Setting the direction of the business

1. An objective tells everyone where the business is heading. Once the target is written down and circulated, every employee is working towards the same figure instead of their own idea of what matters.
   1. A shop assistant who knows the store is chasing a weekly takings target understands why the manager keeps pushing add-on sales at the till.
2. It converts the owner's intention into something the organisation can act on. Wanting the business to do well is a private thought, while a target of 12,000 units by December can be handed to a production manager.
3. It also tells staff what is not the priority. A business targeting survival is telling its managers to protect cash, which rules out spending on a project that would only pay off in five years.

Guiding decisions and allocating resources

1. Each decision is tested against the objective. When managers face a choice, they take the option that moves the business closer to the target and reject the one that does not.
   1. A café with an objective to raise weekly revenue by 10 per cent extends its opening hours into the evening rather than closing early to save on wages.
2. Money, staff and time are steered towards the objective. A firm chasing market share puts its budget into advertising and lower prices, while a firm chasing survival puts the same money into paying suppliers on time.
3. The objective settles arguments about priorities. When two departments both want the same £20,000, the target decides which request is funded, so the choice is not left to whoever argues hardest.

Coordinating the functional areas

1. One shared objective aligns the departments. Marketing, finance, operations and human resources each plan their own work from the same target rather than from four different ideas of success.
   1. Marketing plans the campaign that will deliver the sales the target needs, and finance sets a budget that makes the target affordable.
   2. Operations arranges production and stock to meet those planned sales, and human resources recruits and trains the extra staff who will be needed.
2. Without a shared objective the departments work against each other. Marketing can promise a next-day delivery that operations has no capacity to make, so the business loses the customers it has just paid to attract.

Motivating staff

1. A target gives employees something definite to work towards. Sales staff given a monthly figure know exactly what counts as a good month, which an instruction to work hard never tells them.
2. Hitting a target is a visible achievement. Staff can see they have done what was asked, and managers can reward it, so effort rises and productivity with it.
3. It connects one person's work to the whole business. A warehouse worker who knows the company target depends on orders leaving the same day treats a late pick as something that matters.
4. A target set too high does the opposite. Staff who believe the figure cannot be reached stop trying at all, so an objective only motivates while it stays within reach.

Checking progress and correcting course

1. A measurable objective gives managers something to compare results against. Each month the actual figure is put next to the target, and the gap between them is the size of the problem.
   1. A business £15,000 behind a £100,000 half-year sales target knows how far off course it is, not merely that something is wrong.
2. This gives early warning. Spotting a shortfall part way through the year leaves time to cut costs, change the advertising or reprice, while the year can still be rescued.
3. Missing a target starts a review. The business asks whether the target itself was unrealistic, whether the plan for reaching it was wrong, or whether something outside the business changed.