by Bill Collier
SRC Holdings – originally called Springfield ReManufacturing Corp. – in Springfield, Missouri, has standing targets for its overall organization, including 20% annual revenue growth and 15% profit before tax.
By “standing” targets, I mean these targets are automatically part of each year’s plan. No debating how much they plan to grow sales next year. It’s 20%. No wondering what sort of bottom-line return is expected. It’s 15%.
I’ve been fortunate enough to have been associated with SRC for the last 20 years and am convinced that these standing targets are responsible for its fantastic record of success.
Why a standing annual revenue growth target?
It causes everyone in the company to get in growth mode. No longer is this a decision made once a year. It’s made. Set it and forget it. Get used to it. We have a culture of growth.
This is the engine behind SRC’s almost-unbelievable record of starting 60 new businesses in 30 years. Whether a company wants to start a new business every year or doesn’t want to start any new businesses isn’t the point. The point is this: If growth is expected – you might even say mandatory – people naturally will become more aware of new revenue and growth opportunities. Roll these into the existing business or start a new business? That’s a decision you can make when the opportunity is identified.
Why a standing profit target?
It causes everyone in the company to get in profit mode. No longer is this a decision made once a year. It’s made. Set it and forget it. Get used to it. We have a culture of profit.
After all, why settle for less than a reasonable overall return each year?
And it helps drive decisions. If you know in advance we need to return 12% profit, it adds an element to the decision-making process. Yes, that’s true even with a profit target that gets set annually, but consider: Let’s say one year you have a profit target of 8%. With that in mind, you take on a long-term customer at discounted pricing and enter into a project of some sort with significant expenses. The next year you plan to achieve 12% profit. Trouble is, the customer discount and the project costs that were great at 8% profit are still ongoing and put pressure on your ability to generate 12% profit. With a consistent year-over-year profit expectation, those shifting targets won’t occur.
Most businesses spend significant time every year debating what these targets will be. How about instead investing your time in strategy, people development and planning to achieve your goals? In other words, spend more time on pursuing your goals and less on choosing them.
Whether to have standing targets or to roll new ones out each year is not an obvious choice. Most companies never consider it simply because it never occurs to them. We’re all so used to the typical annual numbers rodeo that a simpler way never comes to mind.n
Bill Collier is the St. Louis-area coach for The Great Game of Business. He works with organizations that want to improve financial results, engage their employees and create a winning culture. Bill can be reached at 314-221-8558, GreatGame.com/stl, GGOBSTL.com or billcollier@greatgame.com.
Submitted 10 years 90 days ago