Goal-Setting Lessons from Corporate America
If you have found it difficult to set and adhere to goals for yourself in your personal life, you may find it heartening to know that professional forecasters have many of the same problems when setting goals for some of the United States’ largest corporations. We can learn a lot about goal-setting, however, by learning some of the corporate forecasting strategies used by professionals.
As a brief background, companies with stock traded on one of the public stock exchanges typically issue formal statements on a periodic basis about their expected performance over a given period of time. This type of statement is usually called an “earnings forecast.” Preparing an earnings forecast is a difficult exercise often involving the input of numerous people throughout an organization, primarily sales, operations and financial managers. A variety of data is put into a financial model and various calculations and assumptions are made. (At a basic level, it is not unlike the work an individual might do to prepare a household budget.)
The final earnings forecast is essentially a goal for the corporation to achieve for the year. It might be communicated to the public as a target sales number or target earnings per share. Professional stock analysts then use the data in their own complex financial models for further analysis. At the end of the year, if the corporation does achieve the forecasted goal, typically its stock price rises as more investors clamor to purchase shares. If the corporation fails to achieve the forecasted goal, its stock price often sinks as disillusioned investors sell their holdings. Generally, the earnings forecast released to the public is a positive increase somewhat short of the actual goal so that the corporation can “surprise” the public with especially good news.
Due to the economic downturn, many firms have been unpleasantly surprised by the difficult business climate. Forecasting earnings (or losses in some cases) has become even more challenging than normal. As a result, some corporate forecasters have adjusted their goal-setting process with some of the following strategies:
- Scenario Planning. Rather than calculating just one set of numbers for the year, a variety of calculations are prepared based on different scenarios. For example, a corporation might be concerned about consumer wealth and might have one forecast assuming the unemployment rate holds steady, one that it improves, and a third if unemployment worsens.
- Rolling Forecasts. If conditions are changing rapidly and it is difficult to predict events occurring a long distance in the future, many corporations are electing to forecast for a shorter period of time and update the forecast more frequently. For example, rather than forecasting for an entire year, the corporation might forecast for one quarter (3 months) at a time and update the forecast each quarter.
- Crowd Wisdom. Rather than restrict the forecasting process to just management-level executives, some companies are using web-based technologies such as Crowdcast to gather insight from their employees. These technologies poll employees for their opinions on issues such as the likely demand of certain products to customers, the impact of certain competitors and other key issues. The results are summarized anonymously and in some cases have shown to be up to 75% more accurate than traditional corporate forecasts.
- Data Weighing. If a company is having trouble determining a course of action due to uncertainty about the likelihood of some events, it might focus in on known events and weight the forecast heavily on the items that it has the most control over. For example, a company might not know how many people will purchase its product but it can control how much it produces and its quality.
- No Forecasts. Some corporations have essentially admitted defeat in their ability to predict the future and are not issuing earnings forecasts.
How can you use these strategies when setting your personal or small business goals? The following ideas incorporate lessons learned from professional forecasters.
Have a Plan for the Worst. Understand the major factors that could impact your life during your goal period. While it is not fun to have to think in the negative, all individuals should be ready to face negative circumstances. Some people avoid thinking in the negative because they are afraid to confront loss or admit failure. I find, however, that if you prepare a plan (much like emergency planning), you can move forward with the rest of your life much more easily. I also like to tell myself that if I have a plan for the worst, it is less likely to be needed–kind of like a good luck talisman. Some of the “worst” questions you might ask yourself are:
* What if I or my spouse lost my job this year? (or What if my business income declines substantially? or What if I still can’t find another job?)
* What if I have to incur a significant expense for _______? (Figure out what is most applicable to you. A health crisis? A major home or car repair? A significant business expense?)
* What sources of income do I have in an emergency? If “none,” what would I do if I had to file bankruptcy?
- Consider short-term rather than long-term goals and continuous goal-setting. It is widely known that New Year’s resolutions sometimes seem overwhelming. A 90-day resolution may be more do-able. For example, one of the most common New Year’s resolutions is to “lose weight.” Perhaps one could break this down into 90-day goals, such as “Exercise at least 3 times a week for 30 minutes.” At the end of 90 days if the goal is not being achieved, perhaps it is the wrong goal and needs to be re-set. It might be more motivating to scale it down to “Exercise at least once a week.” for the next 90-days. If that gets results, then scale up from there. If it is still not being achieved, the next goal might be, “Figure out why I am not exercising.” Continuing to have a goal, even one that is significantly less ambitious than the initial goal, has helped me progress on nagging projects and learn more about my own work-style.
- Consider input from others in your goal-setting. Sometimes others with our best interests at heart have valuable help and advice to offer. You have to be careful, though. Goals are often very personal objectives and lay bare a lot of our own insecurities. Getting a lot of affirmations from people you trust about your negative qualities is not always helpful and you have to have a thick skin about this. Where input from others can be helpful, however, is when you are having trouble either identifying the source of a problem or how to solve it. “How do you deal with ____?” is often a helpful question and easier to tolerate than “How do you think I can better deal with ____?” –the answer to which almost no one wants to hear.
- Focus your planning on what you can control. Sometimes it is easy to feel that you have control over nothing but there is always something that you have control over. You can choose to have a positive attitude. You can choose to work hard. You can choose to be kind to people and develop loving relationships with your friends and family. While these may seem like small things, they matter quite a bit and often future success comes from having the small things right.
- Keep some goals private. Some of your goals may involve subjects that don’t need to be shared with everyone. While there is sometimes a motivating value to having a public goal, knowing that you will be ashamed if you don’t achieve it, some goals are better left unsaid.
I hope these corporate lessons have given you some food for thought this Monday. Please share in the comments any lessons you have learned about personal or business forecasting. Any commenters this month can receive a Ruly thank you note if you email me your mailing address to email@example.com.
I am setting a goal for a thought-provoking week! Type to you on Wednesday.