Personally I try to set two sorts of objectives:
Business-focussed objectives (this is why we are getting paid after all). For instance, "complete project X by 1 June 2009"). These objectives are often shared across several members of the team (and they are aware of this). The team can exceed the objective by bringing the project in early or by exceeding the functionality required. Individuals can exceed the objective by producing more functionality, having fewer bugs against them, or coaching and supporting other members of the team.
Personal growth objectives, for instance completing a project involving a technology that the developer wants to add to their skill set, understanding the user's domain better, gaining leadership experience etc.
I feel that it is important that:
- Objectives are SMART
- Objectives are aligned with the needs of the business
- You do include "normal work" in objectives, in fact these are the most important objectives!
- The employee has some opportunity to exceed the objectives you set
Finally, I would stay away from software metrics as objectives - they are too easy to game and probably won't give you what you need. I would only use a metric where I want to coach someone in or out of a particular behaviour.
