You have developed high-level goals that your organization as a whole wants to achieve (e.g., expand market presence). The next step is outlining steps to achieve the corporate goal. This is what creating strategic objectives is all about!
Strategic objectives are purpose statements outlining focus areas and measurable steps for your organization to help achieve its broader corporate goal.
Understanding examples of strategic objectives and the key formulas for creating them will help you formulate effective strategic objectives.
This article will examine these concepts in detail, including real-world examples of using them to create strategic objectives.
Let’s start the discussion with what a strategic objective should look like!
Anatomy of a strategic objective
An effective strategic objective should be a simple one-sentence purpose statement with four elements - a verb, an object, a measurable unit, and a timeline.
Verb: A strategic statement should begin with a power verb - an action-oriented verb that forces you to be specific about what you want to do. Examples include increase, decrease, improve, etc.
Object: Follow the power verb with an object, which is the focus area you want to affect to achieve your strategic goals.
Measurable unit: State how much impact you desire to have in the strategic focus area.
Timeline: Lastly, specify a deadline for achieving the desired impact in the focus area.
Examples of strategic statements (broken down into their elements) are:
7 Key formulas for creating strategic objectives
The key formulas to help you create strategic objectives include:
1. SMART model
Using the SMART model when formulating strategic objectives means you should make your objectives specific, measurable, achievable, relevant, and time-bound.
Following the SMART model helps you create strategic objectives that are well-defined and actionable.
This is how to use the SMART model to formulate strategic objectives.
Specific
The strategic objective should be as simple as possible. The best strategic objectives should outline what you want to achieve with a short and succinct sentence. Do not use jargon or complex sentences. Also, avoid vague objectives.
Consider a company with a vision to “Expand market presence.” A strategic objective that is specific would be “Increase sales revenue in the Asia Pacific market by 10% in 6 months.”
The strategic objective is specific because it clearly outlines what the company aims to achieve.
A vague objective would have been something like “increase sales revenue.”
But the former strategic objective isn’t vague as it includes many details, such as the market in which the increase in sales revenue is desired, how much sales revenue increase is desired, and the deadline for achieving the growth.
Measurable
A good strategic objective should be quantifiable. This means it should include a criterion for measuring progress toward achievement.
In our strategic objective example (increase sales revenue in the Asia-Pacific market by 10% in 6 months), the criterion for measuring sales revenue growth is 10%.
That is, the objective specifies that the desired sales revenue growth is 10%. With this, you can easily monitor your progress towards achieving the goal.
Achievable
The strategic objective should be feasible within the context of your organization’s capabilities and resources. It should not be an overly ambitious target that the organization cannot achieve with its resources.
Our chosen strategic objective example is achievable as the 10% desired sales growth revenue is not beyond reach. An unrealistic objective would be something like “increase sales growth revenue by 200% in one month.”
Relevant
Successful strategic objectives should align with the organization’s overall goal.
In our example, the company’s vision is to “Expand market reach.” See how the formulated strategic objective (increase sales revenue in the Asia Pacific by 10% in 6 months) aligns with the overall vision.
As the company increases its sales revenue, it will be moving the needle toward expanding its market reach.
Time-bound
You should specify a timeframe for achieving the objective. This makes measuring progress more meaningful, as you can compare what you have accomplished with what is yet to be done in light of the time remaining.
The strategic objective in our example is time-bound because it specifies a deadline for achieving the desired sales revenue growth (which is in 6 months).
The deadline creates a sense of urgency. As you approach the deadline, you can compare what you’ve achieved with what’s remaining to determine whether to intensify efforts.
However, without a deadline to look forward to, you’ll likely sit back.
You may also like: How to Achieve Strategic Objectives: Proven Tactics for Success.
2. Balanced scorecard
The Balanced Scorecard is a strategic planning and management tool that provides a holistic view of performance by translating an organization’s vision into a comprehensive set of performance indicators.
A Balanced Scorecard encourages organizations to go beyond focusing on financial growth and using only financial metrics when evaluating performance.
It breaks down the organization’s strategic plan/ vision into four perspectives - financial, customer, internal processes, and learning & growth.
