Objective setting

Objective setting is a process related to management by objectives. Its main assumption is to set specific, measurable, achievable, realistic and time-bound objectives for people employed in the company in order to mark their progress.

Why objectives should be set?

Objective setting has many advantages, for instance:

• it enhances performance,
• it is a motivational factor for the employees,
• effects are often realized on pre-arranged standards,
• it has a positive impact on employees’ performance and satisfaction,
• it provides a valuable feedback.

SMART criteria

In useful objectives, five different elements are required. They can be easily described by the acronym SMART, which stands for specific, measurable, achievable, realistic (or relevant) and time-bound.

An objective which is set in a correct way should be:

• Specific - it means that the objective should be outlined in a precised way and the requirements should be clear. Specific objectives must describe the result in a detailed, focused and well-defined way. When setting a specific objective, the manager should use action-oriented verbs (e.g. change, create, apply, perform) and avoid misleading and ambiguous expressions (e.g. the employee is aware of .... ).
• Measurable - the organization should be able to monitor progress and to know when the objective will be achieved. This element is vital for the manager, because it enables him to evaluate the outcome or the achievement of the employee. It is crucial in setting measurable objectives to decide which elements can be measured.
• Achievable - the objective should be challenging, but also possible to achieve by the employees. An objective can be described as achievable if all necessary resources are available or similar outcomes have been achieved by others in the past in similar circumstances. The objectives must be agreed both by managers and by the employees in order to ensure mutual commitment to them. The employee to which the objective is assigned should be willing and able to achieve it. If the objective is not achievable, employees often feel demotivated and unwilling to invest their enthusiasm and power into something which seems to be impossible.
• Realistic/relevant - realistic objectives should be set in a such way that it is clear how the objective can be reached. "Relevant" means that the objectives are appropriate to the team or the individual.
• Time-bound - the date of achieving the objective must be defined as it contributes to making objectives measurable. Deadlines also help to prompt action and to create the necessary urgency.

Things which should be avoided when setting objectives

When setting the objectives to the employee, the manager should avoid following mistakes:

• setting not specific, unachievable and unrealistic objectives,
• having no time-frames and deadlines,
• having no method to record the actions and the progress,
• forgetting that the situation may change and there can be a need to review and renegotiate the objectives in future.

Examples of Objective setting

• Establishing customer service standards - setting a goal to reduce customer complaints by 50% within a certain time frame.
• Developing team performance - setting a goal to increase team productivity by 20% within a certain time frame.
• Improving financial performance - setting a goal to increase profits by 20% within a certain time frame.
• Developing organizational culture - setting a goal to improve communication between employees by 30% within a certain time frame.
• Developing new products - setting a goal to launch a new product within a certain time frame.
• Enhancing customer satisfaction - setting a goal to increase customer satisfaction ratings by 10% within a certain time frame.

Advantages of Objective setting

Objective setting has several advantages that make it an effective tool for businesses and organizations. These advantages include:

• Improved productivity: Setting specific objectives helps individuals focus and prioritize tasks, leading to improved productivity and efficiency.
• More effective decision-making: Objectives provide a framework for making decisions, allowing employees to determine what actions and choices support the overall goals and objectives.
• Improved communication: Objectives provide a common language and understanding, enabling better communication and collaboration between team members.
• Increased motivation: Working toward objectives gives employees a sense of purpose and accomplishment, increasing motivation and engagement.
• Enhanced accountability: Objectives provide a measure of accountability, since progress can be tracked and evaluated.
• Improved results: By setting objectives, organizations can ensure that the right resources are allocated to tasks, leading to improved results.

Limitations of Objective setting

• Objective setting can be time consuming, as it requires managers to invest considerable time into setting appropriate goals for employees and assessing their progress.
• It can be difficult to measure progress towards objectives, as progress may be subjective and difficult to quantify.
• Objectives can become outdated quickly due to changing market conditions, meaning that companies have to regularly review and update their objectives.
• If objectives are too ambitious they may be discouraging, as employees may feel overwhelmed by the expectations set out for them.
• Objectives may not take into account individual differences, meaning that some employees may be set goals that are out of their reach or that do not take into account their strengths and weaknesses.
• Objectives may lead to a lack of flexibility and creativity, as employees focus solely on achieving the set goals and do not explore alternative solutions.
• Objectives may lead to a lack of motivation, as employees may become too focused on the quantitative outcomes of the objectives and forget about the underlying purpose of the tasks.

Other approaches related to Objective setting

Apart from the management by objectives, there are other approaches related to objective setting.

• SMART goals: SMART goals are used to set objectives which are Specific, Measurable, Achievable, Relevant and Time-bound. This type of goal setting is used to make sure that the goals are realistic, achievable and have a clear timeline.
• Goal setting theory: Goal setting theory is based on the idea that challenging and specific goals lead to higher levels of motivation, performance and achievement. It is used to help employees focus on their goals and set them in order to achieve the desired results.
• Performance Management: Performance management is a process which is used to measure and track the progress of employees towards their objectives. This process helps to identify employee performance gaps and provides feedback to employees in order to improve their performance.
• Kaizen: Kaizen is a Japanese term which means "continuous improvement". It is a type of goal setting which focuses on continuous improvement rather than setting specific goals. The main objective of this approach is to encourage employees to make small, incremental improvements which can lead to long-term success.

In conclusion, there are several approaches related to objective setting such as SMART goals, Goal setting theory, Performance Management and Kaizen. Each of them has its own benefits and should be used in order to help employees achieve their desired goals.

Footnotes

Objective setting — recommended articles

Short-term objectives — Appraisal method — Strategic intent — Training objective — Management by objectives — Strategic goal — Classification of goals and functions — Acceleration principle — Benefits of planning

References

• Chinchilla N., Pitta N, Rey C. (2017) Objectives are SMART, Missions are WISE: Employees with Purpose, IESE Insight, vol. 33, pp. 45-51
• Greenbank P. (2001) Objective setting in the micro-business, International Journal of Entrepreneurial Behaviour & Research, vol. 7, pp. 108-127
• Islami X., Mulolli E., Musafa N. (2018) Using Management by Objectives as a performance appraisal tool for employee satisfaction, Future Business Journal, vol. 4, pp. 94-108
• Setting SMART Objectives Checklist (2019), Chartered Management Institute

Author: Marta Łazarz