Setting business objectives – how to set targets
This section will provide some good reasons to set goals moreover the benefits of setting goals will also be listed.
Some planners try to emphasis that a difference exists between goals and objectives – that is fine so long as they clearly define the difference. But for the majority of the managers there is very little difference between the terms. Most people think that mission goal, objective, target etc are the same thing i.e. what the company wants to achieve in the long/ short run. This understanding of the term is correct so long as everyone in the organization recognize the terms in the same light so that there is no miscommunication.
However some people have the tendency to confuse objectives with tactics or strategy. The easy way to avoid such a misunderstanding is to always remember that goals means “where” you want to go. Tactics or strategy mean the action plans that you will adopt to get there (or reach your objectives)
It is very important to note that the objectives of one group might be the strategy of another group. For example top management set the objective of launching new products this will be the strategy of the production department.
The benefits of setting objectives are given below:
Objectives in short define the entire purpose of your business (possibly) in a couple of sentences. This is a clear indicator that your not in business just for the heck of it but rather to achieve certain prior specified objectives.
The objectives that you set will finally determine the quality of the strategy or tactics that you will adopt.
Goals allow you to manage by objectives (MBO). This is a technique that is used to improve the productivity of management. Although the phrase is well known it is rarely implemented in the way intended. It mans that management will spend almost all of its time ensuring that the organization is moving toward its goals. Further, MBO allows you to avoid time in argument – where everyone agrees on the objectives it is likely that they will also agree with strategy too. MBO also helps in introducing a more participative management culture where employees are encouraged to set their own objectives.
Many B-Schools use the SMART criteria to define attributes of good objectives:
Details of the SMART criteria are given below:
Both short range and long range targets should be set.
Both quantitative and qualitative
Clear. Put them in writing, to be achieved within a specified time frame.
Measurable. So that they can be compared with actual results.
Challenging. This is so that staff will put greater effort and be more motivated.
Achievable. Avoid overly optimistic goals as this might be counter productive due to their demotivating nature. Goals should be realistic, reasonable, reachable and beatable. Avoid hidden goals and don’t be over specific.
In addition the following are important too:
Allow for game playing. Be ready to lose battles if you want to win the war.
Have a fall back position.
Be flexible. Drop obsolete goals in favor of more current ones.
See that the goals fit the top management and company mission.
Set goals for routine work as well as one off items (such as training programs, strengths to exploit, or weaknesses to solve)
State which goals are based on assumptions such as performance of the economy, market, industry trends and identity these factors. The greater the number of assumptions the weaker the position of the objectives (more likely to change).
At all costs avoid goals that are incompatible with the current resources of the company. As these would only serve to drain the resources of the company.
Strategic Planning Objectives
|Goal/Item||1-6 Months||2-6 Months||1st Year||2nd Year||Long Term|
|Net Profit After Taxes|
|Production Efficiency %|
N.B. You should make changes to this format to fit your own situation. For example add more columns change the time periods etc.