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Lynch on Strategy
Part III
What Are Strategic Numerical Targets?

Business is filled with numbers, but you want everyone in your company to be aware of, understand, and talk about only a few. These are the numbers that track the execution of your long-term, 3 to 5 Year Strategic Moves, and chart your progress toward your BHAG (Big Hairy Audacious Goal).

I call these your Numerical Targets to distinguish them from your Metrics (often called Key Performance Indicators). Metrics are the critical success factors that drive your current operating model - the things

you do every day to drive "business as usual."

Numerical Targets are strategic, big-picture numbers. To see how they work, let's use a fictional company:

This company chose "Number of Paying Customers," "Number of Branch Offices," and "Number of Resellers" as the Numerical Targets it wanted everyone to be aware of. You might be asking yourself why it didn't choose a financial measure like sales or revenue per employee.

Not everyone understands or is motivated by hitting financial targets and accounting ratios.

However, everyone, from the most junior employee through to the CEO, understands what a branch office looks like. They also know what a paying customer looks like. Those are tangible things that people can imagine and count for themselves if they wanted to.

Everyone in this company knows that the goal is to have a total of 400 paying customers by the end of the current quarter. Everyone knows that the goal is to have a total of 1,500 customers by the end of the year. And everyone can see that, by the end of the following year, the company plans to have 3,000 customers.

Now employees have something tangible they can visualize and grasp. They know how the company intends to grow and evolve as they implement their strategy. They can also see that the company intends to open more branch offices to serve these customers, which no doubt means it will be hiring more staff as well. Wow! This company is going places! The future is bright!

Using numbers like this helps employees visualize how their own personal careers could fit into this picture. Perhaps there are future opportunities for them to grow and develop with the company as the company achieves each milestone and makes progress toward these Numerical Targets.

Let's consider the principles:

Everyone should understand exactly what the number means. You can track financial results as Numerical Targets, and some companies do. But most employees understand visible, concrete things, things they could count if they chose to.

When defining your Numerical Targets I urge you to use the following format: “The number of …” And since you're going to track these numbers publicly, select measures that you don't mind sharing.

Remember that you want the people in your company to be aware of these numbers and discuss them. Inevitably, the competition will learn what you're tracking, so make sure you don't mind.

The numbers you track should be fundamental to your strategy.

The rule is simple: strategy first, then numbers. Select numbers that are based on your BHAG, 3 to 5 Year Strategic Moves, and Strategic Projects. These numbers will be the basis for your budgets, financial forecasts, human resource planning, and more. Budgets and forecasts should not be done until you have created your strategy, and they must be aligned to the strategic choices you have made.

Display the numbers over different time periods.

The numbers for this quarter are important. They're hard targets, the things you definitely expect to achieve in the next three months. That gives your team clear goals to aim for, but you need to provide some additional context. Based on your Strategic Projects and what you know to be true right now (your current reality), what do you expect to achieve by the end of the current year? What about the year after that?

The further you project into the future, the less certain you can be, because, as we know, your current reality (SWOT Analysis) is always changing. Thus, you need to review and update your Numerical Targets at the end of every quarter to ensure your stated goals always reflect the current reality. Nothing is more demoralizing or pointless to your people than keeping annual targets in place that bear no resemblance to the current reality.

Now it's time to get your team together and do the following:

Choose at least one, but no more than three, Numerical Targets. Make sure they are numbers that have meaning for all your people, and are tangible things you could physically count if you chose to do so. Project them over three time periods e.g. 90 days, one year, and two or even three years. Identify the person who's accountable for making those numbers.

Decide how you will make the targets visible. These targets and your progress should be a regular topic of interest and conversation. Make them noticeable and provide frequent progress updates. Some companies use technology to help. I've seen companies use giant computer screens in their offices to display the current numbers and highlight progress in real time.

And finally, track your Numerical Targets openly and often. When you're off track, huddle everyone together to change that. And when you're on target, be sure to celebrate. Numerical Targets not only align your team with your strategy, they should help you build your team as well. People prefer to succeed, and when you define success like this, that can, as it should, become a central pillar of your corporate culture.