CAT / FIA FMA Syllabus F. Performance Measurement - Strategic,operational and tactical objectives - Notes ^{2 / 4}

The purpose of strategic and operational and tactical objectives and their role in performance measurement

Objectives may be developed at strategic, operational and tactical levels in order to allow an organisation to measure progress towards the overall goal. 

Suitable performance measures therefore need to be set to monitor the achievement of each objective.  

Measures will differ according to the type of objective.

1. Strategic objectives 

   are often the responsibility of the senior management and will be measured by indicators that reflect the performance of the whole organisation, 

   e.g. increasing market share over 5 years

2. Tactical objectives 

   are often the responsibility of middle management and measures may be used that summarise the performance of a department or division, 

   e.g. producing annual budgets

3. Operational objectives 

   are often concerned with the day-to-day running of the organisation and are often physical measures, 

   e.g. quantity of rejects, number of customer complaints produced daily.

The problem of short-termism

Since managers’ performance is measured on short-term results, there is a bias towards short-term rather than long-term performance.  

Companies often have to make a trade-off between short-term and long-term objectives 

e.g. reducing quality control to save operating costs; postponing capital expenditure projects in order to protect liquidity and profits.  

Managers may also manipulate results, since bonuses and rewards are often linked to performance.