Strategic goals are a type of goal used by businesses and companies to define what they’d like to improve. Most of the time, these strategic goals link up to a bigger picture for the company. For example, if a company wanted to work on decreasing overall returns for a product, one of their tactics might be to improve product quality to work towards that.
Strategic goals are just what the name implies: part of a strategy to reach a larger purpose or idea, usually over the course of one or more years. In this article, we aim to teach you more about the best strategic goals, how to set them properly, and what they accomplish for businesses.
Strategy and Tactics
Within a business’ strategic goals, there are two major parts: the goal itself, and the “tactics.” Tactics are the courses of action the company uses to carry out its larger strategic goal. We stated one example of this in the introductory paragraph above, but here’s another: if a business wanted to reduce error rates among its employees, it might put stricter training and testing regimens for its employees into effect.
Tactics are a requirement of strategic goals to make them successful. Moreover, the tactics employed by a specific business need to be fine-tuned to match the environment and restrictions of the company itself. For example, a restaurant in a hip, trendy town would want to take very different steps to increase revenue than one in an older, quiet town.
Choosing Strategic Goals
When brainstorming strategic goals to set for a company, there are several important factors to consider. One, which we touched on above, is the environmental factor. Businesses in different locations may need to create vastly different strategies to get the most out of the business.
The company’s industry is an important thing to take into consideration, too. A manufacturing company, for example, will have very different objectives for growth and improvement than a restaurant will. The growth and identity of your business will play a factor, as well. A company prioritizing fast growth and expansion would set different goals than something slow-growing and reliable.
Thirdly, the plans you have for the business will also play a role, as will the company’s current position. A people-based business, for example, would work very differently than a media-based business that operates through apps or online.
As such, the previous businesses would have different goals for growth or expansion; the people-focused company might want to hire more employees, while the app-based company might be more concerned with firmware upgrades.
Types of Strategic Goals
A business can turn virtually any long-term goal into a strategic goal, but they usually fall into one of several different business-related categories: financial goals, customer goals, internal goals, and regulatory goals. We break down these sections for easy understanding below.
Financial tactics will often fall into a broader strategic goal for a business, whether the larger goal itself is financially-based or not. Sometimes, the purpose of gaining finances will be to allow for expansion or growth, rather than just increasing revenue on its own. In this section, we’ll provide several examples of financial tactics that can help a business reach its broader financial goals.
The goal of any company is to sell a product or service and make money, so of course, increasing that revenue is on every business owner’s radar. However, revenue increasing can become critical if a company is specifically looking at short-term, large-scale growth as its strategic goal. Increasing revenue is a sign of a healthy, growing company, after all.
Increasing revenue can be done in many different ways, and these can vary by business. Some common methods involve the following:
- Increase the price of goods
- Decrease spending
- Increase units sold
- Prune unproductive employees
- Boost marketing
- Offer more products
If increasing revenue isn’t an option for a business, managing existing costs might be an excellent alternative option. This can involve going through existing programs to find areas that might be lacking, starting new programs with a well-documented cost management plan, or both.
Cost management can be broken down into four steps: resource planning, cost estimating, cost budgeting, and cost control. Resource planning usually involves deciding what will be necessary for a project, be it labor, materials, time, or something else.
Cost estimating gives a good idea of how much the former resources will cost. Cost budgeting involves setting aside money and resources to handle the project over time. Lastly, cost control involves taking the proper actions to ensure that costs for projects and plans are at their minimum, so that money isn’t being wasted anywhere.
Diversifying revenue streams for a business not only increases revenue potential but also improves security. There is an inherent risk involved with only maintaining one stream of revenue at any time. If, for example, a particular good or service falls out of style or is overtaken by a superior service, such as the replacement of landlines with wireless phones, those who specialize in the former product or service will suffer.
When a business diversifies its services and products, it also opens up opportunities for two types of customer retention: the ability to attract new customers with new sources of revenue, and the chance for existing customers to purchase additional goods and services from them.
