In 1993, newly minted IBM CEO, Lou Gerstner, when asked about his vision for the company, replied that IBM was in a mess and he did not have the time now to indulge in of vague forecasts. The press reacted poorly. Descriptions of Mr. Gerstner’s vision for IBM would be helpful for quarterly guidance. The press was not asking for a futuristic, vaguely mystifying, inspirational message. They were looking for visionary guidance to better understand where IBM wants to go and how it plans to get there.
Analysts and observers want to hear a specific and meaningfully encouraging vision that serves as the corporation’s guiding star. , Short-term goals are essential. But so is the future ambition. Using SMART objectives as the basis for guidance provides a framework for delivering both. SMART Objectives mean objectives that are: Specific, Measurable, Aspirational yet achievable, Related to overall business growth, and Time-specific.
Take Ford Motor Company, for example. Ford was the US car company that did not go bankrupt during the financial crisis; Ford did not take millions of dollars from the government. It weathered the downturn using its own reserves and came out of the recession in really strong shape. The company had record earnings in both 2015 and 2016. Ford’s recent statements to Wall Street have erased this recent history.
In May 2017, Ford hired a new CEO, Jim Hackett. Since then, Mr. Hackett has made several attempts to articulate what he sees as the vision for Ford. Every time, Mr. Hackett has been criticized for making generic, uninspiring, less than positive descriptions. Mr. Hackett has said a lot without saying anything.
According to Automotive News, Wall Street is becoming impatient with the vagueness of the Ford messaging. Wall Street complains that he is not specific in his commitments. On the one hand, Mr. Hackett is honest in his comments, letting analysts know that Ford is not as competitively fit as its competitors, and that the company’s revenue and volume have not grown as hoped for: even though there was revenue growth, costs increased at the same time. On the other hand, he has not communicated Ford way forward in an encouraging, meaningful manner. As one money manager remarked, “When a CEO comes out and says it’s going to be a bad year, that’s not going to instill confidence in investors. There hasn’t been the data or the narrative to instill confidence. It’s created uncertainty around what success at Ford can be.” Mr. Hackett has failed to articulate a specific aspirational ambition.
Commentators and analysts say that General Motors CEO, Mary Barra, has done a much better job of creating a meaningful description of GM’s current goals and future goals 5-10 years down the road. At Tesla, Elon Musk continues to generate rapture with analysts and investors even though each statement he has made has not come true. An exciting vision is a powerful force. An analyst with Autotrader.com put it this way in The New York Times, “They (Tesla) haven’t delivered what they’ve promised, but does it matter? It doesn’t seem to matter to its investors and the customers who’ve put down deposits.”
Financial Times’ Lex reporters say that “The Tesla Chief Executive cannot be accused of being distracted by his promises to Wall Street. Nor has he been corrupted by conservatism.” On his analyst call – Financial Times hesitates to call it an earnings call, as Tesla has none – Mr. Musk laid out a future – near and longer-term – of promises and bets. These may seem unachievable but we cannot know. Clearly, Mr. Musk believes these are.
Tesla’s goals are 1) sustained positive quarterly operating income (Tesla has recorded only one of these); 2) 5,000-a-week Model 3’s rolling out (over a year late); 3) to make money (Tesla has recorded only 2 quarters of teeny-tiny profit); 4) to have an autonomous vehicle drive from LA to NYC (promised for 2017); and 5) improved margins for the S and X models (margins for both fell the last two quarters), Mr. Musk offers an exciting, ambitious vision with specifics. He sees a future 4-year’s out where Tesla would produce 100,000 electric trucks a year. He is completely confident this will be achievable. At the end of the call, Mr. Musk enthusiastically proclaimed that if Tesla could send a Roadster into space to orbit the asteroid belt, “I think we can solve Model 3 production.” He is a master of the appeal of SMART objectives.
Mary Barra continues to stonewall on its pledges to compensate families whose loved ones were either injured or killed driving GM cars with flawed ignition switches. Yet, Mary Barra receives positive reviews for GM’s vision of tomorrow
Mr. Hackett’s October 2017 Ford vision generated more grumbles than golly gee’s. He committed Ford to cost cuts, shifting money to the money making vehicles, moving manufacturing to China to save money – including the production of Ford Focus for North America, pivoting from gas to electric, simplifying and modernizing the company, and, making Internet connectivity a priority.
As rapacious and greedy as Wall Street investors and analysts can be, there seems to be a soft spot for the big ideas. As Oliver Wendell Holmes (a Supreme Court Justice) once said, “Every now and then, a man’s mind is stretched by a new idea or sensation, and never shrinks back to its former dimensions.”
CEOs must optimize the short-term with the long-term. To offer meaningful messaging, CEOs must rely on SMART objectives.
- Specific: Saying that the brand is doing X but not providing details frustrates listeners.
- Measurable: Remember, especially today, all claims are checkable.
- Aspirational and achievable: Ensure that plans are possible dreams.
- Related to overall business growth
- Time-specific: for the short-term goals, Wall Street can be very impatient. For long-term goals, make the horizon just close enough so investors and analysts can see the brand there.