavily on quarterly goals could ruin a business--which is often the case with companies that are in startup through growth-equity development stages. These earlier-stage businesses should be wary of focusing on quarterly goals versus yearly goals. Why? Because when you're new or growing, you need to be able to pivot. Goals set at the beginning of the year may become obsolete by the end of February. So instead of rigidly sticking to outdated goals, you need to be able to switch gears--and switch gears quickly.
For larger companies, there may be some merit to having quarterly goals, but I'd still argue the need for agility. In today's fast-paced world, larger companies are getting beat by smaller more nimble startups. Combine this with the ever-accelerating pace of new and emerging digital technologies, and goals made at the beginning of January may not make any sense by the end of the month.
Taking the long view
For startups and companies in growth mode, it's important to take the medium-to-long view as often as possible when making decisions. Have a crystal-clear vision for your company and list out the milestones you need to achieve it. From there you may need to be flexible in how and when you can achieve those milestones.
If you didn't meet a specific sales goal but made a decision that will bring you closer to achieving the company's vision, then--in the long run--you may achieve greater success. For example, being forced to achieve higher profit too quickly can harm an early-stage company. This is not to say profit and sustainability aren't important--they are--but so is making investments in the business that will result in scale and competitive advantage in the long run.
When you focus too closely on short-term goals, you can miss out on something more important in the bigger picture. For mature companies, the quarterly goals approach may work at times, but adaptability is vital in today's lightning-fast business environment. For startups and growth equity companies, take a longer view. It's important to have a clear vision for your company, but be open to shift priorities based on business needs and emerging opportunities.