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Business objectives

Goals or targets that businesses set themselves to achieve. Objectives are important throughout a business’s life and especially when starting up, as they provide: a target to work towards / a sense of direction, which can aid motivation, encourage teamwork, and make it easier to co-ordinate employees’ actions and activities (which is particularly important as a business increases in size); a means of evaluating performance; the focus for decision making and control; part of a business plan required by a bank manager in order to secure a loan. In order to provide the above benefits, objectives need to be SMART ie: Specific – state exactly what the objective relates to eg Sales, Profit or Market share?; Measurable – provide a yardstick against which performance can be measured, eg secure a net profit to sales percentage of 10%; Agreed by all those directly involved – then people are more likely to understand the objective and be more motivated to achieve it. They are also more likely to be realistic (see below); Realistic – Whilst it is important to have an objective that is challenging in order to move the business forward and maximise its potential, it needs to be achievable. If an objective is perceived as unachievable this will only serve to demotivate rather than motivate; Timescaled – ie state by when the objective must be achieved in order to provide impetus and allow measurement to take place eg to achieve a net profit percentage of 10% within 18 months. The existence of SMART objectives guides the business towards making the best decisions, given a number of choices. Lack of SMART objectives is likely to lead to poor decision making, conflict, and loss of direction and control. Without clear overall business objectives, strategy and tactics cannot be planned. As the old saying goes – if you don’t know where you are going, how are you going to plan how to get there? Determining SMART objectives and the most appropriate strategy to achieve these objectives, requires the key decision makers to take into account the internal capabilities of the business ie its strengths and weaknesses, and the external business environment including any opportunities and threats. This is essential to ensure the objectives and strategies decided upon are appropriate in terms of realism, and in maximising the business’s potential. Some of the most common business objectives concern the following: Survival; Break-even; Profit and profitability; Sales; Market share; Growth. See also corporate objectives, functional objectives, financial objectives, marketing objectives, HR objectives, operational objectives.

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