Understanding your objectives is the most important part of business planning, and of the risk management process.
The first and most important ‘risk’ is that you don’t understand the objectives fully. An incomplete understanding could mean that your unit works hard to go in the wrong direction, or overlooks something that will turn out to have been very important.
Knowing where you’re going is necessarily more important than wondering about what might take you off course.
To deliver confidence in your unit and its business plan, you start the ‘risk’ work by validating the unit objectives. You re-validate them by re-generating them, using a method specifically designed for risk management. The method is also excellent if you haven’t yet defined the objectives for the business plan.
You end up with a set of objectives and a set of potential outcome pictures for each of those objectives. The potential outcome pictures range from best through to worst imaginable.
The outcome pictures show your boss, and anyone else who cares, exactly what you’re expecting to deliver and what else might happen. They also show the disappointments and nightmares from which you are protecting everyone, and that you care about results beyond the end of the current planning year. All of that should go a long way to justifying your unit’s existence and the resources it consumes.
‘Risk’ is all about those objectives. In this guide, and throughout Clear Lines on Audit and Risk, risk is understood precisely as the effect of uncertainty on objectives, the definition of risk in the international standard ISO 31000.
Work already done on your business plan will make this re-generation of objectives relatively easy, but still re-assuring. You reconcile the original business plan objectives later. The risk-based re-start on objectives will validate the business plan.
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When considering objectives, it is customary to say that objectives should be SMART: Specific, Measurable, Achievable, Realistic, and Time-based. In this approach, you will get to each of the SMART elements you need, one step at a time. That’s SMART enough. There is a danger that the easily measurable objectives will take priority over the important objectives. That would be a win only for the measurement police. The steps in this guide continually re-emphasise the important over the measurable. |
The objectives are the outcomes that the unit delivers for the organisation.
The objectives are what the Board, CEO, and your boss want in exchange for funding your unit.
The boss is as much the owner of your objectives as you are. The boss may be involved in clarifying those objectives, perhaps more than you are involved. At the minimum, you should make your proposed objectives available to the boss, so the boss has an opportunity to respond to any differences of perspective.
What you and your team want for your unit is important – to you and your team. When looking your boss calmly in the eye, the conversation will be about assuring outcomes – for the organisation. Not so much about outcomes for you.
It is a common mistake to think of risk in terms of how much your unit and your business plan might be messed up. The more important dimension of risk is how much your unit can mess up the organisation and its stakeholders. (This point is explored again within drawing pictures of different outcomes on each objective.)
To create a solid list of objectives you will answer some big questions, and put those answers into a precisely engineered structure. The steps are detailed below. The initial answers to the big questions will come fairly easily, but the precise structuring stage will throw up further questions. To get a good result you will loop back repeatedly from structuring to answering questions, then apply some further review and structure, and so on.
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If your unit is several levels removed from the CEO, you don’t need to spend much time on the enterprise objectives. The objectives that matter for you are those you deliver to the boss, the one at the next level up from your unit. This guide assumes that you can have useful discussions with your boss about what the organisation really needs. If that isn’t true for you, you may be more concerned about risk to your own position. In your position, the objectives are what your unit needs to achieve, and to avoid, in your own interest. The unit objectives will look almost the way they would have looked had you discussed them nicely with the boss. |
Big questions: You can find the objectives by asking about your unit’s benefits, costs, dangers and capabilities.
Ask each of these big questions. There are multiple answers for each question. Those answers are your objectives.
- Benefits: What does the organisation expect the unit to deliver in exchange for the cost of maintaining it?
- Costs: What costs does the organisation incur in maintaining the unit?
- Dangers: What unintended consequences could arise from the unit’s activities (and are best avoided)?
- Capabilities: At the end of the plan period, which unit capabilities need to be as good or better than they are now?
The ‘capabilities’ question deals with long-term sustainability and prospects beyond the end of the planning year. Expected outcomes for further years are wrapped into ‘capabilities’.
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Payroll Unit – objectives for the coming year Benefits: What does the organisation expect the unit to deliver in exchange for the cost of maintaining it? 1. Get employees paid correctly 2. … |
Payroll is an internal service function. Your own unit may be more focused on the world outside the organization, in which case your answers to the big questions will reflect the differences your unit made to the wider world.
Full payroll unit example for objectives
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Two other big questions might come up. They might be along the lines of ‘Isn’t the main goal being still around at the end of the year?’, and ‘Where are reputation and credibility?’ We can refer to those two common concerns as ‘existential risk’ and ‘reputation risk’. They are an important part of anyone’s future. For a work unit within a larger organisation, benefits, costs, dangers and capabilities beat existence and reputation. Existence and reputation are important, and you can recognise them properly by approaching them through the four big questions. In the same way, it is not necessarily good or bad if the unit gets bigger, or if one of the unit’s activities gets more or less management support. Usually, none of those developments are best to achieve, or best to avoid, in themselves. They are not objectives. |
Precision engineering: Ensure that those objectives are necessary, sufficient, independent – and yours.
Keeping the list of objectives clean, accurate and short will help a lot in conversations with the boss. In this stage you also draw a clear boundary around your unit’s responsibilities, and leave everything else to the boss or to other units.
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Original objective |
Issues |
Precision objective |
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Benefits: What does the organisation expect the unit to deliver in exchange for the cost of maintaining it? |
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1. Get employees paid correctly |
Think through what that means, exactly (i.e. improve precision). Asked the question ‘why does this matter’. Found there were two basic drivers. One was purely about legal correctness, and the other was about making employees feel that they are being looked after. So split the objective into two. |
1. Maximise the timeliness and accuracy employee payments employees in line with proper management decisions and legal entitlements |
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2. Maximise the employee perception that this organisation is a good employer |
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Full payroll unit example for precision-engineering objectives
If the process has been followed successfully, the number of objectives will usually end up somewhere between four and fifteen.
Choose your priorities within risk management.
If you’re on a tight timeline, you can now stop to think about your priorities within risk management. That may mean setting aside some of the objectives for further development after you have had your business plan assurance conversation with the boss.
Drill-down articles
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Priorities within business plan risk management Some risk needs immediate attention, not all risk. You choose the objectives that need immediate attention. |
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| Everyone | Version 3.0 Beta |
Parent articles
Main article on Risk in work unit business planning
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