3.3 Strategic planning
3.3.6 Setting small and medium-sized enterprise objectives
Once the SME has agreed to engage in a strategic planning process, the next step is to set the SME’s objectives (Maleka, 2014). The foundation of the strategic planning process is, thus, setting, defining, and clarifying the SME’s objectives, vision, and mission (Taylor, 2016).
Setting an SME’s objectives influences all other aspects of the SME’s development and management, as this puts forward a set of strategic plans on how to most effectively operationalise all other SME aspects (Thompson et al., 2016). According to Peterson, Jaret, and Schenck (2016), setting SME objective is not only the first step in the strategic planning process, but it also serves as a goal for subsequent processes, such as planning, organising, leading, and controlling.
Setting objectives, furthermore, directly allows an SME to act in way that makes and provides owners and top management a reference point for evaluation (Williams, 2020). Gaspar et al.
(2016) similarly states that targets, goals, aims, and levels of results established for SME activity are all designed and supported by set objectives. Therefore, it is possible to assert that setting objectives effectively improves SME performance (Zwikael, Chih, & Maredith, 2018).
Various scholars have also established that there is a positive relationship between well-defined objectives and SME performance (e.g., Peterson et al., 2016; Smith, 2020; Zwikael et al., 2018). According to Smith (2020), for example, objectives are statements that describe what SMEs hope to achieve. SME objectives, thus, set the stage and foundation for what they aim to achieve during a specific period of time (i.e., their strategy) (Alquist, 2017). In setting SMEs objectives, then, various approaches and criteria have been used by scholars; however the
‘specific, measurable, achievable, realistic, and time-bound’ (SMART) approach has become most prominent, and is confirmed as an effective and successful approach to use (Gaspar et al., 2016; Thompson et al., 2016).
In particular, scholars have agreed that the SMART approach is a standard approach in management that is effective for developing objectives and which should be followed when setting SME objectives (Bjerke & Renger, 2017; Hughes, 2017; Ogbeiwi, 2017). A study by Bjerke and Renger (2017) details what is meant by the SMART approach as follows:
• Specific: to ensure that the objectives are not vague. SME objectives should be clear enough for everyone to know and understand exactly for what objectives they are aiming, as well as the behaviour required for and from every individual in order to reach the targeted objectives;
• Measurable: to ensure that the objectives are calculable, whether quantitatively or qualitatively. SME objectives should include criteria that function as a measuring tool in order to determine whether or not the SME has accomplished its objectives.
Measurability enables progress to be tracked of a given period of time;
• Achievable: to ensure that the objectives are not impossible to reach. SME objectives should be in reach of all employees, especially considering the available and allocated resources, knowledge, and time at their disposal.
• Realistic: to ensure that the objectives are workable and relevant to the SME in question. SMEs must be honest when setting objectives, especially in respect to the employee competence, resource allocations, and time restrictions, as such honesty can better ensure that objectives are realistic. Realistic and relevant objectives ensure a higher level of commitment, energy, and passion aimed at the attainment of said objectives.
• Time-bound: to ensure that the objectives are grounded by a specific timeframe.
Setting a clear timeframe helps in determining target dates of by when a particular objective should be completed. SMEs should, therefore, set objectives that are time- bound (either long- or short-term) in order to limit procrastination and excess costs.
Objectives are means (i.e., short-) and end (long-term) goals (Bjerke & Renger, 2017). SME objectives serve as a guideline for all management decisions as well as benchmarks against which actual achievements can be compared (Hughes, 2017). Thus, SMEs objectives to measure their success and progress towards reaching their goals (Norman, 2019). Objectives are also the foundation of strategic planning, as well as planning overall (Gaspar et al., 2016).
SME objectives can be studied according to various categories, including profitability, growth, stability, efficiency, and survival (Ogbeiwi, 2017). As noted previously, there are also five key aspects for the development and management of SMEs, namely strategic planning, finances, human resources, operations, and marketing (Thompson et al., 2016). Each key aspect has its
own objectives; which means that the various objectives from the different aspects all work together to form part of the overall SME objectives (Gaspar et al., 2016). Setting SME clear objectives leads, in turn, to formulating a vision and mission statement (Nwachukwu, Chládková, & Fadeyi, 2018). The vision and mission statement provide a direction for SMEs, while the formal strategic plan helps and guides the businesses’ strategic implementation (Nwachukwu, Chládková, & Fadeyi, 2018; Sandada, 2014). Both Bora, Borah, and Chungyalpa (2017) and Allen, Kern, Vella-Brodrick, and Waters (2018) describe a strategic vision and mission statement as follows:
• Vision statement: focusses on the destination of an SME and essentially specifies where the SME is headed by providing the business’s long-term direction. The vision statement also provides a perspective of the SME’s position and situation, 5 or more years from the present. Thus, the vision statement describes an SME as it wishes to be in future.
• Mission statement: focusses on the journey of how an SME moves forward in order to reach the aforenoted vision. A well-defined mission statement, thus, describes an SME’s present business scope and includes the following three statements: 1) the products and/or services being offered by the SME; 2) the type of customers the SME has and caters for; and 3) the technology, competencies, and business capabilities of the SME. By including these three points, a mission statement can focus on the purpose of the SME, which makes it an essential component and cornerstone that communicates the overall aspects of the SME.
Of further note is that the vision statement provides a long-term direction of what an SME should look like and what it should achieve (Coetzee, 2019). By comparison, the mission statement operates as a guideline along the journey towards achieving the vision. A well- defined vision and mission statement, thus, enables SME owner-managers to establish clearer knowledge and allocate required resources pertaining to whether and how their SMEs need to change over the coming 5-10 years in order to achieve growth and sustainability (Ahmed, 2019). The strategic objectives, vision, and mission statements, altogether, should be developed and formulated for the future success of the SME in question (Hawthorne, 2019).
An SME’s vision and mission can be formulated based on the foundation of a certain philosophy (e.g., culture, sets of beliefs, attitudes, or convictions), and elicited and developed through deep conversations and reflections (Coetzee, 2019). The philosophy then underpins how an SME will be seen and how it will seek to operate (Antosz & Stadnicka, 2017). Hence, the chosen philosophy influences the overall conduct and structure of the SME in terms of its culture, strategy, and operations, as well as the behaviour and performance of its staff (Coetzee, 2019).
Generally, a business philosophy emerges from both an ethical and operational foundation (Lewis, 2019). The ethical and moral philosophy helps SMEs advance their performance (Lewis, 2019). Therefore, establishing an SME’s clear moral philosophy and ethical behaviour can help determine the framework that acts as a guideline to business interactions with customers and employees, as well as the conduct of the SME’s operational activities (Coetzee, 2019).