Objectives must be applied using the SMART acronym as they help define and guide the strategies and action plan to achieve the identified goal.
Objectives provide focus for your business. It is said that businesses that have clearly identified their objectives, are usually more successful than those that have not identified clear and specific objectives. The success has been attributed to the SMART objective setting as this leads the business owner to know exactly what they are trying to achieve.
The acronym SMART, stands for objectives that are:
- Specific - objectives need to be concrete and highly detailed, i.e. not as abstract as your long-term goals.
- Measurable - they should include a figure or value, such as a dollar amount, number of units or percentage, so the objective can be measured.
- Action oriented - describe what actions need to be taken by which people and when by.
- Realistic - make goals challenging, but consider your resources and capabilities of the business within its marketing and operational environment that allow objectives to be achieved to ensure that they are actually reasonably attainable.
- Time framed - set a deadline for achievement of the objective.
There are many types of objectives, but most common are corporate objectives, and functional objectives. Both corporate and functional objectives share a close relationship. There is a cascade effect, where functions in a business need to create objectives that will then support and deliver against the corporate objectives.
- Corporate objectives will focus on areas of structural and financial aspects of the business, such as rate of return, operating profit, increase earnings per share, cash flow, etc.
- Functional objectives will focus on areas of the business that connect with the day-to-day running of the business, such as sales and marketing objectives - increasing market share, increasing brand awareness, increasing sales per customer etc.
Some examples of objectives that apply the SMART approach are:
- To earn a minimum of 20% after tax rate of return on net investment by the end of the financial year.
- To reduce operating costs by 10% over the next year by improving the efficiency of the product manufacturing process.
- To increase market share in the Product X market from 2% to 7% by the end of 2018.
- To reduce the time taken to call back customers from the current 7 hours to under 4 hours by December this year.
Consider two SMART objectives that you believe would achieve the identified goal of your online business.
© RMIT University 2016