The right performance objectives will help your business or team stay focused, purposeful and competitive.
However, knowing what to aim for is difficult and many businesses fail to set effective goals. A survey of small business owners found that only 5% met all of their objectives in the previous 12 months, while nearly 65% met half.
Set the wrong company-wide objectives, and you’ll waste valuable resources chasing them. Get overly ambitious, even with relevant goals, and you’ll likely fall short and damage team motivation.
In this article, we’ll help you find the perfect balance. We’ll answer the question “what are performance objectives” (with examples) and show you how they work alongside other goal-setting methods to boost team performance.
What are performance objectives?
Performance objectives are goals with specific results, set by employers or managers, that contribute to the success of a business or team.
They provide teams with a clear and structured understanding of what they need to achieve and allow business leaders to evaluate organization-wide performance.
As well as providing consistent direction, performance objectives are powerful motivators when they’re aligned with employees’ more immediate tasks and goals (such as objectives and key results, or OKRs). A McKinsey study reported that 91% of companies with effective performance management systems link their employees’ individual goals to wider business priorities (i.e. performance objectives).
5 examples of performance objectives that support business growth
While all organizations have their own priorities, many business strategy experts agree that five key performance objectives are useful to all businesses.
Quality
Speed
Dependability
Flexibility
Cost
With an understanding of these and a few examples in mind, you can start to create a more detailed, bespoke list of effective targets for your own business.
1. Quality
Quality is the clearest indicator of how well your business fulfills its purpose. It’s a fundamental aspect of performance that shows in the effectiveness of your products and directly impacts brand reputation, running costs, sales and customer loyalty.
The overarching question to answer when setting quality-based performance objectives is: does your product, service or operation consistently work as intended?
One way to measure this is to track warranty expenses. According to APQC data (an organization that benchmarks performance data), the median warranty cost for a U.S. business is 2% of sales revenue (e.g. $1,000 for $50,000 of sales). You could use this figure to benchmark your own quality performance and set an objective to reduce warranty spending by a certain deadline.
2. Speed
Speed is the turnaround time between customers ordering a product or service and receiving it, and research suggests it should be high on your priority list.
PwC reports that 56% of consumers look for efficient delivery or collection services when shopping online, making it the second biggest draw behind cost. Quickly and conveniently navigating a website to find products is also a top-three factor for 30% of online shoppers.
As well as positively impacting conversion and customer retention rates, a faster, more efficient sales process can free up resources to reduce your running costs.
For an e-commerce business, a speed-based performance objective could be to reduce the average amount of time it takes from receiving an order for it to be dispatched to the customer.
3. Dependability
Dependability is your business’s ability to meet its promises and commitments. It incorporates some of the other objective types in this list, namely quality and speed.
If you promise to deliver products of a certain standard within a specific timeframe and consistently do so, you’ll be perceived as dependable by your audience and are more likely to retain customers.
Research shows that dependability also contributes to brand advocacy. Sitel reports that 49% of consumers would share a positive brand experience online to encourage others to buy from the same seller.
A performance objective in this area, therefore, could be to improve your business’s average score on a review platform like Google or Facebook.
4. Flexibility
Adjusting operations to meet customer needs is a crucial part of business success.
At the simplest level, a restaurant might remove allergens from a customer’s dish or an online retailer could offer a range of delivery options.
To capture their target audiences’ attention, loyalty and advocacy, brands must also be proactively flexible by delivering personalized services. Accenture reports that 91% of consumers are more likely to shop with brands that recognize and remember them and provide relevant promotions and recommendations.
Not all flexibility requires human attention, as in many cases, brands can create bespoke experiences using automation (e.g. personalized promotion emails), but flexibility-based performance objectives will help you ensure you’re ready to meet every customer requirement.
5. Cost
PwC’s research tells us that cost is the top priority for online and in-store shoppers, so it’s a key area for goal-setting.
The right cost-focused performance objectives will help you streamline production costs to keep buyer-facing prices low and appealing. That should allow you to close more sales and retain more customers.
To start, look at what you’re spending on creating one product (or delivery of a specific service) and set a target to reduce that cost by a certain deadline. It might be that you can use a cheaper material without reducing product quality or negotiate for a better deal with your supplier.
