Most Important Goal: Level 1 Business Hierarchy of Needs

Up until now, we have been talking about stakeholder needs. There are hundreds of them, across a range of interests (companies, people, customers) and topics and it is extremely difficult to track and prioritize which ones to satisfy first. During my career in corporate and lessons learned completing my MBA, I was taught that a company should have three-to-six key strategies. In this section, I want to introduce a way for leaders to help prioritize needs, integrate activities, and simplify decision making by introducing the concept of a MIG.

I have always thought there should be one driving goal that can be measured and used to prioritize needs and assess the effectiveness of business strategies. Of course, good strategies will have measurements, but how are they tied together? In developing The Business Hierarchy of Needs? I concluded there should be a primary goal for a company that is measurable.

So, that gave birth to the concept of a Most Important Goal (MIG) for a company. I am not the first to suggest this and have become a true believer that the MIG, when properly structured, will have a clear objective outcome that measures the success of a company. The Board of Directors, owners, senior leadership, and funding partners are responsible for defining and agreeing to the MIG for a business. Every business entity must have one and only one MIG.

If you think about it further, the MIG defines what the business is going to achieve through the execution of its strategic plan. It needs to be objective, easily communicated, and measurable. Every stakeholder in your business needs to understand it and use it as the basis for everything they do.

Creating your unique MIG is not as difficult as it might sound. An effective way for creating a MIG for your company is to start with understanding the needs of your business through a technique I call the “5 Whats” which is an adaptation of the Six Sigma tool called the “5 Whys”. They are:

1. What are the needs of the owners?

a. Understand the needs of the owners. Private equity owners who want to divest their interest in five-to-seven years will have needs that are different from shareholders of a publicly held company or a private owner where the business is their legacy.

2. What stage in the business life cycle is the company?

a. Identify the business life cycle stage as shown in the figure below. This is important because every stage will have a unique set of performance requirements as shown in the next figure. A mature company whose MIG is to double enterprise value wants strategies to optimize Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) and increase its multiple (Enterprise Value = EBITDA x Multiple). A growth company’s MIG might be to double in sales, whereas a harvest company’s MIG might be to realize the highest cash flow possible.

3. What accomplishments will the company have realized over a five-to-ten-year period in support of its vision?

a. Identify the accomplishments to move the company towards its vision supporting the needs of the first two “Whats”. When defined, those accomplishments will clearly define what needs to be done.

4. What is the common theme of those accomplishments?

a. Identify the common theme from the accomplishments. This results in the definition of the MIG. Is the common theme growth, enterprise value, a merger, cash flow, profits, a sale of the company, etc.?

5. What measure will define success?

a. Define the measure for the MIG that will tell all stakeholders where they stand in moving toward the MIG over time.

Whenever I present this concept, many people push back because based on what they know about strategic planning, they do not believe a company can have only one Most Important Goal. During the conversation, I ask them about their current strategic priorities and by using a Six Sigma Tool called the “5 Whys”, we quickly get to a common theme for the MIG. An example is appropriate here.

During a recent conversation with a strategic planning VP at a University, he told me that their strategic objectives were to add more campuses around the globe, grow their athletics program, and introduce new educational disciplines. After going through the “5 Whys” with him, we got to their MIG: They really wanted growth. As you can imagine, achieving that MIG required the institution to create measurable objectives around growth and create a set of unique strategies supporting them, which required much more than those three objectives. They needed to better understand the specific student demographic they were trying to attract, define what attracted those students, and build a set of strategies focused on them.

A company’s MIG should be discussed with all stakeholders, including suppliers and customers. Suppliers need to understand your MIG so they can tailor proposals to your needs. You need to understand your customers’ MIG so you can do the same for them. It is an easier way to talk about why your offering helps them to succeed.

Third-party service groups, contract workers, and temporary workers have MIGs as well. It is important to know it for each category of workers because their needs are rapidly changing in response to remote work and changes in work-life balance. If understood and properly addressed, there is a likelihood that turnover in these categories will be reduced, especially if they are engaged in the development and implementation of the company’s Business Hierarchy of Needs?.

If your stakeholders do not have a MIG, help them create one and agree to it so you can be the leading participant in helping them achieve their MIG. This checklist is for a business, but other entities such as vendors, stakeholders, universities, not-for-profits, governments, and other organizations will have a similar checklist for their needs and service offerings. The checklist will provide the organization with invaluable insights into the MIGs of their stakeholders. To begin, we recommend this be done for the top stakeholders across the supply chain, including internal stakeholders.

A couple more examples are appropriate here. I remember a conversation with a supplier who told me that their MIG was to reduce working capital throughout their business. Given that, it was obvious that I could not rely on this vendor to keep more inventory of components and finished goods to help us reduce our working capital consumption. We had to find another solution, and/or find another vendor for those products. Remember that your business is a supplier as well, so the same example applies to your customers. If you do not know what your customers’ MIG is, you may not be the best choice for them. It is important to align yourself with vendors who have strategies that support yours and develop approaches in your product and service offerings that will support your customers’ MIGs. If different, resolve those conflicts. As pointed out in previous examples, offering a customer a portfolio of products and services that supports their MIG can give you a competitive advantage.

Another example of the application of the MIG is when I was implementing Total Quality Management (TQM) at a Fortune 500 company in the early 90s. We created the process and then rolled it out globally to the company’s eight divisions. We gave presentations, held training classes, and expected the leadership teams to figure out how to apply what they had learned. That was thirty years ago. Knowing what I know now, I would have focused on how the application of TQM tools would help them achieve their MIG and prioritized my work in their business based on the expected impact on their MIG.

Material results keep teams excited and focused. Measurement tells everyone the score. Without a score, we do not know how we are doing. Always use the MIG as the litmus test for what you do throughout the entire supply chain.

Once you have created a MIG for your company you need to identify the MIGs across all stakeholders and ensure that strategies, tactics, and projects are designed to support the company’s MIG. As stated earlier, if a project or action does not help the company achieve its MIG, then it cannot be brought to the table.

Discussion of the company’s MIG should occur at the start of every review meeting. It needs to be prominent throughout the facilities and the MIG should also be on every computer start-up screen. There will be those who say, “Well, we don’t want our competitors or other outsiders finding out what our MIG is, so we are not going to communicate that to everyone.” Well, if you do not communicate it to everyone, then you will guarantee that you will end up with suboptimized results. Keeping your MIG to yourself is nonsense.

After reading this section, you should be thinking about:

1. Do I/we believe that a MIG should be the driver for everything we do?

2. What is the MIG for our company? How do we create one?

3. Do we really understand the MIGs for suppliers, contract workers, temporary workers, and are we acting on them?

4. How can we break down our MIG into actionable strategies?

Don't want to wait for the next newsletter? Get it all from the book "Strategy Realized - The Business Hierarchy of Needs" here .

Learn more about Jim Gitney, the author here .

Call me to discuss getting started on developing your company's unique Business Hierarchy of Needs: (909) 949-9083, or drop me a line at [email protected]