Criteria for Effective Business Objectives

Business objectives refer to the purpose for which a business is established.

In simple terms, business objectives are statements that enable various stakeholders of an organization, such as employees, managers, customers, and suppliers, to understand the underlying basis of business activities.

“Earning of profit cannot be objective of a business any more than eating is the objective of living”-Urwick.

An organization can be successful and survive in the long-term if it sets effective business objectives.

Following are the criteria for effective business objectives:

i. Quantitative:

Implies that business objectives should be expressed in terms of numbers. For example, an organization’s objective, such as increasing sales, is not effective as it does not provide information about what should be the percentage of increase in sales. On the other hand, increasing sales by 20% in a particular year is an effective business objective that may be easily comprehended by all stakeholders.

ii. Time specific:

Refers to one of the most important criteria of an effective business objective. An organization should clearly mention the time period up to which a particular goal should be achieved. This enables the organization to understand its current status with respect to the completion of the on-going objective.

iii. Realistic:

Implies that an organization should set an objective that can be achieved within the given time and available resources. If the business objectives of an organization are not realistic, this may cause disappointment of investors.

iv. Understandable:

Constitutes an important characteristic of business objectives. The business objectives of an organization should not be complex and formulated in a comprehensible way. This helps an organization to communicate its objectives with various stakeholders, such as investors, employees, and partners. If business objectives are property communicated among stakeholders, it would become easier to attain them.

v. Flexible:

As we all know that the economy is dynamic and subject to changes. Therefore, it is necessary that business objectives of organizations should be adaptable to change. For example, if a business requires changes as per current trends, the business objectives should also be changed to reflect such changes.

Generally, it is believed that the main objective of organizations is to earn maximum profit. However, it is not the only objective of organizations. Acceding to Urwick, “earning of profit cannot be objective of a business any more than eating is the objective of living.” Economists have provided a number of alternative objectives of organizations besides profit maximization.