Objectives are precise statements of what an organisation wants to achieve. They represent important components of the strategic intent, describing at a high level the strategic priorities and outcomes that will lead to improved performance.
A business objective is the link-pin between the organisation's mission / vision and its activities / projects. It serves as a basis for performance monitoring and appraisal. It also acts as the glue that unites organizational agendas, enabling alignment.
Smart objectives designate a set of criteria considered best practice in describing a business objective. An objective that meets all the criteria below is considered a SMART objective:
- S – Specific – objectives are aimed at what the business does, e.g. a hotel might have an objective of filling 60% of its beds a night during October, an objective specific to that business.
- M - Measurable – the business can put a value to the objective, e.g. €10,000 in sales in the next half year of trading.
- A – Achievable / Attainable / Action oriented / Aggressive
- R - Realistic – the objective should be challenging, but it should also be able to be achieved by the resources available.
- T- Time specific – they have a time limit of when the objective should be achieved, e.g. by the end of the year.
Strategic objectives and the Balanced Scorecard
According with Lawrie and Cobbold (2004), the concept of strategic objectives introduced by Kaplan and Norton was an important step in the development of the Balanced Scorecard from a performance measurement system to a performance management system and later on to a strategic performance management system.
Strategic objectives were initially represented as short sentences attached to the four Balanced Scorecard perspectives and were intended to capture the essence of the organizational strategy in each of the four areas: Financial, Customers, Internal Processes and People, Learning & Growth (Lawrie and Cobbold, 2004). Based on the strategic objectives, measures are later on selected in order to reflect the achievement of these strategic objectives.
Thus, objectives have become today important components of a Performance Management System based on the Balanced Scorecard, making the connection between strategy and the measurement process. The Strategy Map is the basic instrument that mirror organizational strategic objectives and the linkages that are created between them. Below is an examle of a Strategy Map which outlines organizational objectives grouped by perspectives and the cause and effect linkages that are established between them.
- Lawrie & Cobbold (2004), The development of the Balanced Scorecard as a strategic management tool, 2GC Active Management LTD, Maindenhead, UK, available at: http://boe.workinfo.com/free/Downloads/BSC.pdf.