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How to set effective, data-driven performance objectives for your business
All performance objectives are different in detail. The exact targets you aim for might be influenced by the size of your company or team, your industry, previous success or available resources.
However, most performance objectives follow a similar pattern.
Using the SMART methodology as a checklist for effectiveness
You can use the SMART methodology as a checklist to validate your planned goals. This acronym stands for specific, measurable, attainable (or achievable), relevant and time-bound.
Specific: Write down a clear definition of what the objective is and how you plan to achieve it
Measurable: Make sure you can measure your progress and success
Attainable: Ensure the target is feasible and not overly stressful or challenging to reach
Relevant: Confirm it aligns with other business performance goals
Time-bound: Set up realistic a time frame in which you want to achieve your goal
It’s simple to use smart goals for performance reviews. Examples of your next performance objective could include:
Our objective is to [achieve specific objective] by [this deadline]. [The company, individual or team] will achieve this by [the actions you’ll take]. Achieving this goal will benefit us by [result].
To use a quality-based performance objective example:
Our objective is to reduce warranty spending from 2% to 1% by the end of Q4 2023. The company will achieve this by carrying out extra quality checks during production. Achieving this goal will benefit us by improving customer satisfaction and retention.
Four more tips for setting effective performance objectives
1. Collaborate: When setting your performance objectives, consider who might be involved in achieving them and collaborate with those people from the start. This will make it easier to determine whether what you’re aiming for is feasible and what actions are necessary to get there.
2. Monitor results: Performance objectives should be well-defined at the start but can evolve over time. Set time-based milestones and monitor progress so you can change your approach if a tactic isn’t working or you spot another opportunity.
3. Expect challenges: Some business objectives won’t go to plan, but falling short doesn’t have to mean failure if you’ve learned something useful from the process. If you achieve every objective without issue, be more ambitious in the next goal-setting process.
4. Embrace technology: Customer relationship management (CRM) software, project management applications, spreadsheets and automation tools will help you set useful objectives, monitor progress and measure the impact of your actions.
Achieving company-wide performance objectives and boosting efficiency through smaller-scale goal-setting
Performance objectives are usually based on broad business improvements, like reducing X cost by Y, increasing a profit margin or improving customer satisfaction. However, the various actions needed to achieve these objectives are usually much smaller and involve multiple people.
When multiple people or teams contribute to the process, each will need their own smaller targets to ensure they’re pulling in the same, useful direction towards your desired end result.
You can set these smaller targets, track progress and keep teams and individuals accountable using OKRs and regular employee performance reviews.
The OKR methodology is a collaborative goal-setting practice that companies use to set business goals, measure results and assess team member performance. They often cascade down from department heads to managers and individual employees and typically comprise a performance-based objective with two to five supporting key results (key performance indicators, or KPIs).
The team at Mind Tools draws on Daniel Pink’s book Drive to explain how linking smaller measurable goals like individuals’ OKRs to wider objective performance targets can motivate staff:
For example, for a wider performance objective of increasing the company’s average deal size by 10% in the next 12 months, you might set individual targets as part of each sales rep’s OKRs to close at least three deals worth $X over the next quarter.
To keep your reps working towards these objectives without too much oversight, you could encourage them to conduct self-performance reviews. Self-performance review goal examples could include getting the amount of deals to each stage to close an average of three deals a quarter.
If you aim to improve or gauge dependability, you could set targets for each team member to obtain 10 customer reviews over the next quarter. Every OKR task your team ticks off is a step towards your company’s wider performance objective.
How to track performance objective progress and success
You can use a mix of technologies to track the progress and monitor the impact of company-wide performance objectives and smaller targets.
By populating sales dashboards with data from your CRM software, you can identify opportunities to create new objectives and amend existing ones, determine the success of recent actions and see which individuals and teams contribute to your wider goals.
Sales metrics that act as objective performance measures include:
Customer satisfaction levels
Lead response times
Deals closed
Average order value
Opportunity win rate
Meeting time spent
Learn more about tracking sales goals in our article on sales metrics.
Final thoughts
Performance objectives are key elements of business growth that every entrepreneur, department head, manager and employee should understand.
The goal-setting process takes time, planning and plenty of data but together, the right objectives will give direction, purpose and accountability to everything you do as a business or team.
