BOARD MEMBER’S CORNER

Move Your Business Forward Through the Power of Objectives

by Patti P. Phillips

Project objectives play a much broader and more important role in business than most people think. At the organization level, they should focus on business impact and financial return on investment. At the project level, they can focus on how people react to a project, what they learn from it, or how they perform during and after implementation. Whether you’re focusing on the strategic direction of an organization or on positioning a project or initiative at the tactical level, powerful objectives that pertain to perception, learning, application, impact, and even ROI are critical.

Three conditions are necessary for developing useful objectives:

1. The chain of impact must exist.

2. The objectives must contain conditions.

3. The objectives must contain criteria.

The Chain of Impact

As briefly described in “Achieving Business Alignment” (February) and as shown in Table 1, there are five levels of objectives. Together, objectives at these levels describe the chain of impact. As people react to a plan, project, or initiative, they learn what they need to do; they apply what they learn, and consequently they observe improvement in key business measures. And as improvement in business measures are converted to measures of money, they calculate ROI by comparing monetary benefits to implementation costs.

Table 1. Levels of Objectives

If your company wants to see a positive ROI, projects and initiatives that support the strategy must drive this chain of impact.

Conditions

An objective might rest on one or more conditions. For example, you might expect your customer service team to react to customers using a certain process in a certain situation. That situation is the condition under which the customer service team must perform.

If the objective is written as: “Given an angry customer, five steps will be taken to defuse the tension,” the condition for performance is a customer in an angry state. If the objective is “Sales representatives will use the customer relationship management software properly, given access to the quick reference guide,” the condition is provision of the quick reference guide.

Criteria

Objectives need to specify at least one criterion for success, such as “5 percent sales increase” or “95 percent of action items are complete.” A criterion may relate to accuracy, quality, or time.

Examples are:

• Accuracy measures.“Follow the customer complaint investigation process in at least 95 percent of

customer complaint situations.”

• Quality measures.“Obtain a customer rating of 4 out of 5, immediately after the new product

presentation is completed.”

• Time measures.Most objectives are time based. For example, application measures set deadlines

for actions to be completed and impact measures set deadlines for measures to be achieved (“Book

sales to new customers will increase 15 percent by December 31,” for instance).

Use these three criteria as your basis for developing objectives. Then, to ensure that you have powerful objectives that position your efforts for success, integrate their use with the actions described below.

Four Steps to SMART Objectives

You may have heard of the acronym SMART in reference to objectives, but do you apply the concept when you’re planning projects and initiatives? Table 2 defines SMART objectives.

Table 2. SMART Objectives

To develop SMART objectives, take these four steps.

1. Be clear about your objective in terms of performance. Clarity about an objective requites clarity about where performance needs improvement. If sales are not at the level they should reach, which specific sales are problematic? What is causing the less than desirable level of performance? Has the competition become stronger? Is the sales team following the prescribed sales process? If not, why not?

2. Identify relevant measures or indicators for the objective. You can identify the measures that reflect the objective you hope to achieve by answering the following questions:

• What are we going to measure?

• How will we use the information provided by the measure?

• Will one measure be enough, or would multiple measures give us a better picture?

• What aspects of performance does the measure address?

For example, if your broad objective is “Sales will increase,” you might identify measures such as “Number of fiction books sold to new customers,” “Number of nonfiction books sold to existing customers,” and “Number of children’s books sold to new and existing customers.”

3. Collect baseline data. To be able to show improvement, a measure must relate to a baseline. Various sources of information are useful in developing baselines. These include:

• sales reports

• performance records

• customers’ input

• survey data

• employee feedback

If you do not have a baseline, initial results from measuring against the SMART objectives can serve as baseline for performance.

Table 3 shows an example featuring objectives, indicators, and baseline data.

Table 3. Objectives, Measures, Baseline Data

4. Set a target for measuring success. Your baseline starts the progression toward the target. The target becomes your SMART objective.

When setting a target, consider the following:

• What is our baseline?

• What does our experience tell us about what can be achieved within a given time frame?

• What do stakeholders expect?

• What needs to be accomplished, given the current state of affairs?

To calculate the target, simply consider the baseline and decide how much improvement you want to aim for within a certain amount of time. In other words:

Baseline + Desired Change = Target by a Specific Time

The target, your SMART objective, should describe exactly what is expected by when.

Table 4 shows the move from broad objectives to SMART objectives.

Table 4. Moving from Broad to SMART Objectives

Next Steps

Using the fundamental criteria for objectives along with the four steps to SMART objectives, you can position your efforts for even greater success. Also, you will have more accurate measures of success.

So the next time your management team meets to discuss organizational goals or a new undertaking, or the next time you plan to purchase a new service or piece of equipment, establish a few SMART objectives before you make the investment. Then measure the success of that investment by comparing the results of your efforts to the objectives. Now, that’s SMART!

Patti Phillips, president/CEO and co-founder of the ROI Institute, Inc., has just completed a term as an IBPA board member. She can be reached at patti@roiinstitute.net.