Corporate Objective: Definition, Importance, Types, Examples

What’s it: A corporate objective is a specific, measurable, and time-specific target by which you can achieve your overall corporate goal. In other words, it is a target that your company must achieve to realize your business goal. A good objective has SMART characteristics: Specific, Measurable, Achievable, Realistic, and Time-specific.

Vision and mission statements lack specific details to provide clearer guidance for taking action, designing strategies, allocating resources, and making operational decisions. So you need to break it down into more specific and measurable objectives. Then, it can be expressed in various measures such as profit, market share, and revenue growth.

The objectives you set will ultimately affect the company strategy you choose. A company’s strategy is a detailed medium and long-term plan to meet these objectives.

What is the importance of the company’s goals?

Objectives provide guidance and direction to all your employees on what they need to achieve. Clear objectives encourage employees to focus and be motivated to achieve them.

For management, objectives are an indicator to measure how successful management is in operating the business. As a result, some companies may often associate management bonuses with achieving objectives.

Several reasons explain the importance of corporate objectives. Here are some of them:

• Your company can achieve the goals you set because the two must be connected, where the objectives represent specific targets to achieve the goals.
• Your business has a clear direction by setting out what you need to achieve in the future and mapping out what your company must do now and in the future to achieve its goals.
• Designing business direction and goals are one way to motivate employees. Of course, it requires you to communicate them to everyone in your company.
• Objectives allow management in your company to have priorities for allocating resources and making decisions.
• Having a clear direction helps the management in your company design appropriate and detailed strategies and actions.
• By comparing the results with the objectives you set, you can evaluate whether the strategy is working? Do business activities support objectives? And whether the company’s strategy is still relevant to the business environment.

What is the difference between corporate objectives and corporate goals?

Goals and objectives are important because they provide direction to your business on what to achieve. They look similar, and some people often use them interchangeably in discussing corporate strategy. But, actually, the two are different. Several important points distinguish corporate objectives and corporate goals.

• Goals – the overall target or broad result to be achieved. It doesn’t detail how your company is getting there. For example, you want your company to be a market leader.
• Objectives – more specific and measurable targets or results to meet the goals you set. For example, to become a market leader, your company targets zero defects for products, increasing sales by about 10% and reducing customer complaints by 5% in the next year.

What are the types of corporate objectives?

Corporate objectives should be broken down into more specific objectives to provide a clearer direction. Usually, it has hierarchical levels according to the hierarchical structure of your organization. In other words, corporate objectives are broken down into objectives for top, middle, and lower management, where the objectives at the lower levels must support the objectives at the upper levels.

• Strategic objectives – about what your company should achieve in the future. It focuses on general, broad, and long-term issues and is defined by top management. It guides them in operating the business, influences the entire company, and serves as a guide for lower management levels in setting their objectives.
• Tactical objectives – about what the department or division within your company should achieve. It aims to focus efforts on supporting and achieving strategic objectives. It is under the responsibility of the middle manager. Setting tactical objectives can map out how their department can contribute to achieving strategic objectives and determine what they need to do and achieve.
• Operational objectives – about what teams or individuals in a department should achieve. Lower-level managers are responsible for establishing them, which is important for addressing short-term issues and ensuring everyone in the department is working and moving in the same direction to realize tactical objectives.

What are the criteria for a good corporate objective?

Good corporate objectives meet the SMART criteria: specific, measurable, achievable, realistic, time-specific.

• Specific – what aspects or operational variables do you have to achieve? Whether it’s market share, revenue, output quality, or production volume. Say, that’s the sales value for your two product segments: product ABC and product XYZ.
• Measurable – you can quantify the objective. For example, your company targets sales of product ABC to increase by 10% and product XYZ to increase by 5%.
• Achievable – the objectives you set are within the limits of your company’s internal capabilities, neither too easy nor impossible to achieve. For example, targeting a 10% increase in sales value for ABC products makes more sense than targeting a 120% increase.
• Realistic – the objective is according to the conditions under which it is to be achieved. To set an objective, it requires you to consider aspects such as market conditions and competition, capabilities, and company resources to set the percentage above. For example, targets for a 10% and 5% increase in sales could be unrealistic if a recession hits.
• Time-specific – you decide when to achieve the above objectives. For example, you target sales of product ABC to increase by 10% and product XYZ to increase by 5% next year.

What are examples of corporate objectives?

The following are examples of common corporate objectives:

Survive. If your company is a new business, survival may be your goal. With limited competitiveness and internal problems, business failure rates are usually high. And, if you survive successfully, your business has the opportunity to strengthen its competitiveness and fix internal problems, then grow the business and make a profit. After that, you can pursue other long-term goals.

• If you are competing in a hypercompetitive market, you may also be pursuing this goal. Your business is facing significant competitive pressure. Maintaining a competitive advantage becomes almost impossible because it can disappear instantly due to high external pressures.

Profit maximization. All profit-oriented businesses aim to generate the highest possible profit in the long run. Without profit, it is impossible to grow and to survive.

• Profit is also important and is usually used as a measure for investors to invest in the company, either by buying shares or corporate debt. It also became an internal source to finance further business expansion. In mathematical calculations, profit will be maximized when marginal revenue equals marginal cost.

Profit satisficing. This means earning enough profit to satisfy shareholders. Maximizing profits requires management to work hard and often reduces their free time.

• Indeed, from the point of view of shareholders, they want maximum profit. But, from the point of view of workers and managers, they may not. They prefer to generate adequate returns for shareholders rather than maximizing profits.

Growth. If your company is already established, pursuing growth could be an objective alternative for you. You are trying to earn more money by increasing the size of your business. It allows you to lower costs by reaping the benefits of higher economies of scale. Also, seeking growth elsewhere is an alternative to increasing revenue, either through internal or external growth, once your old business has matured.

Market share. This goal is usually associated with being a market leader. Market share is often correlated with higher economies of scale, higher incomes, and better competitiveness. Say, we measure market share by sales value. To increase market share, your company must increase sales value at a higher percentage than competitors.