Financial leverage is, in essence, another word for debt. Most people maintain a certain amount of debt through most of their lives, whether it be through loans, credit cards, or otherwise. Businesses do the same, and they plan to keep a certain amount of debt for various reasons.
The goal behind financial leverage goals is increased revenue. If a company borrows $50,000 but uses that money to buy out another company that can improve their profitability and diversify their options, they may make that $50,000 back in relatively short order.
Financial sustainability is the goal of any business. However, just as an average person’s financial sustainability can fluctuate with the economy, so can that of a business. Ensuring financial sustainability should be a strategic goal of any business if they want to stay in operation for long.
A business that has obtained financial sustainability is one that sells its products at a high enough price to cover expenditures and produce a profit. However, this doesn’t always include environmental fluctuations.
Take General Motors during the Great Recession. Although the business is undeniably financially sustainable under normal circumstances, their lack of diversification coupled with the economic downturn resulted in disaster. Even the largest companies can fall prey to these fluctuations, but good sustainability practices and goals can help prevent or mitigate them.
To maintain a good reputation among buyers or users, a company needs to make sure their customer experience is the best it can possibly be. If businesses don’t pay attention to this, their reputation, and eventually their profits, will suffer.
To figure out reasonable customer goals, try putting yourself into a customer’s shoes. When buying from a company or business, what would the ideal buying conditions be? What does the perfect product from them look like? What types of products do they offer?
Questions like the above are what define consumer-centric strategic goals, which we explore further below.
The closer a good or service gets to the value-for-cost ratio, the more popular it will be among consumers. The trick is to reach the ideal ratio while still maintaining profits within the business. After all, selling a valuable, cheap product, even if it’s popular with consumers, won’t keep you in business for long if you can’t pay the bills.
Another way to think of this is “perceived value.” If the customer believes a product is worth more to them than the price tag, the chances are that they’ll buy it. There are several ways to increase perceived value, each with varying degrees of success, including the following:
- Increase the price
- Draw attention away from the price
- Rebrand the product
- Cite scarcity and urgency (i.e., “only three left!” or “on sale for a limited time!”)
- Offer a free trial
If your business has a good reputation, or if the product is widely regarded as reliable, people are more likely to buy it. Customers may be willing to pay more for reliable, trustworthy services and goods that they know will stand the test of time instead of buying cheap products that may fail.
Business reliability is a tricky thing, though. In most cases, it takes years for a business to be considered well-established and trustworthy, but other times, a new product will surge in popularity and everyone will want to have it. In the same way, a business can lose its reliability in one night if they release a faulty product. Warranties are a great way to increase consumer confidence in a product.
“Market share” approaches are concerned with bringing their products to more consumers. With today’s bounty of internet-driven commerce, companies like Amazon have access to bigger market shares than ever before, but local companies, such as small businesses, don’t innately possess that kind of reach.
There are many ways to increase market share, and which method is your most effective option varies by region and product. We’ve featured some methods in the list below.
- Innovation, or introducing new, exciting products to entice more buyers
- Strengthening relationships with customers to increase brand appeal
- Acquiring other businesses to extend reach and influence
- Hire more skilled and desirable employees
Bottom line, if a company provides the best product or service out of all competitors, they will attract consumers for that reason alone. This can even attract or keep customers when your product is more expensive than others. Providing exemplary products or services is an excellent way to start growing your business’ reputation.
However, having an excellent service alone isn’t always enough to attract and maintain customers. As we mentioned earlier, reputation is enormously important. To get customers to buy your products and see how good they are, you may need to spend extra money on marketing or lower prices until you’ve built up enough of a reputation to attract consistent buyers.
Whenever possible, a company should try to keep their customers’ needs in mind. If a business wants to sell a particular product, but there’s no need for it in a particular area or region, sales will be predictably low. Instead, they will either need to go to where the need is for the product or produce products that are needed in their region.
Consider a small farmer who’s trying to sell fresh vegetables. If he tries to sell them out of his farm in the country, far from civilization, he will probably sell some portion of his produce. However, if he brings them to a stand inside the city or to an established farmer’s market, many more people will notice his business and go there to purchase his products.
