What are investment objectives?

Investment objectives have two purposes:

  • They clearly communicate the intended outcomes from an investment in terms that can easily be quantified and evaluated. They tell stakeholders, decision-makers and ultimately project teams tasked with delivery what the investment is expected to achieve.
  • They inform the selection of options. Investment objectives are the basis for critical success factors for use in multi-criteria analysis (MCA). This enables the effectiveness of options to be considered alongside other MCA criteria (such as costs, benefits, timing, risks and uncertainties, and interdependencies). It allows informed decisions to be made about the best value for money approach, and is a key input for optioneering.

Put simply, investment objectives describe what the investment is intended to achieve. Setting investment objectives is a key action in the strategic case and informs the later assessment of potential alternatives and options in the economic case.

Economic case

Developing investment objectives

Investment objectives must flow logically from the problems and benefits. Specifically, they must accurately reflect what the investment needs to achieve in order to:

  • successfully address the effect (or end consequence) of the problems, and
  • achieve the targets set in the benefit map, and
  • reflect trade off decisions between outcomes as agreed by partners.

Defining problems and benefits

To fulfil their dual purpose, you should aim to state investment objectives in SMART terms. In other words, they should be:

  • specific
  • measurable
  • achievable
  • realistic.

View larger image [PNG, 252 KB]

Following the process outlined in the diagram above can help you develop SMART objectives that accurately reflect the problems and benefits. This process will be helped if you have previously put the right effort into developing your benefits map, as part of your strategic case.

Benefits map template [PPTX, 64 KB]

In practice, it may not always be possible to develop investment objectives that are fully SMART. A more qualitative approach may be acceptable, provided each investment objective is clearly stated, reflects the intended outcomes of the investment, and is supported by a fit-for-purpose benefits map. Either way, you should discuss investment objectives with your Waka Kotahi investment advisor as you develop them.

For an example of how investment objectives can be developed from the benefits map, download the document below.

Investment objective example [PDF, 121 KB]

When should investment objectives be developed?

Because they flow from the problems and benefits, investment objectives should be developed after you have completed problem and benefit definition. This includes completing any work needed to address evidence gaps and revise the problems and benefits if needed. The completed benefits map will include the details you will need (see diagram above).

Similarly, the investment objectives should be developed before attempting to assess alternatives and options, as they are a key input to that optioneering process. They can also act as a prompt for ideas when initially identifying alternatives and options.

Often an investment objective is developed initially as a range of outcomes that would be acceptable to stakeholders, which is then narrowed as the business case develops until the final investment objective is the commitment to outcome delivered by the preferred option.

Optioneering in the economic case

How can I right-size the investment objectives?

A key purpose of investment objectives is to clearly communicate the outcomes expected from an investment – or, put simply: What is it we want to buy?

When phrasing your investment objectives, ask yourself:

  • Do they clearly communicate expectations to stakeholders, decision makers, or project teams, who then need to shape solutions to achieve the desired results?
  • Will they form a useful input to your MCA process? Will they support well-informed decisions about which options are most likely to achieve the desired outcomes?
    Multi-criteria analysis

Following the process mapped in the diagram above is a good way to achieve this, however this is not a fixed process. Developing your investment objectives needs to follow the Business Case Approach (BCA) principle of fit-for-purpose effort. Some investments find it easier to present complex information as a simple qualitative statement, supported by a benefits map that introduces the SMART elements. For example – Increase carbon neutral mode share by 5% – with a benefits map introducing key performance indicators (KPI) for different modes, vehicle types and measures over relevant time frames (including current baselines).

Resources and further information

Template

Tools

Need support?

Contact your Waka Kotahi investment advisor or email the Business Case Process team at businesscaseprocess@nzta.govt.nz