Traditionally, business activities have been planned and measured with a very strong focus on financial performance. On
the one hand, managers may define both financial and nonfinancial objectives, while on the other hand they might be
interested only in the outcome of the financial measures. This misalignment between objectives and measures leads,
sadly, to undesirable yet predictable behavior.
The modern enterprise does not only have to be competitive financially, but to be so on a variety of different fronts.
Business goals must define more than just financial measures. They must also focus on, for example, employee
satisfaction or customer success. Simply defining different business goals is not enough to ensure success, because
certain goals might be measured or enforced more than others.
Modeling business goals provides a technique for considering how the business strategy should be implemented in the
short- and long-term and for defining a balanced set of measures to ensure that business processes support the
The question that arises from this issue is: How do you implement strategy, particularly one that could require radical
Business strategy defines the manner in which the organization should interact with its environment, so as to fulfill
its purpose. As such, business strategy is essentially focused on the external perspective of the organization, rather
than internally managing the organization. Business strategy and business goals are closely related: Business goals
define what needs to be achieved to realize a higher-level goal, while business strategy provides the boundaries within
which these goals will be defined. Strategy does not, however, prescribe specific goals.
Strategy is about positioning. In military terms, strategy organizes the preparation for battle and the results
of the battle, and ensures that results of a battle contribute to achieving the purpose of the war [CLA97]. The battle itself is a tactical affair. In business, strategy describes the
desired competitive position of the organization. The organization can fulfill its purpose once it finds itself in a
sustainable competitive position. Business goals describe what must be achieved to reach that desired competitive
position. Both business strategy and business goals are concerned with what must be achieved and not how it will
Kenichi Ohmae defines strategy as being anything that gives an organization sustainable competitive advantage [OHM91]. Business goals should therefore focus on what provides competitive advantage
to the organization, for only this is strategic. We can conclude that business goals must define what must be achieved
in order to reach a sustainable competitive position.
Business goals are usually high level and have a long-term focus. However, business goals need to be translated to a
concrete, measurable level before they can be used to manage the activities of the business. Such a measurable and
time-constrained business goal is often referred to as an objective. Business goals therefore need to be arranged in a
hierarchy, with each business goal (or objective) traced back to the higher level goals it supports. In [KAP96] Kaplan and Norton explain, "Without such linkage, individuals and departments
can optimize their local performance but not contribute to achieving strategic objectives."
While Kaplan and Norton introduce the concept of linkage, they do not supply any further notions or methods to support
their concept. It is imperative to obtain clear insight into this hierarchy of business goals and how it is
supported by the activities of the business (as described in the Business Use Cases). This allows for rapidly
propagating changes in direction from the strategic level downward. This ability to rapidly change the direction of the
entire operation is called strategic agility, and it allows the organization to react to changes faster than its
Here is an example of a business goal hierarchy in a payment services organization:
The high-level business goal Customer Intimacy has been translated to business goals at a lower level, which are more
recognizable to individual departments within the organization. By defining these more concrete business goals, the
problem of objectively measuring customer intimacy is solved. Sometimes it may be necessary to translate one or more of
these lower goals further.
Goals are useless in themselves. They must be translated into action in order to be meaningful. Every business goal
should be directly supported by at least one business process, or should be further defined in terms of more concrete
It has always been difficult to define a business strategy and then derive objectives in support of this strategy for
different parts of the organization. Business processes in the modern enterprise are integrated and cross-functional,
and this actually makes the process of allocating business goals easier than before. Business goals are allocated to
parts of the organizational in terms of these integrated business processes, which add value to stakeholders of the
business. The contribution of one particular part of the organization to customer satisfaction, for example, can be
defined and measured.
The answer to the question posed above must be sought in a method that gives the user insight into the course of action
taken. The method must also indicate to the user the consequences of any action taken. One such method is the
Balanced Scorecard (BSC) by Kaplan and Norton [KAP96]. The BSC
defines a technique for translating business strategy into business goals and measures, thereby ensuring a balanced
focus on achievement of all goals.
Kaplan and Norton write: "Front-line employees must understand the financial consequences of their decisions and
actions; senior executives must understand the drivers of long-term financial success. The objectives and measures of
the Balanced Scorecard are ... derived from a top-down process driven by the mission and strategy of the business."
The theory behind the BSC is quite logical:
Know where you want the organization to be in the future (desired competitive position).
Know the business and the sort of organization required to reach that position (purpose, or mission).
Define the relationship between the mission and the activities of the business (business goals).
Define more precisely what is to be achieved and when the results are to be accomplished (operational objectives).
Business goals are scored using four perspectives. It could be concluded that there are only four types of business
goals. However the method of scoring and thus the types of business goals is arbitrary. An organization is free to
define more types as they are required.
Financial Perspective-Indicates what has happened in the past and measures what should be done to achieve the
financial objectives and check the performance.
Customer Perspective-Looks at the present and indicates what should be done to improve customer relationship.
Learning and Growth Perspective-Looks at the future and what needs to be done to maintain growth and achieve
Internal Process Perspective-Looks at the present and indicates which internal processes should be performed
with excellence for customer and shareholder satisfaction.
An important feature of the BSC is that there should be a cause-and-effect relationship between all the perspectives
and hence also between all the identified business goals. The following simple but effective example illustrates this.
Learning and Growth
Have sufficient qualified staff.
Adequately execute processes.
Satisfy the right customer.
Maintain or improve business profitability.
This is an iterative process, because maintaining or improving profitability will enable the organization to keep
employing sufficient qualified staff. As Kaplan and Norton indicate, "If you cannot measure it, you cannot manage
it." It is imperative therefore that business goals can be measured objectively, either quantitatively or
qualitatively. (See the next section.)
