How to Define Business Objectives for an Organization the best way

How to Define Objectives
How to Define Objectives

The previous article explained that the business objectives define the purpose, direction, and goals of a business and provide a roadmap for the company to achieve its goals. Have you ever wondered how to define business objectives for a high-performing functional organization the best way from function to action? Well, as someone who understands the hierarchical process involved in setting these objectives, let me explain.

A functional organization is a widely accepted organizational structure where personnel are grouped based on their area of expertise and execute tasks pertinent to their respective functions. This structure causes a hierarchical process involving multiple departments, managers, and employees so that levels of business objectives can be found out.

How to Set up Objectives for an Organization the best way
How to Set up Objectives for an Organization the best way

Overall Business Objectives

The overall business objectives are based on the company’s mission and vision, and they typically focus on long-term goals and outcomes.

At the highest level of the organization, the CEO and/or board of directors determine the overall business objectives, which serve as the organization’s North Star. These objectives should be ambitious, measurable, and align with the company’s mission and vision. I like to think of this level as a football game, with the overall business objectives serving as the end zone. The CEO and board of directors are the coaches, who have set the ultimate goal, and the rest of the organization are the players who have to work together to score the touchdown.

Functional Objectives

The overall business objectives are then broken down into functional objectives. Functional objectives are specific to each department and align with the overall business objectives. Each department should have its own set of objectives that will help the company achieve its overall goals. Department heads or managers determine these objectives, which help the company achieve its overall goals. It’s like a relay race, where each department is responsible for carrying the baton and passing it on to the next department until the organization reaches its overall objective.

Departmental Goals

Once the functional objectives have been identified, departmental goals are set to align with the objectives. Departmental goals should be realistic, measurable, and achievable within a specific timeframe. Department managers work with their teams to set these goals, ensuring they align with the functional objectives. It’s like a puzzle, with each department’s goals fitting perfectly together to form the bigger picture.

Individual Objectives

Departmental goals are further broken down into individual objectives. This is where managers work with their employees to set specific, measurable goals that are designed to help the employee achieve the departmental goals. Individual objectives should be challenging, yet achievable, and should be directly linked to the departmental goals.  It’s like a game of chess, where each employee is a pawn that must be moved strategically to help achieve the bigger goal.

Performance Metrics

Once individual objectives have been established, performance metrics are determined. Performance metrics track progress toward achieving individual and departmental objectives. These metrics should be objective, measurable, and aligned with the objectives. For example, a sales team’s individual objectives might include achieving a certain number of sales. And the performance metric could be revenue generated from those sales. It’s like a scorecard that helps keep track of progress and performance toward the ultimate goal.

Monitoring and Evaluation

Regular monitoring and evaluation are critical to adjust objectives or performance metrics as needed. Managers provide regular feedback to employees, and evaluation is based on agreed criteria and not subjective. It’s like a coach providing feedback and making adjustments to the game plan based on how well the team is performing.

In conclusion

By following these steps, a functional organization can determine its levels of business objectives. It ensures that everyone is working toward the same overall goals. It also helps track and evaluate the organization’s performance and make any necessary adjustments to meet the desired objectives. However, some argue that this hierarchical approach can lead to a lack of creativity and innovation. In this approach employees may become too focused on achieving their objectives rather than thinking outside the box. Counterarguments suggest that organizations can mitigate this. It can be by encouraging employees to collaborate and share ideas across departments, fostering a culture of innovation and creativity.

Overall, while a functional organization’s hierarchical approach may not work for every organization. It can be an effective way to ensure everyone is working toward the same goals. It can be a useful framework for achieving success.

Read more business articles here.


  • Ram

    Ram, the author of "Business Development: Perspectives" on Amazon Kindle, has a wealth of experience in business development across multiple industries. He has over 30 years of experience in commodities, FMCG, and software industries, and has held various leadership positions in these sectors. In the commodities and FMCG industries, Ram served as GM of Business Development for southern India, where he successfully established new businesses and expanded existing ones. In the software industry, he was Regional Director of Business Development for Asia, where he was responsible for expanding the company's presence in the region. Ram has a proven track record of turning around loss-making ventures and establishing successful businesses. Ram has also served as the Director of Industry Partnerships and IT Blog editor at a software company, showcasing his expertise in technology and industry partnerships.

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