Doing this ensures that all organizational activities align with the overall vision.
Instead of focusing on only financial aspects, you’ll also use customer satisfaction, internal processes, and employee productivity to drive the organization toward its goal.
Below is how to use the Balanced Scorecard to create strategic objectives:
Financial perspective
The financial perspective of the Balanced Scorecard considers how the company looks before stakeholders. It looks at profitability and outlines steps for improving it.
Consider a company with a vision to “Expand market presence.” Using the Standard Scorecard starts with developing strategic objectives related to financial performance.
A good practice is stating a goal, specific objectives/ targets, and performance indicators.
The financial goal will be to increase revenue, with a specific objective like “increase revenue by 10% by year-end.”
Customer perspective
The customer perspective considers how the company looks before customers. It focuses on improving customer satisfaction to drive the company towards achieving its overriding goal.
For the company with a vision to expand “market presence,” after developing strategic objectives for financial performance, develop strategic objectives related to customer satisfaction.
A good goal will be to improve customer satisfaction, with specific objectives like “increase customer satisfaction (measured by NPS score) by 10%.
Internal processes perspective
The internal processes perspective focuses on improving internal operations toward achieving the organization’s overriding goal. It involves activities like enhancing product/ service quality, reducing production costs, improving delivery times, and more.
For the company with a vision to expand market share, the next step is identifying internal processes that directly impact the goal of expanding market share and then developing strategic objectives relating to improving the business processes.
For example, you can have a goal to streamline delivery, with a specific target of improving delivery times by 20%.
Learning and growth perspective
A Balanced Scorecard’s learning and growth perspective focuses on improving employee productivity toward helping the organization achieve its ultimate vision.
It involves activities like enhancing employee skills through training programs, increasing employee engagement and satisfaction, etc.
With a vision to expand market presence, develop objectives related to human capital development to enhance the capabilities of your employees.
A good goal will be to acquire a team with the right skill set, with specific objectives like “hire and onboard 5 product development experts”.
When you’re done with everything, the balanced scorecard will look like:
3. Return on Investment (ROI) method
Return on Investment (ROI) is a financial metric used to evaluate the profitability of an investment relative to its cost. Incorporating ROI in strategic planning means checking that the proposed initiative to achieve your strategic objective is profitable.
Specific steps for incorporating ROI into your strategic planning process are:
Estimate costs
Identify all the costs associated with achieving the strategic objective (direct and indirect costs).
Consider our example strategic objective of increasing sales revenue by 10% in 6 months.
You need to identify both direct and indirect costs associated with increasing sales revenue.
This includes product development and improvement costs, distribution and logistics costs, marketing and advertising costs, salaries and commissions of the sales team, cost of maintaining and optimizing the online sales platform, any costs associated with educating the sales team to enhance product knowledge, etc.
Quantify returns and benefits
Quantify all the benefits you’ll enjoy as a result of achieving the strategic objective. Depending on the strategic objective, benefits may be an increase in revenue, a reduction in cost, a reduction in time, etc.
Whether benefits are cost-related or not, quantify them by assigning them a monetary value.
In our strategic objective example of increasing sales revenue by 10%, simply calculate the estimated increase in revenue.
Calculate the ROI
Calculate the return on investment by inputting your calculated costs (investment) and benefits (returns) values into the ROI formula.
Interpret the result
After calculating the ROI of your initiative, check whether the result is positive or negative.
A positive result means the benefits outweigh the costs, showing that the initiative is profitable.
Conversely, a negative result means costs outweigh benefits, indicating that the initiative is not profitable.
4. Critical Success Factors (CSF)
The term Critical Success Factors (CSFs) is self-explanatory. It refers to specific factors that are critical to achieving business success.
Incorporating CSFs when creating strategic objectives is a strategic management approach that ensures you direct efforts to the most important elements necessary for achieving success.
Specific steps for incorporating critical success factors in the strategic planning process are:
Identify your strategic objectives
The process starts with defining your strategic objectives. So, outline the high-level goals that your organization aims to achieve to fulfill its vision.
Let’s continue with the strategic example of increasing sales revenue by 10%.
