Setting business goals and objectives is crucial for the success of your company. They provide a roadmap to identify and manage risks, gain employee buy-in, boost team performance, and execute your strategy. Additionally, they serve as important markers to measure your business’s performance.
However, meeting these goals can be challenging. According to a study by The Economist, 90% of senior executives from companies with annual revenues of one billion dollars or more admitted to failing in reaching all their strategic goals due to poor implementation. To effectively execute your strategy, it is vital to understand what is attainable when developing organizational goals and objectives.
If you’re struggling to establish realistic benchmarks for your business, here’s an overview of what business goals and objectives are, how to set them, and what you should consider during the process.
What Are Business Goals and Objectives?
Business objectives dictate how your company plans to achieve its goals and address the business’s strengths, weaknesses, and opportunities. While your business goals may shift over time, your objectives remain constant unless there is an organizational change.
Business goals describe where your company wants to end up and define the expected achievements of your business strategy.
According to the Harvard Business School Online course Strategy Execution, there are different types of strategic goals. Some might push you and your team out of your comfort zone but are essential to implement.
For instance, David Rodriguez, global chief human resources officer at Marriott, emphasizes the importance of stretch goals in Strategy Execution, stating, “pushing people to not accept today’s level of success as a final destination but as a starting point for what might be possible in the future.”
However, it is crucial to strike a balance between bold and unrealistic goals. To do this, you must understand how to responsibly set your business goals and objectives.
How to Set Business Goals and Objectives
While setting your company’s business goals and objectives may seem simple, it is important to base them not only on what you hope to achieve but also on your company’s key performance indicators (KPIs). These quantifiable success measures should justify why the goal should be achieved and align with your business strategy.
A strategy map is a valuable tool to illustrate the cause-and-effect relationships underlying your strategy. It helps you identify and align your business goals and objectives. HBS Professor Robert Simons states in Strategy Execution, “A strategy map gives everyone in your business a road map to understand the relationship between goals and measures and how they build on each other to create value.”
To ensure your goals and objectives are achievable through your current business strategy, a balanced scorecard is essential. This tool helps you track and assess non-financial measures and their alignment with your goals. Simons adds, “If you’ve designed measures well, the answer should be yes.”
These four perspectives are key considerations when setting your business goals and objectives. Here’s an overview of what those perspectives are and how they can help you set the right goals for your business.
4 Things to Consider When Setting Business Goals and Objectives
1. Financial Measures
It’s crucial to ensure that your plans and processes lead to desired levels of economic value. Therefore, some of your business goals and objectives should be financial.
Examples of financial performance goals include cutting costs, increasing revenue, and improving cash flow management. Profit plans, which are budgets drawn up for business units, are essential in this process. They provide a critical link between your business strategy and economic value creation.
According to Simons, it’s important to ask three questions when profit planning:
- Does my business strategy generate enough profit to cover costs and reinvest in the business?
- Does my business generate enough cash to remain solvent throughout the year?
- Does my business create sufficient financial returns for investors?
By mapping out monetary value, you can evaluate the cost of different strategies and determine the likelihood of meeting your company’s and investors’ financial expectations.
2. Customer Satisfaction
To ensure your business goals and objectives contribute to your company’s long-term success, it’s crucial to prioritize your customers’ satisfaction. In today’s world where customer reviews and testimonials are crucial, measuring customer satisfaction is vital.
Tom Siebel, founder, chairman, and CEO of C3.ai, emphasizes the importance of customer satisfaction, stating, “And what could be more important than customer satisfaction? We do anonymous customer satisfaction surveys every quarter to see how we’re measuring up to our customer expectations.”
Measuring customer satisfaction helps identify what customers love and capitalize on it through future strategic initiatives. Your customer satisfaction measures should reflect your desired market position and focus on creating additional value for your audience.
3. Internal Business Processes
When setting your goals, it is crucial to consider internal business processes. These are the aspects of your business that are not directly affected by external forces. By considering internal processes, you can create a balanced business strategy that is not solely driven by external factors.
Tom Polen, CEO and president of Becton Dickinson, emphasizes the importance of balancing internal business processes. “Our goals are balanced to make sure we’re holistically managing the business from a financial performance, quality assurance, innovation, and human talent perspective,” he says.
Internal business processes encompass various aspects such as operations management, customer management, innovation, regulatory compliance, and social responsibility. While improvements to internal processes may not be directly driven by economic value, they can still lead to a positive return on investment.
4. Learning and Growth Opportunities
Consideration of learning and growth opportunities is essential when setting business goals and objectives. These opportunities aim to increase employee satisfaction and productivity.
According to Strategy Execution, learning and growth opportunities involve three types of capital:
- Human: Your employees and the skills and knowledge required for them to meet your company’s goals.
- Information: The databases, networks, and IT systems needed to support your long-term growth.
- Organization: Ensuring your company’s leadership and culture provide people with purpose and clear objectives.
Employee development is a common focus for learning and growth goals. Through professional development opportunities, your team will build valuable business skills and feel empowered to take risks and innovate.
Creating a culture of innovation requires providing a safe space for your team to make mistakes and learn from them. “It’s really important to us that people feel it’s safe to try new things. And all we ask is people extract their learnings and apply it to the next situation,” says David Rodriguez.
Achieve Your Business Goals
Setting business goals is not only about envisioning success but also about considering potential failures. Identifying critical performance variables and anticipating potential failures is crucial. By learning from real-world case studies of past strategy successes and failures, you can better understand where companies went wrong and avoid similar pitfalls.
If you need help setting your business goals and objectives, explore Strategy Execution—one of our online strategy courses—and gain the insights necessary to create a successful strategy. Remember, setting the right goals and objectives is the key to achieving long-term success for your business.
