Developing operational objectives[edit]
Peter Drucker suggested that operational objectives should be SMART, which means specific, measurable, achievable, realistic, and time constrained.[3]
First, an operational objective should be specific, focused, well defined and clear enough rather than vague so that employees know what to achieve via the work.[4] A specific objective should state the expected actions and outcomes. This would help to prevent the possibility of employees working for different goals.
Secondly, an operational objective should be measurable and quantifiable so that people can know whether it has been met or not. For example, an objective might be increasing sales revenue by ten percent. This would prevent the confusions and conflicts on whether it has been met between different stakeholders.
Thirdly, an objective should be achievable and feasible. It also should be agreed by stakeholders, especially by employees. If they think it is un-achievable, it might demotivate them.
Fourthly, an objective should be realistic as well as challenging. It should be reasonable given their limited resources.[3]
Lastly, it should have a specified deadline (time frame) for its achievement. This would prevent the work from dragged on, and would help to increase productivity. It is also good to determine priorities. For example, operational objectives that would have greater influence on customer satisfaction should be completed in a faster time frame than those have less influence.[5]
It might be difficult to set operational objectives that are understood and accepted by all employees, as they might see different priorities and values.[6] Therefore, it is important to let employees to participate in the determining of the objectives and to state them as clearly as possible.[7] After setting appropriate operational objectives for each department, business plans can then be made to achieve them.[8]
Examples of operational objectives[edit]
Survival[edit]
One of the most common operational objective for businesses is survival.[3] For new businesses, survival would be their main priority, as they are likely to face a number of problems, such as negative cash flows and intense competition. Survival can also be an important priority for established firms, as facing an economic recession and becoming a takeover target can be a significant threat to its survival.
Increasing sales revenue[edit]
Another common operational objective can be increasing sales revenue.[1] This is very important for all businesses, as it is directly related to their survival. However, firms with a high sales revenue might struggle to survive, as it is not profit.
[edit]
Many businesses set raising market share as their operational objective. By increasing sales, this will be also improved.
For many businesses, each department tends to set its own operational objectives.[10] Examples of SMART operational objectives that a business might have are:
Importance of operational objectives[edit]
Motivation[edit]
If an organisation has SMART operational objectives, employees can be inspired and motivated to work harder to meet common objectives, as they are measured. By achieving short term goals, employees might feel a great sense of accomplishment and this would help to improve their motivation. According to a research conducted by Rodgers, R. and Je Hunter, management by objectives (MBO) has been shown to increase productivity.[11] Operational objectives also encourage managers to think strategically.[3] In order to set objectives and plan for the next 6 to 12 months, they need to have a deep understanding of business's current position. According to Peter Drucker, rewards such as recognition, appreciation and performance-related pay need to be provided for achieving objectives to motivate employees and raise efficiency.[7]
Measure and control[edit]
Operational objectives help to control and unify an organisation, as they are short-term goals, which are consistent with its aim.[3] In addition, they enable managers not only to track the performance of the workforce against targets, but also to measure and evaluate their performance so that managers can provide feedback and rewards. This would help to identify the areas they have problems and need improvements in order to attain their aims.
Guidance and direction[edit]
By stating an organisation's operational objectives specifically, they would provide employees a guidance and direction.[12] Operational objectives tend to be specific and measurable, so that they can help an organisation to achieve its long term goals. It can also help to improve budgeting. For example, the sales department might set an operational objective, which targets to raise sales revenue for the next several months.[12] This encourages managers to predict what level of sales revenue will be in the future, and help them to budget better.