About Cost Control Management

Goals and Goal Setting

Goals are directives or the condition that an organization hopes to reach in the future. Organizations set performance objectives to guide their operations and make the best use of their resources (Grusenmeyer, 2001). Goal setting is described as a process that entails first deciding what one wants to accomplish and then putting in place a deliberate plan of action to do so. Creating goals that inspire personnel within the firm is one of the five golden criteria that govern a successful goal-setting process. SMART goals, which stand for specific, measurable, realistic, and time-bound, should be established by businesses. Goals ought to be clearly defined, possess the ability to measure the degree of success, achievable, relevant to the desired direction of the business and must have a clear deadline. Lastly, it is imperative for companies to put down in wring their goals, develop an action plan and stick to the scheme (“Golden Rules of Goal Setting: Five Rules to Set Yourself Up For Success”).

Methods for Developing Goals

Several methods exist for developing the upcoming year’s goals such as using recent trends, using previous year’s goals, the firm’s competitors among others as suggested by the senior managers. It is crucial that a sober assessment of the benefits and cons linked to the use of any of the three methods mentioned earlier be examined in depth in an attempt to decide the best method to utilize. Moreover, an investigation into the goal setting theory by Locke will be conducted so as to assess its contribution in helping one decide on the method to use so as to develop the company’s performance goals.

Using Recent Results and Trends

The executive financial officer (CFO), Steve, suggestion to use recent results and trends so as to determine the upcoming year’s goals entails the use of the firm’s data over time in a bid to identify recurring patterns. As a result, one would be placed in a position where one understands how the business performs and can predict the events that are bound to recur in future. In this method, the identification of the company’s key performance indicators especially those that affect sales figures, cash flow, and cost and leads to the overall success of the firm must be known. A continuous control and review of the key performance indicators like waste management costs, the changing of conversion rates and trading hours would help the business make informed decisions on the goals to pursue the coming year. Regular collections of data, accurately keeping the records of business, maintenance of data integrity and the storage of data in a format that can be used with ease are some of the activities. If correctly carried out, these activities will ensure the quality of the historical data of the company kept (“Trend Analysis For Business Improvement | Business Queensland”).

Benefits of Using Recent Results and Trends

The use of recent results and trends in developing the coming year’s goals has several benefits linked to it because of the utilization of recent data and trend to make critical decisions. Duplication of success is possible because of the identification of areas that are performing thus strategies for the following year will be developed around the areas identified. Since it was possible to determine which areas are performing poorly, goals that would minimize the losses that the organization is bound to suffer from ought to be formulated. Furthermore, effective strategies that would place the business at a desirable level will be implemented thereby securing the success of the business in the upcoming year. Lastly, using recent results and trends provides evidence on the decisions taken by the managers. Therefore, the actions implemented have been developed from an objective point of view and not a subjective one which at times is flawed by biases. Since the decisions have been made rationally, one would convince the employees on why the company has chosen to focus on a particular direction.

Limitations of Using Recent Results and Trends

There are several limitations to the use of recent results and trends that ought to be considered such as the inability of the method to factor in inflation in the data collected. A rise in inflation levels exposes the enterprise to increased cost in wages, international competition and confusion, and uncertainty. Comparison of data annually may not be accurate as other unidentified factors may influence the performance of that year. The dramatic change in the external environment of a company that could be caused political instability weakens the utilization of the trends in developing the following year’s goals (Slavik, & Bednár, 2014).

Using This Year’s Goals

Michael who is the chief controlling officer recommendation of developing the future year goals based on this year’s goals is riddled with the myriad of benefits. Evaluation and reflection of the business goals, operations and strategies are possible so as to identify success and change points within the business. Once an investigation is carried out to understand what went on between the expected and actual results within the year, areas of weaknesses, need for implementing change strategies can be efficiently used to ensure the firm’s success in the coming year. Moreover, the company departments may assess whether its’ past year goals were specific, measurable, achievable, realistic and time-bound, so each department independently influences the overall operations of the company. It is possible for one to assess who is accountable for what and launch inquiries on the reasons for the good or poor performance for the replication or elimination of the strategies in the upcoming year (Duckworth, Peterson, Matthews & Kelly, 2007).

