Every CEO understands the necessity of goal-setting. After all, you are responsible for establishing the North Star and motivating your team to pursue it. However, as a Fractional CFO, I have worked with small and mid-sized companies in the financial services space for over 20 years, and there is one critical mistake I have seen CEOs make repeatedly. They get uber-focused on high-level goals and ignore the underlying details required to make them a reality.
Now, don’t get me wrong. I’m not suggesting you shouldn’t dream big or must spend your time on minutiae. Nor would I submit that financial services is the only industry where this issue occurs. But, just as you wouldn’t set a retirement goal for your clients without a multi-step, multi-year plan for how they will get there, you shouldn’t set big goals for your team without establishing and celebrating the achievement of smaller goals.
Below, I explain how this oversight can snowball into significant real-life issues and the steps you can take to avoid it.
What Is the Consequence of Faulty Goal Setting?
So, what happens when you don’t have an effective goal-setting process? In short, it can lead to a breakdown in communication and, ultimately, the demise of your company. It really is that simple and potentially dramatic.
A goal is your vision for the future – a measurable accomplishment indicating success. But you cannot build an empire overnight, and I wouldn’t recommend it even if you could. Constructing an organization that can grow, scale, and serve your customers for years to come isn’t something you can rush. Investing time and effort into developing distinct, realistic short-term and long-term goals and tracking your progress is vital to this equation.
Your employees want to feel pride in their work. Goals that are not attainable within a reasonable timeframe can lead to confusion, internal feelings of failure, and a lack of motivation – for your staff, their managers, and even your leadership team. Over time, such feelings damage morale and your ability to keep the employees you need to run your business.
Imagine what could happen if you allow such a situation to fester. Distracted, unmotivated, and unhappy employees can lead to lackluster vendor, partner, and customer experiences. That, in turn, could affect your reputation and your bottom line, undermining your entire organization.
Let’s look at a real-life but more discrete example to show you what I mean.
A Registered Investment Advisor (RIA) With a Botched ERP Implementation
Implementing a new technology solution can be exciting, but sometimes businesses allow that excitement to drive the migration and find themselves disappointed in the end. I once worked with a Registered Investment Advisor (RIA) who had precisely this experience.
The Problem
The organization was growing and decided to move from Quickbooks to a full-ERP solution. They signed a contract with Netsuite and jumped right in. The team copied information from Quickbooks into the new system. Then, they proceeded to use the two solutions simultaneously – Quickbooks for some accounting and Netsuite for the remaining accounting functions and everything else.
That created tremendous inefficiencies and unnecessary duplication of effort. For example, the company’s employees didn’t have confidence in either solution and had to export data from both systems into a spreadsheet to create their monthly financial statements. In the financial services space, which is subject to strict regulations and requirements for regular filings, situations like this can be devastating. If you can’t meet your filing obligations or submit erroneous reports, you will be subject to hefty fines or worse.
The Solution
I inherited this challenge as the company’s new CFO and took it on. An ERP implementation is a big undertaking; you must go all in to succeed. So, I met with the executive team to clarify what the system was like before, the desired outcome, and their quantifiable rationale for making the change. With an ERP solution, most companies want to drive efficiencies, save costs, or improve their data.
As it turned out, this organization had gotten ahead of itself. There wasn’t a strong justification for the change, but it had already signed a multi-year contract with Netsuite, so we decided to proceed. We agreed on the goals, and then I documented the steps and timeframe required to complete the project before moving forward.
In the end, we had to unravel everything and start over. The project was premature and required a much more significant investment than it would have if the organization had thought it through. But we got them back on track and set up the system correctly so they could confidently manage their growth and, ultimately, scale the business.
How to Set Goals and Achieve Them
What can you do to avoid these types of situations? Many will cite goal-setting theories or the use of specific, measurable, attainable, relevant, and time-bound (SMART) goals, and that’s great. But, I have found that if you ask the following three questions every time you make a significant decision, you can be mindful of the details while keeping your eye on the high-level prize.
1. What do we want to achieve?
In most cases, the answer will be to increase revenues or reduce costs in some fashion. But please write your goals down and be specific. In other words, which revenue stream(s), expenses, or inefficiencies do you expect to impact? This information will help you answer my next question and will also help later when it is time to track results.
Initially, the RIA above didn’t define its goals. The team proceeded with the project based on the “feeling” that “we are growing, so we need this,” but that wasn’t true, and their misplaced enthusiasm proved costly. In the re-initialization process, we focused on:
- Expense reduction in a few defined areas
- Development of metrics
- Implementation of effective financial planning and analysis (FP&A)
- Improved regulatory reporting
- Full use of NetSuite’s functionality
2. How can we quantify that outcome?
Determine the situation today regarding revenue, expenses, headcount, or whatever the decision will affect that is measurable. Then, outline how you expect it to evolve if you do nothing or move forward. Again, be specific. Ask your team to perform a return on investment (ROI) or total cost of ownership (TCO) analysis showing the various options.
For instance, when I performed the ROI analysis for the RIA above, I found that (with the proper budgetary constraints) the full use of NetSuite’s functionality would empower us to slow hiring in our “Data Integrity Team” while creating a dedicated FP&A function. That, in turn, would allow for greater accuracy in management reporting, regulatory reporting, M&A initiatives, and custody and settlement firm comparisons.
3. What steps must we take in these areas to move forward?
- People
I mentioned earlier that faulty goal-setting can lead to employee attrition. Hiring, training, and integrating new people is expensive, so consider how you can optimize your existing team to address the situation. Then, structure incentive plans, training, HR initiatives, and strategies that support the organization’s objectives while respecting each team member’s personal goals – motivating them and empowering them to thrive alongside the organization and their teams. - Systems
Your tech stack must evolve with your organization, so when making big decisions, keep your technology in mind and be ready to change when the situation requires it. Stay abreast of industry trends and engage with industry advocacy groups, custody partners, and settlement partners to understand appropriate and necessary tech stack usage. That said, change can be costly. It is ok to have solutions you are not thrilled about if they are acceptable for the given situation and your current growth stage. - Processes
Every company needs documented processes that marry people and systems together. These organizational building blocks empower management to drive optimal outcomes and avoid expensive missteps. They provide training “bumpers” for new employees, markers for regulatory examiners, and demonstrate professionalism to all stakeholders. Therefore, before making encumbering decisions, consider how you will adjust your processes to ensure your organization continues running smoothly.
In the case of the RIA, we needed to update and, in some cases, create a radically different set of processes and procedures. The change affected not just our accounting practices but also how finance related to other teams within the organization and addressed the needs of internal and external stakeholders.
You will need help to do this work and should be able to rely on your executive team for much of the heavy lifting. But knowing what questions to ask can help you hire the right people, set meaningful and measurable goals, and intervene when necessary.
Final Thoughts on Goal-Setting
Your high-level aspirations are essential. But, in the end, it’s your connection with the people that makes it all possible and the work worthwhile. Attainable goal setting is about the people – making commitments that matter to everyone, holding each other accountable, and celebrating each milestone.
Please reach out if you would like to discuss this article or your situation.
