In setting strategic objectives, companies usually end up with a list of worthy but vague aspirations. The secret to getting a list of clearly defined and measurable objectives is to anchor them in what you, as a company’s leaders, want to get from your stakeholders. This leads you to defining desired behavioral outcomes, even fairly obvious ones like buying more. The debate can then move to thinking about how to trigger that behavior, and progress toward these outcomes can be described in measures that are in dollars, like revenue; quantities, like units sold; or percentages, like market share. Thinking in this way sounds prosaic, even obvious, but it is an effective way of getting a management team to think clearly about what they need to do.

Ann is the CEO of my country’s largest independent, not-for-profit aged-care provider, offering residential aged care, retirement living, and at-home support. It was established well over a hundred years ago and is set in many of its ways. One of these is how strategic objective-setting is conducted. But Ann’s not happy with the process. I asked her, “Why not?”

She explained. “When we get together to discuss our future direction as a business, we invariably get to the point where we need to write down our objectives. If we’re using a facilitator, and we usually do, that person will walk over to a flipchart or whiteboard and write ‘Objectives’ at the top. Then everyone piles in brainstorming to produce a list that’s far too long.”

“And you whittle that list down?” I asked.

“Yes,” Ann continued. “The discussion and arm-wrestling then start with the aim of reducing the items to about half a dozen. After some considerable time, my exhausted and frustrated colleagues are only too happy to move on to the next agenda item.”

Ann explained how her team was usually not content with the result. “Nor am I,” she added, “because invariably the ‘Objectives’ list contains a hodgepodge of activities, nice-to-haves, and vague statements of intent.” Ann showed me her latest result:

• To become an employer of choice.
• To grow the business by opening additional centers.
• To maintain stability in resident and client care.
• To manage risks and crises effectively.
• To secure compliance with regulatory authorities.
• To transform operations by adopting additional technology.

Maybe your own endeavors have produced a similar list. You might be wondering: What’s wrong with this? The answer is: Plenty.

Any strategy she comes up with will have to specify what the company can do to meet the needs of each key stakeholder group: residents, clients, employees, suppliers, shareholders, and the community. This means that her business will have to take a position on the factors important to each of those groups. For instance, Ann’s management team must set policy on working conditions, pay, organization culture, and so on for employees. What should guide these decisions? And how will Ann know if the decisions are progressing the organization? How will she measure this?

The answers should be her list of strategic objectives. But Ann’s hodgepodge doesn’t deliver a clear line of sight between the business’s competitive stance for each key stakeholder group and the results. How can you tell if a strategy is working? It’s as though the list of objectives exists in a black hole.

Shift Your Thinking About Objective-Setting

The trick to breaking away is to flip your perspective and ask what your organization wants from its key stakeholders. (This comes as an “aha” moment for most managers.) These will be your strategic objectives. For example, consider revenue from customers, innovation from employees, and support from the community. Your thinking must shift to be outside-in if you are to produce successful strategic objectives. If you picture organization objective-setting this way, you can see how it can be broken into a stakeholder-by-stakeholder exercise.

Step 1: Identify a behavioral outcome for each stakeholder group.

To illustrate, let me share a story. One CEO I advise, Stuart, heads up a mutual bank with “members.” I ran a workshop for him and his managers. We identified the credit union’s key stakeholders, one of which was, naturally, members. To break through the traditional brainstorming hodgepodge, I asked the group a seemingly simple question: “What do you want your members to do?”

This came as a surprisingly fresh approach to the group and required them to think more deeply. After some discussion, we got this: “To get members to borrow more and to get potential members to become members.” I explained how I call this a behavioral outcome.

Step 2: Convert behavioral outcomes into organization objectives.

I then led Stuart’s group to the second step, which is to convert this behavioral outcome to an organization objective. This usually starts with “to increase” or “to decrease.” After careful consideration and debate, the group agreed to: “To increase revenue from current and future members.” Notice “future.” This will be driven by positioning on the strategic factors relevant to members.

Why didn’t I just start there at the second step? The reason is that invariably the process falls back into becoming a hodgepodge. Identifying a behavioral outcome for each key stakeholder group first anchors organization objectives, which then become clear and measurable.

Step 3: Identify measures.

