If you are in a management position or aiming to get into one, you'll have heard about the 5 performance objectives.
If you are in a management position or aiming to get into one, you’ll have heard about the 5 performance objectives. For an organisation, they’re valuable ways to stay focused, achieve goals and be successful. However, the common understanding of the 5 performance objectives is also fraught with misconceptions and buzzwords.
In this post, we’ll give you a condensed guide to what the 5 performance objectives are really about. We look at the “top 5” that you’d learn about in business school.
What is a performance objective, anyway?
Before you get inundated with dozens of buzzwords about what the 5 key business objectives are, let’s take a step back. What exactly is a performance objective, and why should you care about it?
A performance objective is a fancy word in the field of operations management. At a company-wide level, a performance objective is a singular goal that enables the organisation to plan, organise and execute to achieve a predetermined result.
Think of it this way. If you’re a CEO and you want your business to succeed, what are the areas that you should focus on? What types of activities should you promote so that your company is financially viable and successful? The answers to those questions are your performance objectives.
What are the 5 performance objectives?
Over time, academics and experts have agreed about 5 performance objectives that apply to most organisations. They are:
Cost. You’re probably not surprised to find this financial indicator on this list. The lower the cost of business operations, the lower the price can be for customers. Cost is one of the fundamental elements of competition, and so it’s an attractive performance objective to almost every business model out there.
Quality. It’s all about “doing things right.” Quality is how a company can maintain consistency in meeting customer expectations. It can make or break a company’s product or service because it’s frequently the thing that is most visible to customers. Does the product work like it’s supposed to? Is a customer happy with a service? Moreover, inside an organisation, high-quality operations can also lead to reduced costs and more dependability.
Speed. Speed is a massive part of a customer’s decision-making process. The faster they can receive a product or service, the more likely they are to purchase it. In that way, the speed at which a company can meet a customer’s needs can increase sales. It can also reduce the reliance on inventories and reduce other risks such as forecasting errors or costly inputs.
Dependability. When a company meets its promises and commitments, it is perceived as dependable. And that’s a great thing for a business to strive for – it increases trust with customers and saves time and money in operations.
Flexibility. In business, flexibility means the ability to alter operations in response to changes. That could mean increasing production volume to meet a rise in demand or introducing new services to meet shifting customer preferences. Flexibility as a performance objective can speed up response time, save cost and promote dependability.
To read more about the 5 performance objectives, we suggest you pick up an introductory business textbook. We chose Operations Management 7th Edition by Slack, Brandon-Jones and Johnston (2013). You can find it here. A business coach can help you identify what the performance objectives are for your business.
Related: What is performance coaching?
What happens when you don’t set performance objectives?
In reality, there are lots of performance objectives that can be a priority for your business. These 5 are just the ones that have been standardised by years of study and analysis by business schools and experts.
Whether you know it or not, you’ve probably worked in an organisation that used performance objectives in some way.
So, suppose you’re still wondering what’s so great about the 5 performance objectives. In that case, it’s perhaps easier to understand them by considering what would happen if a company did not use any form of performance goal-setting. Without clear performance objectives, a company might exhibit some of the following bad characteristics:
- The company’s mission, or reason for existing in the first place, is unknown.
- All business-related activities are done without purpose or meaning.
- Managers lack an understanding of how to prioritise the time of their employees.
- No employee profiling has been done, so there’s a lack of awareness of employees skillsets.
- When challenges are faced, those roadblocks are challenging to overcome.
- Important operational decisions are made slowly.
- Promises to customers are frequently broken.
- Customers complain about price or quality.
- Collaboration with colleagues or other departments is challenging.
- Work is almost impossible to get done because of competing priorities.
- Job responsibilities and opportunities are distributed unfairly across the organisation.
These characteristics don’t sound very helpful for a business, do they? Unfortunately, the symptoms are all too common at many workplaces. If even a few of them are apparent, it could be a severe cause for alarm that your company lacks a clear focus or a reliable plan for setting performance objectives.
Tips for using the 5 performance objectives in your everyday life
Why study performance objectives, anyway? It’s not just essential to know them for your Business 101 exam. There are also real-world applications.
What’s often overlooked by traditional instruction about performance objectives is just how important they are for a business’ everyday operations. A company is misguided if it hurriedly slaps together 5 important objectives into an annual plan and then puts them up on the shelf to collect dust.
Instead, performance objectives should be part of the everyday operations of a business. Executives, managers and all other staff should have at least a cursory knowledge of the goal-setting process so that they can find value in their work and contribute to the company’s overarching goals.
Here are some of our favourite tips and tricks to apply performance objectives:
- Create metrics and set targets to monitor your performance toward meeting your company’s main objectives.
- Be transparent about your company’s performance objectives. Make sure every staff member is aware of how their efforts contribute to the goals.
- Make sure there is a single “truth” about your performance objectives. Prevent variations from being created in different departments by publicising them to the entire organisation.
- Continue the dialogue about performance objectives throughout the entire year. Ensure that executives and managers talk about objectives and make them a year-round priority.
- Set up rewards (and consequences) for a meeting (or failing to meet) the objectives. Doing so ensures that the performance objectives are part of the daily operations, not just left to high-level strategy.
Making performance objectives work for you
A basic understanding of performance objectives is an integral part of your daily professional life. That’s true whether you’re an entrepreneur who is interested in improving the operations strategy of your business, or a manager who needs to understand your company’s performance plan.
Just remember that while a business can emphasise a wide array of performance objectives, the top 5 most agreed-upon goals are cost, quality, speed, dependability and flexibility.
By integrating those goals into your business’ planning exercises, you’ll be well ahead of countless others. Just don’t forget to write them down, commit to them, and continue the dialogue about them as part of your everyday life at the workplace.