Just the intention to achieve goals is not enough to ensure that the business strategy will be executed. People must
receive feedback on their actions in order to learn and improve. By measuring the achievement of business goals,
business activities can be increasingly aligned with strategy. In [ERI00],
Eriksson and Penker identify quantitative goals and qualitative goals. Quantitative goals are easy to measure, because
some attribute must have a particular value at some point in time. Qualitative goals, however, are more subjective ,and
human judgment is needed to determine whether the goal has been achieved.
Measurements are useful for a number of reasons. First, measurements provide an indication of how successfully the
business strategy is being implemented at various levels of the business. Second, measurements give insight into the
effectiveness of goals. Finally, measurements provide a feedback mechanism with which minor adjustments can be made to
the strategy based on operating conditions. This feedback can also be accumulated and aggregated over a long period
with which the strategy can be adjusted more significantly.
If business goals are not translated to sufficiently measurable levels within the organization, they may remain too
abstract for employees to relate to, which will make it very unlikely that people will strive to achieve the goals in
their daily tasks.
The current definition of Artifact: Business Goal includes the details to measure the goal
in the future whereas a more complete model commonly used in strategy modeling is shown in the figure below.
Goal or sub-goal: Organizations define goals to meet their mission and to set strategic direction. In SOMA, the
term goal denotes a business aspiration starting at a high level. For example a high level goal could be to increase
revenue. This goal can be decomposed into sub-goals such as "increase revenue from <x>", and "increase revenue
KPIs: KPIs are used to determine how well a business is meeting its goals, or to assess the level of performance
of business processes. For example, for the goal "increase revenue", a specific KPI could be "increase revenue by 5%
during the next fiscal year". This provides a specific way to determine if the goal has been met.
Metrics: Metrics identify the type of measurements that need to be collected to assess the state of the KPIs.
For a KPI such as "increase revenue by 5% during the next fiscal year", a metric could be "record the revenue from all
revenue generating transactions". Measurements would then need to be taken of each relevant transaction, across all
systems that support those transactions. An implication of this is that all of the individual measurements dictated by
the metric would need to be aggregated and reported in a meaningful way so that it can be determined if the related KPI
has been met.
Due to the diverse nature of business goals, they may appear to conflict with one another. A typical example is for
call-center employees to service many customers in a specific time (throughput), yet deliver high quality of service to
each customer (which takes time). If the call-center manager rewards the employee with the most calls, the service
level will drop. On the other hand, if the manager rewards the employee with the most satisfied customers, the
throughput will drop. Volume versus time or quality versus cost are recognizable goal-conflict patterns to which
Eriksson and Penker refer. They also described a technique, using an association stereotyped
<<contradictory>>, for explicitly modeling conflicts between business goals.
Managers must be aware of this very common dilemma when setting business goals. However, the strategy of an
organization does not stand or fall on any single business goal, much the same as a war is not won or lost by a single
battle. The direction of the organization is derived from the sum of all actions taken. It may therefore seem that a
business goal is counter-productive, but when the goal is measured as one part of the whole, the sum is actually
positive. This means that localized inefficiencies may actually contribute indirectly to the business strategy.
Nonetheless, not performing a minor "course correction" (because for example, somebody is more interested in the bonus
as a result of the performance of his or her own department) can put the organization as a whole at a disadvantage.
Imagine a large furniture store that sells reasonable quality furniture at a reasonable price to the very large
middle-market. The store's showrooms border on a warehouse at which customers can directly pick up the item they have
purchased and take it with them. Alternatively, customers can arrange to have large items delivered. A business goal
hierarchy for this company may look as follows:
Note that the business goal Reasonable Quality is sufficient to retain existing customers but will not serve to attract
new customers. People will not go to shop somewhere because the quality is no less than competitors. People will be
attracted to shopping there because prices are lower and it is convenient.
It may have been determined that product quality meets customers' expectations and that no quality improvements are
therefore necessary. However, facilities may need to be improved. The business goal Improve Facility Quality may be
further divided into things like Sufficient Parking, Clean Restrooms, and Multilingual Signs.
Remember that it should be possible to measure business goals; otherwise they may need to be refined further. Prices
can be objectively compared to competitors' prices, whereas convenience for customers is very difficult to measure.
Therefore, customer convenience has been subdivided into Accessibility, Immediate Availability, and Opening Times,
which are more concrete ways to measure customer convenience. Opening Times can be optimized, for example, by measuring
the number of people in the store during every hour of the day. Accessibility can be (partly) determined by the number
of payment methods available to customers. The immediate availability of products is defined by the stock-on-hand,
which can be measured by the percentage of back orders directly requested by customers, and the delivery time, which
can also be objectively measured.
An organization has a vision, which is translated into a strategy. The strategy should be met by the business
goals that are ultimately measured in the operations of the organization. The vision is implemented by business workers
and business actors interacting to realize the business use cases. Business goals are the "glue" between the business
strategy and business use cases. If they are correctly defined, they will give the organization the required insight to
keep on course or to change course as required.
Business goals must be defined at a sufficiently high level in order to focus the entire organization on the vision.
Objectives and measures must be defined at a sufficiently low level within an organization in order that employees can
identify themselves with them. Business goals must be measurable to be effective, either quantitatively or by the sum
of subgoals (qualitatively).
There are a number of techniques for defining and measuring business goals, one of which is the Balanced Scorecard.
Whatever technique is used, however, it should be applied as a management tool and not solely as a measurement