This brings me to the third step: identifying measures, a short list of which is usually referred to as key performance indicators or KPIs. This can be tricky, as all sorts of things become labeled as KPIs in exercises like this. In the past, Stuart’s organization had labeled actions by individuals and program descriptions as KPIs. So, I needed to point out that a key performance indicator is a key performance measure.

The clincher for Stuart and his group came when I demonstrated that there are only three ways to measure results in business and that they can be neatly summarized by three symbols: $ (or the local currency), # (number of), and % (percentage). No one had condensed results for them in that way before.

The advantage of this is that Stuart and his team now have a stakeholder-oriented objective for members that can be measured. Stuart can measure the total revenue generated by new and existing members; the number of new and existing members; and the bank’s percentage of market share. Any strategies aimed at creating competitive advantage — around, for example, product range, customer service, and pricing — can be evaluated using these hard results.

I do this for each of an organization’s key stakeholders: customers, employees, suppliers, and so on. It always gets a management group to probe what the organization is really trying to achieve.

Your Objective-Setting Journey

If you want to produce clearly targeted strategy, you simply must avoid the standard practice of brainstorming to yield a list of strategic objectives. It leads to a hodgepodge of difficult-to-measure items, as Ann’s experience demonstrates. Instead, rethink your journey by identifying who your key stakeholders are — and what you want from them.

This will provide you with clear and measurable outcomes that will help focus your organization’s strategic positions for each of your key stakeholders. Strategic clarity will be your result.

When introducing new strategies in response to the ever-shifting business landscape, executives must take care to align them with the larger picture of where their organization is heading — the company’s “vision.” That’s because when vision and strategy are at odds, employees, shareholders, and customers may lose confidence. To achieve this alignment, executives need to evaluate whether proposed short-term strategic shifts are consistent with the longer-term vision and resist the pressure to those strategies that run counter to it.

Given the time and effort it takes to develop and execute new strategies, it’s best not to introduce them too often. But there are instances when short-term strategic shifts are unavoidable — especially in today’s ever-changing business context. Take, for example, the need to respond to calls for social change or demands from investors to turn around poor financial results.

When responding to these kinds of pressures, executives must take care to align the strategic shifts they introduce with the larger picture of where their organization is heading and what it aspires to accomplish in the future — the company’s “vision.” After all, strategy — overarching decisions about priorities and resource allocations — should be all about translating that vision into action. When vision and strategy are at odds, employees, shareholders, and customers may lose confidence that management has a coherent and consistent plan for moving the company forward.

To achieve this alignment, executives need to evaluate whether proposed short-term strategic shifts are consistent with the longer-term vision and resist the pressure to those strategies that run counter to it. This process itself can help leaders assess whether their vision is sufficiently clear and compelling or may need to be sharpened or revised.

Let’s look at how this plays out in different contexts in practice.

Responding to Social Change

Connecting short-term strategic responses to a long-term vision is particularly important when companies are responding to social movements. These can put pressure on companies to act quickly and publicly. But when company leaders implement strategies that aren’t tied to a larger vision, those strategies can wither on the vine.

For example, in the summer of 2020, after the murder of George Floyd, many firms raced to come up with strategies to convince their people and their customers that they stood firm against systemic racism. But the results of their efforts have been decidedly mixed. While some have pointed to the inefficacy of widely implemented anti-racism training as the culprit, I believe that these strategies fell short of their companies’ rhetoric because they were not supported by a larger vision of how the companies themselves needed to change.

Take a counterexample: For some companies that already had a robust vision for building inclusion and diversity, the new strategies were supported by a pre-existing framework, and have proved more successful. At Johnson & Johnson, for example, by the summer of 2020, the pharmaceutical firm already had a detailed vision — “to maximize the global power of diversity and inclusion, to drive superior business results and sustainable competitive advantage” — and was actively engaged in initiatives that would move the company in this direction. So in November of 2020, when J&J responded to the increasing awareness of social injustice by pledging $100 million to address racism and health inequities, the strategy — which included support for mobile health clinics in communities of color, and a 50% increase in hiring people of color into leadership positions in J&J — was clearly part of an ongoing commitment, and not a one-time, knee-jerk response to social pressure. This consistency is perhaps one reason that employees from often-marginalized categories feel highly positive about the company’s culture and work environment, putting it in the top 10% of companies with over 10,000 employees on Comparably, a workplace rating site.