Limitations of Using This Year’s Goals

The limitations associated with using this year goals to determine the coming year goals include the continual focus on failing strategies and the possibility of stifling diversification. Adoption of failing actions is possible are the firm has a close examination into the operations of the business. Therefore, poor strategies may be implemented in the coming year due to the inability to compare the firm’s results over a long period. Moreover, since the enterprise is focusing on the year goals, diversification is strangled as the firm is not flexible enough to change in response to the dynamic environment.

Using the Competition

The suggestion made by Janet the chief operations officer on developing the future year goals based on the competition is beneficial as it will enable the company to develop a competitive edge regardless of the players in the industry. The company may adopt a price skimming strategy which involves lowering the price of products from an initial high rate so as increase the number of buyers. A rise in the perception of quality and development of a cost recovery scheme are some of the benefits linked to the use of price skimming. Setting goals based on the actual competition may enable the firm to gain the competitive advantage over its competitors. Since the company can provide lower prices and superior services, it can boast of serving a large client base. As a result, the company may have cost leadership from maintaining high levels of productivity, efficient use of technology, proper utilization of capacity and the implementation of lean production methods like just in time. Further, the company enjoys leadership that is differentiated from selling superior products, engaging in consistent promotional support and branding. Consequently, the firm will serve different market segments and the profits are significantly increased (Majeed, 2011).

Limitations of Using the Competition

Availability and efficient utilization of firm resources, quickly responding to environment changes, investing in state of the art technology among others are some of the factors that contribute to the success of the business. If a company does not have the same financial power as a competing firm, it may find it difficult to develop goals that are similar to that of the competition. Some of the strategies implemented by the competing firm might be specific to the company in question and failure to tailor the strategies to meet the requirements of the enterprise.

Goal-Setting Theory

According to Locke and Latham who developed the goal-setting theory, they identified five principles that improve the chances of success for the goal such as clarity, commitment, challenge, and feedback and task complexity. Developing clear and challenging goals, ensuring the commitment from employees, embracing feedback and assessing the complex nature of the task are essential elements that may assist one in deciding on a particular method (Locke & Latham, 2013). As a result, I have decided to base the upcoming year goals on recent data and trends as it helps one to evaluate the business over a given period. The company stands to develop achievable and realistic goals as key areas of improvement and change will have been identified from the recent years. Despite, the vast limitations associated with the use of trend analysis the benefits far outweigh the challenges experienced. The company will be placed in a favorable position to decide which goals to continue with and dropping of strategies that have outlived their time.

The Importance of Goal Setting

The process of setting goals is invaluable to the overall success and survival of an enterprise. It is imperative to communicate to every individual within the firm on the reasons for pursuing certain goals so that all the efforts may be directed towards achieving the goals.

References

Duckworth, A. L., Peterson, C., Matthews, M. D., & Kelly, D. R. (2007). Grit: perseverance and passion for long-term goals. Journal of personality and social psychology, 92(6), 1087.

“Golden Rules Of Goal Setting: Five Rules To Set Yourself Up For Success.” Mindtools.com. N.p., 2017. Web. 29 Apr. 2017.

Grusenmeyer, D. (2001). Mission, Visions, Values, & Goals.

Locke, E. A., & Latham, G. P. (Eds.). (2013). New developments in goal setting and task performance. Routledge.

Majeed, S. (2011). The impact of competitive advantage on organizational performance. European Journal of Business and Management, 3(4), 191-196.

“Trend Analysis For Business Improvement | Business Queensland.” Business.qld.gov.au. N.p., 2017. Web. 29 Apr. 2017.

Slavik, S., & Bednár, R. (2014). Analysis of Business Models. Journal of Competitiveness, 6(4).