Objectives and business decisions

A SMART objective is one that is Specific, Measurable, Achievable, Realistic and Time-limited — for example, 'increase sales by 10% within one year', which is precise, quantified and has a deadline.

Communicating objectives gives employees a clear sense of direction and purpose, so they understand what the business is trying to achieve and how their own work contributes. This motivates staff and helps co-ordinate their efforts toward the same goals. If objectives are not communicated, employees may be confused, duplicate work or even act against the firm's aims, reducing efficiency.

The first benefit is that SMART objectives can be measured and monitored. Because they are specific, quantified and time-limited, managers can compare actual performance against the objective at the deadline and see clearly whether it has been achieved, allowing corrective action if progress is off track.

The second benefit is motivation. Realistic, time-bound targets give employees a clear, achievable goal to work toward and a sense of progress, which is more motivating than a vague aim. Staff can see exactly what is expected and when.

Together, these benefits make SMART objectives far more useful than vague ones, which cannot be measured and so cannot guide or motivate effectively.

A business's objectives change as both its own situation and its environment change. The most important internal reason is the firm's stage of development. A new business faces high risk and limited cash, so its priority is survival — simply staying in business. Once it is established and survival is secure, it can pursue more ambitious objectives such as growth, increasing market share or profit, which would have been too risky at the start. Success in one objective therefore naturally leads to setting the next.

Objectives also change because the external environment is dynamic. A recession or a sharp rise in costs may force a growth-focused firm back to cost control and survival. New competition may make defending market share the priority, while new laws or social expectations may add environmental or ethical objectives. Technological change can open new objectives (e.g. moving online) or make old ones obsolete.

Therefore objectives change because the firm's internal circumstances (stage, resources, past success) and its external environment (the economy, competition, technology, regulation) both evolve. Keeping objectives fixed would leave the business pursuing goals that no longer fit its situation — so regularly reviewing and updating objectives is essential.

Communicating objectives clearly to the workforce can be very important. When employees understand the objectives, they gain direction and purpose and can see how their own work contributes, which improves motivation and co-ordination across departments. Clear communication also allows staff to be set meaningful targets and to take ownership, and it reduces wasted effort. Poor communication, by contrast, can cause confusion, duplicated work and resistance, with employees pulling in different directions or even working against the firm's goals — so clear communication helps ensure objectives are actually achieved.

However, its importance should not be overstated. Communicating objectives clearly is necessary but not sufficient for success. Objectives must also be realistic and well-chosen: clearly communicating an unachievable or wrong objective will not help and may demotivate. The way objectives are communicated and whether staff are involved matters as much as clarity — imposed targets, however clear, can reduce buy-in. And other factors (leadership, pay, resources, the market) also drive performance.

Judgement. Clear communication of objectives is important but works only alongside other conditions. It is most valuable when the objectives themselves are SMART and realistic, when communication is two-way and involves staff, and in larger organisations where informal understanding is impossible. In a tiny firm where everyone already shares the goals, formal communication matters less. The most defensible conclusion is that clearly communicating objectives is a necessary foundation for aligning and motivating the workforce, but it delivers results only when the objectives are sound and communication is genuine and two-way — clarity alone does not guarantee success.

Business ethics are the moral principles guiding what a business considers right and wrong. How far ethics should shape a firm's objectives and activities is debated, and the answer depends on the firm's situation.

The case that ethics should strongly shape objectives. Acting ethically protects and builds reputation, which is increasingly valuable as customers, employees and investors pay attention to how firms behave. Ethical objectives — fair pay, ethical sourcing, lower emissions — can attract and retain customers and talented staff, reduce the risk of scandals, boycotts and legal penalties, and so support long-term profit. In this sense ethics and profit often align over time, and ignoring ethics can be commercially dangerous: exposure of unethical practices can destroy a brand. There is also a straightforward moral argument that businesses have responsibilities to society and the environment, not just to shareholders (CSR and the triple bottom line).

The case that ethics should shape objectives only to a degree. Ethical choices frequently raise costs and reduce short-term profit — using more expensive ethical suppliers, paying above-market wages, investing in cleaner technology. This can conflict with the shareholders' objective of maximum returns, and in fiercely price-competitive markets a firm that loads on ethical costs may be undercut by rivals and struggle to survive. Some argue a business's primary duty is to be profitable (within the law), and that excessive ethical objectives risk the firm's competitiveness. There is also the danger of 'greenwashing' — claiming ethics for image while not delivering — which can backfire.

Weighing it up (criterion). How far ethics should shape objectives depends on how much the firm's customers and stakeholders value ethical behaviour, the competitiveness of its market, and its time horizon. Where customers value ethics and the firm can take a long-term view, strong ethical objectives are both right and commercially sensible. Where the market is price-driven and customers are indifferent, a firm may have to limit ethical costs to survive — though it must still meet legal and basic moral standards to protect its reputation.

Judgement. Ethical considerations should shape a business's objectives and activities to a significant extent, because reputation, stakeholder expectations and long-term profit increasingly depend on responsible behaviour, and because firms have genuine responsibilities beyond profit. However, they should not be pursued regardless of cost or competitiveness: the appropriate degree depends on the market and the firm's ability to bear the cost. The most defensible conclusion is that ethics should be a core influence on objectives — never overridden where it risks reputation or breaks the law — but balanced against commercial survival, so that, for most firms, the right answer is 'to a large but context-dependent extent', with ethics and long-term profitability usually reinforcing rather than opposing each other.