Leaders whose companies feel compelled to take immediate strides in response to social action should consider whether they have this kind of longer-term vision in place as well. If not, they should develop that vision in parallel with their more immediate strategies. PepsiCo’s response in the summer of 2020 was future- and big-picture focused in this way. The company vowed to add 100 associates of color to its executive ranks within five years and has already achieved at least a quarter of that goal. The company also said that it would double its spending with Black-owned suppliers in five years and has made tangible progress in that direction.

Responding to Business Pressure

Aligning short-term strategies with a longer-term vision also is critical in responding to financial pressures, as executives often feel like they have no choice about pursuing change when the numbers demand it.

A case in point is GE which, starting in 2005, had a compelling, long-term vision for reducing environmental impact at a global scale called “ecoimagination.” This vision drove GE towards investments in wind and water and initiatives to lower carbon emissions technologies for jet engines and other products. The vision was generally well received. But the pressure to maintain and grow revenues led GE to a strategy of selling the water business in 2017 and doubling down on acquisitions in the non-renewable energy sector (see, for example the $9.5 billion 2015 purchase of Alstom’s power business, including the manufacture of coal-fueled turbines, and the 2016 merger with Baker Hughes, which provides services and equipment for oil drilling). These deals gave lie to GE’s green image and mired the company with an unmanageable debt load — problems that could possibly have been avoided by staying true to ecoimagination.

In contrast, Merck CEO Ken Frazier kept his company’s actions focused squarely on the company’s ultimate vision despite immense pressure in the early 2010s from shareholders to cut back on research and development as a strategy for increasing profitability and share price. Frazier pushed back on that strategic shift and even budgeted more for R&D because he saw it as key to the company’s long-term vision to “use the power of leading-edge science to save and improve lives around the world.” Despite taking short-term heat for his decision, Frazier kept the company focused on the vision — a strategy that led to the development and approval of a blockbuster immuno-oncology drug, a robust research pipeline, and, by the time Frazier retired in 2021, a stock price that had more than doubled.

Use Change to Accelerate Your Vision

No matter where the pressure to change your strategy comes from, think not only about whether you can align the changes with long-term vision, but also how you can do it in a way that accelerates your company’s pursuit of that vision.

For example, a large technology firm that had a long-term goal of attracting more women to its high-tech jobs used the abrupt move to remote and hybrid work as a way of proactively speeding up its gender diversity vision. From previous studies and observations, executives at the company had realized that women, who still bore the brunt of childcare, often had a hard time breaking into the company’s onsite tech teams where men stayed late or went out together after work; and that many women valued flexible work hours more than camaraderie. Driven by these insights, they intentionally leveraged the lessons from the remote and hybrid work arrangements necessitated by the coronavirus pandemic to make the co-located office teams less essential; and they are now empowering managers to continue creating flexible work arrangements both for new and current employees. Although it’s too soon to know for sure, early indications across the industry are that this is making it easier to recruit and retain women.

Check Your Vision

Aligning your strategy with your long-term vision of course presupposes that you have one. But that’s something you should test — especially when you are faced with the pressure to change your strategy.

A quick way to do this is to first ask yourself how, in the next 3–5 years, your company (or department of unit) will set itself apart from the competition, attract great talent, and be financially or operationally sustainable. See if you can put this down on paper in no more than a few sentences. Then ask three of your direct reports and a few other stakeholders (like a board member, a key customer, or a partner) to answer the same question.

If you can’t articulate the vision easily, or you don’t get a reasonably consistent response from others, then either you don’t have a clear and exciting vision, or it hasn’t been well communicated or understood.

If indeed your vision doesn’t pass this test, then take some time (even if it’s just a few days) and try to clarify the longer-term vision. There are various ways to do this that I have written about previously in the HBR Leader’s Handbook; if you’re not the CEO, then you can still go through a similar process just for your area. In either case, putting your long-term vision front and center is a critical first step for incorporating short-term strategic shifts into your plans.

Without a vision to guide you, responsive strategic shifts will get you somewhere, but not necessarily where you want to go.