Internal objectives refer to strategic goals that concern things within the company itself. For example, customer service is one area of internal operation that strategic goals are often concerned with. Increasing the effectiveness of customer service boosts a business’ reputation and helps to keep repeat buyers.
Most internal objectives fall into one of three categories:
- Innovation: the creation of new products, services, or ideas
- Customer service: a customer’s experience when dealing with or working through a company
- Operational excellence: the efficiency and productivity of internal company processes
- Regulation: control of employees and other internal operations, such as recycling
In the sections below, we go over each category in more detail.
Strategic goals in the innovation category mostly revolve around company growth and expansion. Innovation can refer to processes, ideas, products, or anything new and different within businesses. However, to be innovative, something can’t just be different. It has to provide some advantage over old products or processes.
Coming up with a new, innovative process for salting peanuts, for example, might save a company money on producing their final peanut product. As a result, the company would have higher net profits and lower expenditures, freeing up capital to invest in further strategies or acquire other companies.
Innovation doesn’t just pop up out of nowhere, though. In most cases, innovation requires an initial investment. This can be put into things like research and development, new products, customer acquisition through marketing, and product differentiation.
Innovation also comes with a measure of risk. There is always a chance that the investment made by a business doesn’t yield high enough returns. However, the alternative to innovation is a doomed failure. If a company refuses to stay relevant and evolve with the times, it will eventually become obsolete.
Five different types of innovation in businesses have been defined so far. They are as follows:
- Open Innovation: the use of internal and external resources to research new ideas
- Disruptive Innovation: the phenomenon when new products start off as unprofitable, but eventually move up and surpass competitors
- Reverse Innovation: when products are produced to solve issues in developing nations
- Incremental Innovation: constant updating of existing products to maintain an advantage in changing markets
- Breakthrough Innovation: entirely new ideas and services, often based on new technologies
Although we had a Customer section previously in this article, this section is slightly different. While the previous section had to do with how the customer is treated, this section is specifically geared towards improvements in customer service itself. Customer Service also refers to a multitude of different things here, from customer management to satisfaction to retention.
To create an excellent customer service sector, you must first decide what kinds of service you’d like to provide. For a cable company, for example, a call center in addition to on-site troubleshooting for customers is mandatory. For a videogame company, an online ticket service would most likely be enough for the majority of inquiries.
Customer management and retention is another critical area here. Customer management refers to building relationships with existing customers, satisfying unhappy clients, and improving the overall customer experience. Rewarding and appreciating returning customers and giving proper recompense to unhappy customers are excellent ways to improve the customer retention aspect of management.
Operational excellence refers to the ongoing struggle to ensure that processes within the company are maximally efficient. Common strategic goals set to achieve operational excellence are reduction in error rates, improvements in workplace safety, and quality management practices.
Consumers in the US are well aware that buying products from unknown manufacturers or factories from overseas can be unreliable. These places may not have the same quality control that large, well-known companies here in the US do, which works to our advantage. Most consumers will buy products made in the USA if given a choice between that and another product.
Excellence in operation involves some things that you might not realize at first, though, too. For example, for a retail business, making sure its storefronts are located where their target audience shops is critical. Similar to the scenario with the farmer, if Victoria’s Secret installs an outlet near a campus dominated by men, they might not get the sales they’re looking for.
Error reduction is another area that operational excellence focuses on. If a manufacturer is lax with the materials or standards used to create their products, their reputation and clientele will both suffer. Any business that hopes to maintain either should set goals to reduce error rates whenever possible.
Regulation is a smaller, but equally important category that’s mainly concerned with rule-following in the workplace, both by employees and employers. If a workplace isn’t regulated correctly, employees can get lazy, managers can get complacent, and products and productivity can suffer.
Fortunately, strategical goals can actually be used as a form of regulation on their own. Enforcement to make sure the goals are being followed is necessary, of course, but giving employees a goal that they’re expected to reach is a good start at kicking them into gear.
