What’s it: A business objective is a specific, measurable, realistic, relevant, and time-bound business target. In other words, they represent what results we want, for example, in one year, two years, three years, and so on. These results should be as measurable as possible. So, we can assess our progress and measure how well and quickly we are achieving it. In addition, measurable objectives are also important to take corrective steps when we fail to achieve them according to what we set.
Businesses need objectives to guide the organization and the people within it. Therefore, management sets goals to provide a clear and agreed focus on where the business is going.
Business objectives can be related to growth, profit, and market share. And a business may have more than one objective.
Good objectives must be aligned with the overall goals and vision. In addition, they must also be implemented into specific objectives at the business function level. Thus, the marketing, operations, human resources, and finance departments develop complementary and consistent objectives with business-level goals.
For example, a company targets a 30% increase in sales in the next three years. It should also be implemented into business functions. For example, the marketing area intensifies online channels to increase sales. Meanwhile, in human resource management, companies may want marketing staff to be certified as Professional Certified Marketers in the next year to improve their competence. Management expects an improvement in competence will make it easier for them to achieve higher targets.
What is the difference between a business objective and a business aim?
Objectives are different from aims. Aims are where the business wants to go in the future. For example, your company wants to be a market leader. It concerns an outline to fill in with future specifics (goals).
Objectives describe in detail how you will achieve your business aims. It is measurable and specific. For example, you set your market share to increase by 10% in the next three years.
Being a market leader means you have to have the largest market share in the market. So, you have to sell more than your competitors. If success sells more, your market share increases. And when you have overtaken a competitor’s market share, you become the market leader.
Long story short, aim precedes objective. The latter lays out the specific steps to achieve the former.
Why are business objectives important?
Objectives become a way to support the company’s long-term goals toward a sustainable competitive advantage. By assigning them, our attention will be more focused on what we must do and want to achieve in the near future. We then define responsibilities, allocate resources, and set targets for everyone in the company.
Several reasons why business objectives are important. First, they serve as a guide for setting objectives at the business function level. We break down long-term goals into specific objectives for each business function. Thus, inter-functional objectives can support each other and be consistent with the overall business objectives.
Second, the objective is also a motivation. It motivates employees and managers about what they must achieve and work on. As a result, they are more eager to carry out their role with a clear direction.
Third, the objective is also a way to develop evaluation and control within the company. For example, do we know which objectives missed the target time? What has not been achieved, and what has been achieved? Which division was successful in achieving its objectives? We need them to evaluate performance and appreciate superior individuals or divisions. In addition, we can also take corrective steps for future improvements.
How to write business objectives?
Writing business objectives requires us to think about what our business visions are. Then, we break down these goals into several relevant objectives to be achieved. For example, in the previous example, you wanted to be the market leader.
Being a market leader is still an abstraction. You haven’t defined specific steps and results to back it up. In other words, you have not set an objective to become a market leader.
Criteria for good business goals
How do we write effective business objectives? We must consider the following five criteria – abbreviated as “SMART”:
Specific. We must define objectives as clearly as possible. We have to identify and make it more specific. For example, being a market leader means you have to increase your current market share and, therefore, need to increase sales.
Increasing sales can be achieved in several ways. For example, you encourage existing customers to increase repeat purchases. Or, you increase sales by acquiring new customers. Or, you develop a new market by entering a foreign market. In addition, you can also take other steps such as improving after-sales service and increasing advertising.
Measurable. We quantify our specific objectives as much as possible. In other words, we translate them into numbers. So, for example, you target new customers to increase by 10% to support increased sales. Or, you target a 10% decrease in complaints to encourage customers to repurchase.
Achievable. Our objectives must be realistic. We can reach them, considering the company’s resources and competencies. For example, targeting new customers to increase by 10% is possible for you to achieve, likewise with a decrease in complaints.
Relevant. Objectives must support the company’s long-term goals. In addition, they must be aligned with the company’s other objectives. They must also be relevant to the environment in which the company operates.
For example, targeting new customers to increase by 10% may no longer be relevant to the environment in which you compete. You are competing in a mature or declining industry. So, everyone has bought the product. Consequently, you can only increase sales by stealing customers from competitors.
Time-bound. We must determine when we reach our objective, one year, two years, or three years? Assume you operate in a growing industry. And let’s say you’re targeting a 10% increase in new customers in three years. Meanwhile, you are targeting complaints to decrease in the next year.
What are examples of business objectives?
Business survival is a common objective for small businesses. They strive to continue to generate sales and keep the business operating amidst competitive pressures.
Other key business objectives may be:
Profit maximization. When businesses break even, they seek to pursue as much profit as possible. They seek to generate revenue at a more efficient cost.
Growth. For example, success at one product might prompt us to introduce another. Or, we expand into a wider market when we are successful in our current niche.
Market share. Many businesses want to be market leaders. A higher market share allows for a stronger market position. Thus, we have stronger bargaining power when dealing with stakeholders, enabling us to make more money.
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