Starting situation – what constitutes an ambitious, yet realistic performance expectation?
Ultimately, this manufacturer of medical devices was not performing according to investor expectations. This resulted in the capital market gradually losing trust in the company’s strategic direction. The company was faced with the challenge of setting financial goals that were not influenced by historic developments or current budget planning. In this way, a widening gap emerged between internal and external perceptions regarding target performance levels.
Project approach – from a negotiated solution to ambitious, top-down goals
A goal-setting process based on investor expectations resulted in goals derived from former performance and budget policies. A top-down goal-setting process was established that compared external expectations placed on the industry and the company with internally identified growth and efficiency potential. Based on this analysis, goals from the individual business units were derived from the overall corporate goal, and implemented using strategic pathways. At the same time, the gap between external expectations and internal potential was closed.
Finding – learn and grow through market information
Companies listed on the stock exchange would do well to calibrate their own expectations with those of the capital market. The transparency required of listed companies makes it possible to learn from the top performers, and cast a critical eye over one’s own business. In this case, it was possible to determine realistic goals only in retrospect. In order to reach performance targets and meet expectations, investors require the targets to be pursued via a focused value enhancement path. The necessary initiatives are efficiency optimization and profitable growth – ultimately, putting these into practice will make the difference between a company’s success or failure in the market.
- Creation of a goal-setting and strategy process geared towards the capital market.
- Goals based on investor expectations and the competitive environment.
- Corporate objective broken down into goals for individual business units.