Regulation also covers the following areas:
- Recycling of waste products
- Transparency and reporting
- Community outreach
- Control of cheating or other dishonest practices
Recycling doesn’t just refer to plastic bottles, either. If a manufacturing company produces waste that can be reintroduced to the manufacturing processes, employees need to follow any related guidelines. Concrete, for example, can be crushed and reused when faulty products are made, and metals are commonly melted down and recycled for new products.
Upper-level management is also responsible for making sure dishonest or lazy practices aren’t going on in the workplace. Besides the most obvious contenders, like embezzlement and cheating, management needs to watch for lazy employees who might be negatively impacting productivity. Also, when rules are visibly enforced in the workplace, other employees instinctively respond with better behavior.
Learning and Growth
Learning and Growth goals mostly focus on the employee aspect of a business. A lot of times, things like teamwork exercises, skill training, and productivity benchmarks appear in this category. Of course, making the staff at a business or company more productive increases the quality and number of the final product, so if it’s done effectively, it’s the fastest, most reliable method of improving the final product itself.
Learning and Growth is also concerned with things like leadership potential, team potential, organization, and the abilities of employees from different departments to work together effectively. We go further in-depth with these examples below.
Employee retention is as necessary as customer retention, if not more so. This is especially crucial when it comes to high-quality employees that positively impact the company. If a business is continuously turning over employees, not only will they be unable to keep skilled prospects, but they’ll spend excess time and money training new recruits.
We’ve included some tips to foster better employee retention below.
- Hire more selectively
- Offer attractive benefits
- Provide a comfortable, minimally-stressful working environment
- Offer training to take advantage of untrained employees with high potential
- Listen to your employees’ feedback!
- Conduct quarterly performance reviews
- Celebrate your employees’ accomplishments
Control of employee burnout is primarily within corporate hands. Things like heavy workloads, office culture, bad management, and lack of benefits all contribute to employee burnout but are all fixable with corporate intervention.
Within a business environment, there are often “cultures” that permeate the working lives of employees. When a business doesn’t treat its employees well, this culture might involve a lot of complaining about the company. If the employees feel celebrated and needed, the perception might be appreciative as a whole.
However, if the environment in a company is lazy, this can become a huge problem. Lack of management, poor strategic goals for workers to follow, lack of employee purpose, and weak rule enforcement can all lead to a lazy atmosphere. It just takes one employee getting away with laziness for it to start invading an entire workplace.
Instead, focus on rewarding and promoting productivity in the workplace. If employees are rewarded for hard work rather than laziness, other employees will also follow suit. In this way, the employee culture can be utilized to management’s benefit.
For any trade or business, employees often need to be skilled in one or more areas to keep things running smoothly. Whether this is the same skill across an entire company or small areas of specialization scattered throughout, the same principles apply. Employees should be trained upon hire or pre-screened, and they should be routinely tested to make sure they maintain their skills, as well.
When employees are found lacking or a business becomes in need of something new, employee training becomes the responsibility of the company itself. Analytical and technical skills, such as critical thinking and expertise with computers, are often required of office workers, for example.
Sometimes, a technological investment is required of businesses to increase productivity and efficacy. This has been especially true in recent years as technology has continued to evolve dramatically. The number of office resources and tools to increase productivity and streamline work processes is at an all-time high.
Even if a business has all the right staff on hand, it can still fail miserably if the staff does not have the tools they need for their jobs. This can vary widely depending on the profession, but some fundamental conjectures can be made: a carpenter, for example, requires a tool belt and tools. An office worker needs a computer equipped with any software necessary for their job.
It should always be the company’s goal to provide the necessary tools for their workers to do excellent work, even if there is an upfront cost involved in deploying said tools.
As a general rule, strategic goals for companies fall into one of two categories: maintaining current practices, and moving towards better ones. Both are important to keep a business running properly, and both can be accomplished with the correct strategic goals.
While this guide mostly speaks from a business perspective, take a moment to think about how the things we’ve written here can benefit your everyday life, too. Maybe you’re not a business owner, but now you have a better view of how your office functions. Perhaps you’re a manager who now understands how to motivate their employees better.