Setting Business Objectives

May 8, 2012

Managing is the task of moving an enterprise toward a defined objective. It sounds simple enough, but in the process of determining where you start, or in most cases restart, the process is one hurdle after another.

After all, you are likely still dealing with a challenging economy and deciphering how to strong-arm your way through the daily process of making your business work.

Your aftermarket business is centered on the chore of reselling. As such, you’ll encounter management decisions within the scope of budgeting, strategic planning, performance monitoring and developing appropriate objectives for your business.

Given the central role that objectives or targets play in most management actions, it is critical that they be set correctly. It may seem trite to point out, but it is nonetheless valid: if inappropriate objectives are set for a business, inappropriate outcomes will occur.

More than Money?

You might ask what constitutes appropriate objectives for a business?

As a business and its management evolve, thinking about what constitutes an appropriate objective evolves as well. Throughout this evolution there is ongoing tension between financial goals and objectives, and non-financial targets such as long-term sustainability, employee satisfaction, place in the community, etc.

If a business exists primarily or solely to make a profit, then relatively simple financial objectives will suffice-”or so say many schools of management.

However, others say that businesses exist to serve simultaneously the needs of various entities such as shareholders, customers, suppliers, employees and the aftermarket community as a whole. The interests of these various legitimate constituencies are not always measured by the bottom line, leading to a school of thought that puts greater emphasis on non-financial objectives.

The history of business would suggest that both types of objectives are important.

The irony is that within the brief history of the aftermarket, most businesses were launched as some form of a family enterprise or with few parties involved in the creation. The objectives were quite clear: to provide an ongoing source of employment and income for current and future members of the family or skilled friends.

I’m certain you know of companies that fit this mold. Names such as Edelbrock, Lane and Isky, to name a few, have not only served their customers for years, but employed generations of sons and daughters as well.

As management has evolved, ideas about what constitutes the right objective for a business have changed. In his book Concept of the Corporation, first published in 1946 and at the same time hot rodding became a business of sorts, Peter Drucker described the purpose of a corporation as “generating the maximum profit achievable from its operations.”

He went on to comment on the potential conflict between this purpose and society’s expectations that the job of business was to maximize the production of inexpensive goods and services for consumption. To a modern observer, Drucker’s thinking seems simplistic.

If one takes Drucker’s model to the aftermarket, you are looking at enthusiasts as the consumer and the producer as the manufacturer. Shops want to make money, but also ensure their long-term sustainability and at the same time move the performance aftermarket forward.

You may wonder why some companies seem to thrive over a very long period of time, while others have a brief moment in the sun and then recede into obscurity. Over the past 10 years, we have seen economic spikes in both directions.

It fits that successful businesses equally balance maximizing profits and achieving long-term sustainability in order to survive and thrive in today’s aftermarket. Next time we’ll look at the ways shop owners can set short-term objectives to achieve both goals.