Identify Critical Success Factors for the objective
After identifying your strategic objective, the next step is to identify key business activities directly linked to its accomplishment.
Consider our strategic objective of increasing sales revenue by 10%. The CSFs contributing significantly to achieving the company’s strategy may include:
IT: Implement an online sales system
Manufacturing: Improve product quality
Marketing: Increase marketing budget to increase marketing efforts
Sales: Better customer relationships
Employee: Implement incentive programs tied to sales performance to motivate the sales team
Training: Provide comprehensive training to the sales team
Prioritize CSFs
While the identified critical success factors are essential to achieving the strategic objective, they cannot be of equal importance. So, review the CSFs and choose the most impactful on the achievement of the strategic objectives.
For example, while the critical success factors identified above can all move the company toward its objective of increasing sales revenue by 10%, increasing marketing efforts may be more impactful than implementing an incentive program for sales personnel.
The most impactful CSFs should be your strategic priorities- initiatives you’ll focus on to achieve your strategic goal.
Involve key stakeholders
It is good to include both internal and external stakeholders in the identification and review of critical success factors. This ensures a more comprehensive understanding of key elements essential to success.
Also, communicate the critical success factors throughout the organization.
Ensure that everyone in the organization understands the factors affecting the success of strategic objectives and how their roles contribute to achieving the desired outcome.
5. SWOT analysis
SWOT is short for strength, weakness, opportunity, and threat. SWOT analysis is a strategic management tool that helps organizations gain a comprehensive understanding of their strengths and weaknesses, as well as external opportunities and threats.
Integrating SWOT analysis into the strategic planning process will help you craft successful strategies that leverage strengths, address weaknesses, capitalize on opportunities, and mitigate threats.
Steps for using SWOT analysis when developing strategic objectives are:
Identify strengths
Strengths are internal to the organization, so look internally to identify your strengths. To help you identify strengths, determine what you do exceptionally well compared to your competitors.
Your strengths may include a strong brand, a skilled workforce, the use of advanced technology, etc.
The reason for identifying strengths when incorporating SWOT analysis into strategy planning is to develop strategic objectives that use the organization’s strengths to maximum advantage.
For example, if the organization’s strength is a “good relationship with customers,” you may want to develop a strategy that uses this to the maximum.
Identify weaknesses
Like strengths, weaknesses are internal to the organization. So, look internally to identify weaknesses or limitations. Reflecting on past mistakes and checking customer feedback and complaints can help you identify weaknesses.
These could include outdated technology, inefficient processes, relatively poor quality, etc.
The goal of identifying weaknesses when developing strategic objectives is to address internal limitations that may hinder achieving the organizational strategy.
For example, if the organization’s weakness is “late delivery,” you may want to develop a strategy that addresses this (such as improving delivery time by 10%).
Explore opportunities
Opportunities are favorable external factors that can give your organization a competitive advantage. When developing strategic objectives, review external factors for those you can capitalize on.
Market analysis and competitor analysis can help you identify opportunities.
These opportunities can include gaps in competitors’ product offerings, changing consumer preferences, technological advancement, etc.
Evaluate threats
Threats are external factors that can hinder the achievement of strategic goals. When developing strategic objectives, look for these external factors that can cause problems and develop strategies that address them.
Assessing market fluctuations and reviewing competitors’ activities can help you identify threats.
Threats could include economic downturns, changes in consumer behavior, competitive pressures, technological disruptions, changes in regulations, etc.
Create a SWOT matrix
Create a matrix with the identified strengths, weaknesses, opportunities, and threats. The matrix becomes a visual representation of the SWOT analysis.
The SWOT matrix helps you to comprehend the different factors you’re contending with quickly.
A SWOT matrix can be represented as illustrated below:
Link SWOT analysis to strategic objectives
Link the identified strengths, weaknesses, opportunities, and threats to strategic objectives. This involves developing strategies that leverage strengths, address weaknesses, capitalize on opportunities, and mitigate threats.
Consider that the simple SWOT matrix above is for the company with a strategic objective example of increasing sales revenue by 10%.
