Small Business Planning—How to Create a Quick and Effective Strategic Business Plan: Part 2

In my last post, I explained the purpose and basic structure of the Goal Tree: How to Create a Quick and Effective Business Plan.

In this post, I will demonstrate how to construct a Goal Tree and then begin sharing a real case study with you. A single person can construct a Goal Tree. But if the system it represents is larger than the influence of the individual, a group effort is better. So with this in mind, the first step in constructing a Goal Tree/IO Map is to clearly define the system in which it operates and its associated boundaries. The second consideration is whether or not it falls within your span of control or your sphere-of-influence. Defining your span of control and sphere of influence lets you know the level of assistance you might need from others, if you are to successfully change and improve your current reality. Typically, your span of control represents the point at which you receive raw materials (i.e. receipt from your suppliers) to the shipment of finished goods to your customers. Outside of this span of control lies your sphere of influence (i.e. your suppliers and customers).

Once you have defined the boundaries of the system, your span of control and sphere of influence, and the area you are attempting to improve, the next step is to define the goal of the system. Remember, in my last post we said that the true owner(s) of the system is/are responsible for defining the goal. If the true owner or owners aren’t available, it is possible to articulate the goal by way of a “straw man.” Even then, you need to get concurrence on the goal from the owner(s) before beginning to construct your Goal Tree. Don’t lose sight of the fact that the purpose of the Goal Tree is to identify the ultimate destination you are trying to reach.

Dettmer tells us that the Goal Tree’s most important function, from a problem-solving perspective, is that it constitutes a standard of system performance that allows problem-solvers to decide how far off-course their system truly is. Your goal statement must reflect the final outcome, not the activities to get you there. In other words, the definition of a goal is the outcome of activities, not the activities themselves.

Once the goal has been defined and fully agreed upon, the next order of business is to develop three-to-five Critical Success Factors (CSFs). After these factors are determined, you can set out to achieve the goal. As I explained earlier, the CSFs are milestones that result from specific actions. The important point to remember is that if you don’t achieve every one of the CSFs, you will not accomplish your goal. If you do achieve your goal without one of the CSFs, then it wasn’t a true CSF.

Finally, develop your Necessary Conditions (NCs). These are the simple building blocks for your Goal Tree. The NCs are each specific to a CSF. Because they are hierarchical in nature, there are layers of them beneath each CSF. As already stated, Dettmer recommends no more than three layers for the NCs, but on numerous occasions, I have observed as many as five layers working quite well. With the three components in view, you are now ready to construct your Goal Tree. Let’s demonstrate this through a case study of a company that constructed a Goal Tree.

Goal Tree Case Study

The company in question manufactured a variety of products for diverse industry segments. Some requests were for build-to-order products, while others were orders for mass-produced parts. This company had plenty of orders to fill, but unfortunately, they were having trouble not only filling them but filling them on time. As a result, this company’s profitability was fluctuating between making money one month and losing it the next. Because of this, the board of directors decided to make a leadership change and hired a new CEO to effectively “right the ship.”

The new CEO had a diverse manufacturing background. His career included experience in job-shop environments and high-volume manufacturing companies. When the new CEO arrived, he called a meeting of his direct reports to not only meet them but to assess their proficiencies and capabilities. He soon realized that most of the existing management team had been working for this company for many years and that their skills appeared to be limited. Before arriving, the new CEO had concluded that the best approach to turning this company’s profitability around, and stabilizing it, would be to use a tool he had successfully used before called a Goal Tree. He would use this tool to first, to get consensus on how to improve profitability, second, to assess his new company’s current state, third, lay out a strategic improvement strategy, and finally, implement the strategy.

The First Meeting

The CEO’s first order of business was to provide a brief training session on how to construct a Goal Tree for his new staff. The first step was to define the boundaries of their system which included receipt of raw materials from suppliers to shipping of their products to their customers. The team concluded that they had clearly defined their span of control because they had unilateral change authority within those boundaries. They also decided that they could influence their suppliers and their customers, so their sphere of influence was defined.

In advance of this first meeting with his staff, the CEO had met with the board of directors to determine what the goal of their company. After all, he concluded, it’s the owner’s or owners’ responsibility to define the goal of the system. After discussing this with the board of directors, everyone agreed that their goal was “maximum profitability.” The CEO presented the goal to his team and posted the goal on the top of a flip chart as follows:

The CEO knew that the board of directors wanted maximum profitability both now and in the future, so he had added the future reference to the Goal box. After presenting the Goal to his staff members, he asked one question, “In order to have maximum profitability now and in the future, we must have what?” The Goal Tree uses necessity-based logic and uses the syntax, in order to have x, we must have y (or multiple y’s) and such was the case here at his new company. After much discussion, the CEO and his staff concluded that they needed three things to be in place if their goal was to be achieved, listed in the figure below. Those three CSFs were Maximum Throughput, Minimum Operating Expense, and Minimum Investment.

The CEO then asked the question, “In order to have maximum throughput, we must have what in place?” Once again, after much discussion, the CEO and his staff agreed on a series of necessary conditions as depicted in the graphic below.

The CEO and his staff discussed the remaining two Critical Success Factors and associated Necessary Conditions and completed their Goal Tree, as depicted in the graphic below.

The completed Goal Tree shows the connecting arrows facing upward to demonstrate the flow of results when improvement actions are successfully implemented. In my next and final post on the Goal Tree, I will demonstrate how to use the Goal Tree to assess your organization’s current state and then show you how to build a strategic improvement plan using the Goal Tree.