Role of objectives in running a business

The idea

Objectives are the specific, measurable targets that translate a business's overall aim into action. They give direction so owners, managers and employees know what to prioritise, and they allow progress to be monitored against deadlines. For example, a business aiming to grow might set an objective to increase sales by 10% within 12 months; a business aiming to improve cash flow might set an objective to reduce average debtor days from 45 to 30. Objectives also motivate staff when they are challenging but achievable, and they help co-ordinate different functions such as marketing, operations and finance. They provide a benchmark for judging success and for deciding whether to change strategy. Without objectives, a business may drift, waste resources or pursue conflicting goals.

What earns the marks

• Objectives convert a broad aim into a specific, measurable target with a time frame, so that success can be judged objectively.
• Objectives provide direction and co-ordination: different departments can align their plans, such as marketing increasing promotion while operations raises capacity.
• Objectives motivate employees when they are challenging yet achievable, and can be linked to appraisal or reward systems.
• Objectives allow managers to monitor progress, compare actual performance with the target, and take corrective action if the business is off track.
• Objectives help a business decide priorities when resources are limited, for example choosing between spending on staff training or new machinery.

Common mistakes and how to put them right

• Confusing an aim with an objective.

  Put it right by ensuring each objective includes a measurable outcome and a deadline.

• Writing objectives that are too vague to monitor, such as 'do better'.

  Put it right by adding a number and a time period, for example 'increase repeat purchases by 15% within 6 months'.

• Assuming objectives are only for profit-seeking businesses.

  Put it right by recognising that social enterprises, charities and public-sector organisations also set objectives, such as numbers of people helped or service waiting times.

Exam tips

• Use the command word to judge depth: 'state' needs a brief point, while 'explain' needs a cause-and-effect chain showing how the objective affects the business.
• Apply each objective to the context given in the case study, naming the business and its market rather than writing generically.
• When discussing motivation, link the objective to a specific group of employees and say how they might respond, rather than claiming all workers are motivated in the same way.