Linking the SWOT analysis to the strategic objective may produce the following outcome:
6. Cost-Benefit Analysis
Cost-Benefit Analysis (CBA) is also self-explanatory. It is a process that compares the costs of an initiative with its benefits to assess whether the initiative is economically feasible or not.
When developing strategic objectives, incorporating CBA into the process assesses the costs and benefits of strategic decisions.
The steps for incorporating cost-benefit analysis into strategy planning include:
Specify the strategic objective
You must have a strategic objective to begin with. Ensure the strategic objective aligns with the organization’s overall strategy.
Quantify costs and benefits
After specifying an objective, list all the costs (direct and indirect elements) associated with achieving the objective and the benefits (quantitative and qualitative factors) that will result from achieving the objective.
Ensure that all benefits are expressed in monetary terms. If you have qualitative and intangible benefits, assign them monetary values.
Calculation
First, adjust future costs and benefits to their present value to account for the time value of money. Then, compare the discounted costs with the discounted benefits.
Interpret the results
If the benefits outweigh the costs, the initiative is economically feasible and worth pursuing. But if the costs outweigh the benefits, the initiative is not profitable.
Use the CBA’s results to make informed decisions on whether to proceed with the proposed initiative.
7. Key Performance Indicators (KPIs)
Successfully implementing your strategic plans largely depends on knowing how to measure success. This is where Key Performance Indicators (KPIs) come in!
KPIs are quantifiable metrics used to track progress toward a goal. Incorporating KPIs in strategy planning allows you to rack progress toward the objective.
The steps for using KPIs to create strategic objectives are:
Define your strategic objectives
Define the strategic objectives you want to achieve. Ensure that each strategic objective aligns with your overall strategy/ vision statement.
Choose KPIs for your objective
After defining your objective, select the KPIs you’ll use to measure whether you are achieving the objective.
The traditional process of choosing KPIs is long and tedious. It involves many hours of research of company processes and consultation with relevant key stakeholders to determine the best KPIs.
Worse still, it often results in choosing the wrong KPIs, leading to focusing on the wrong things and failing to achieve goals.
Thankfully, you can use strategy management software like Kippy to generate accurate KPIs for objectives automatically.
You simply enter your strategic objective into the tool, and it’ll generate accurate KPIs in seconds. This saves you the time and hassle of selecting KPIs and the risks of choosing the wrong KPIs.
After getting a list of KPIs for your strategic objective, choose the ones that are directly relevant to the objective.
For example, if your objective is to increase customer retention, you may consider selecting a customer satisfaction KPI like Net Promoter Score (NPS).
This is because outstanding customer service creates satisfied customers, reducing customer churn rate.
Set targets for each KPI
Establish a realistic target for each KPI. For example, if your goal is to increase customer retention, and you have selected NPS as your metric, you may set a target like a 10% increase in NPS score over the last quarter.
However, setting targets for KPI may be unnecessary if you use SMART goals. The measurable element of the goal may suffice.
Regular monitoring
Implement a KPI monitoring system. This involves implementing a KPI tracking software that offers dashboards for visualizing KPI status in real time.
Compare KPI performance against set targets, analyze the causes of deviations (if any), and make necessary adjustments to strategies.
Takeaway: Create effective strategic objectives and be closer to achieving your corporate vision
Strategic objectives guide an organization’s actions and decisions toward accomplishing its broader goals.
Incorporating the above-mentioned concepts into strategy planning will help you develop effective strategic objectives that move your organization closer to achieving overall goals.
Streamlining your strategy formulation and management process requires specialized software tools. This is where Kippy comes in!
Kippy is a powerful SaaS product that allows organizations to manage their strategy, objectives, KPIs, and projects. It automatically generates KPIs for objectives, saving you the hassle of manually choosing KPIs and the risk of selecting the wrong ones.
With Kippy, you can obtain accurate KPIs for your objectives in seconds, easily align everyone in your organization with your objectives, track KPI statuses in real time using interactive dashboards, and more.
Want to streamline strategy management and be closer to achieving your ultimate goal? Use Kippy as your strategy management tool. Book a demo with us today, and see how Kippy can help you.