ORGANISATIONAL OBJECTIVES
Importance of objectives
A business aim helps to direct, control and review the success of business activity. In addition, for any aim to be successfully achieved, there has to be an appropriate strategy – or detailed plan of action – in place to ensure that resources are correctly directed towards the fi nal goal. This strategy should be constantly reviewed to check whether the business is on target to achieve its objectives. Both the aims of an organisation and the strategies it adopts will often change over time. Indeed, a change of objective will almost certainly require a change of plan too. A poor plan or strategy will lead to failure to reach the target. The most effective business objectives usually meet the following SMART criteria:
S – Specific Objectives should focus on what the business does and should apply directly to that business. For example, a hotel may set an objective of 75% bed occupancy over the winter period – the objective is specifi c to this business.
M – Measurable Objectives that have a quantitative value are likely to prove to be more effective targets for directors and staff to work towards, for example to increase sales in the south-east region by 15% this year.
A – Achievable Objectives must be achievable...obviously. Setting objectives that are almost impossible to achieve in a given time will be pointless. They will demotivate staff who have the task of trying to reach these targets.
R – Realistic and relevant Objectives should be realistic when compared with the resources of the company, and should be expressed in terms relevant to the people who have to carry them out. For example, informing a factory cleaner about ‘increasing market share’ is less relevant than a target of reducing usage of cleaning materials by 20%.
T – Time-specifi c A time limit should be set when an objective is established. For example, by when does the business expect to increase profits by 5%? Without a time limit it will be impossible to assess whether the objective has actually been met.
Aims, objectives strategies
Aim - the general and long-term goals of an organisation. They are broadly expressed as vague and unquantifiable statements,
serve to give a general purpose and direction for an organisation and are often expressed in a mission statement. They are usually set by the senior directors of the organisation.
Objective - the short-to-medium and specific targets and organisation sets in order to achieve its aims. They are more specific and quantifiable. Objectives must be consistent with the firm's aims and can be set by managers and their subordinates.
Strategy - the plans of action to achieve the strategic objectives of an organisation. Tactics are short-term (day-to-day) methods used to achieve an organisation's tactical objectives.
Levels of business strategy include:
1. Operational strategies - day-to-day methods used to improve the efficiency of an organisation
2. Generic strategies - those that affect the business as a whole
3. Corporate strategies - targeted at the long-term goals of a business i.e. they are used to achieve the strategic objectives of an organisation.
Corporate aims are the long-term goals which a business hopes to achieve. The core of a business’s activity is expressed in its corporate aims and plans. A typical corporate aim is: ‘To increase shareholder returns each year through business expansion.’ This example demonstrates a typical corporate aim. It tells us that the company aims to give shareholders maximum returns on their investment by expanding the business.
Corporate aims have several benefits:
● They become the starting point for departmental objectives on which effective management is based.
● They can help develop a sense of purpose and direction for the whole organisation if they are clearly and unambiguously communicated to the workforce.
● They allow an assessment to be made, at a later date, of how successful the business has been in attaining its goals.
● They provide the framework within which the strategies or plans of the business can be drawn up.
A business without a long-term corporate plan or aim is likely to drift from event to event without a clear sense of purpose.
Some common objectives include:
● Profit maximisation
● Profit satisficing
● Growth
● Increasing market share
● Survival
● Corporate social responsibility (CSR)
● Maximising short-term sales revenue
● Maximising shareholder value
Corperate objectives differ between organsations because of:
● Corporate culture i.e. the code of behaviour and attitudes that influence the decision-making style of the managers and other employees of the business
● Size and legal form of the business
● Public or private sector businesses
● Well-established businesses
Issues relating to corperate objectives:
● They must be based on the corporate aim and should link in with it.
● They should be achievable and measurable if they are to motivate employees.
● They need to be communicated to employees and investors in the business. Unless staff are informed of the objectives and their own targets that result from these, then the business is unlikely to be successful.
● They form the framework for more specific departmental or strategic objectives.
● They should indicate a time scale for their achievement – remember SMART!
Mission and vision statments
A mission statement is an attempt to condense the central purpose of a business’s existence into one short paragraph. It is not concerned with specific, quantifiable goals but tries to sum up the aims of the business in a motivating and appealing way. It can be summed up as a statement about ‘who we are and what we do’. In simplier terms:
Mission statement - a statement of the business’s core aims, phrased in a way to motivate employees and to stimulate interest by outside groups
Vision statement - a statement of what the organisation would like to achieve or accomplish in the long term
Here are some examples of mission statements:
● College offering IB and A Level qualifications – ‘To provide an academic curriculum in a caring and supportive environment’.
● BT – ‘To be the most successful worldwide telecommunications group’.
● Nike, Inc. – ‘To bring inspiration and innovation to every athlete in the world’.
● Microsoft – ‘To enable people and businesses throughout the world to realise their full potential’.
● Google – ‘To organise the world’s information and make it universally accessible and useful’.
Minnesota Health Department (USA):
VISION = Keeping all residents healthy.
MISSION = To protect, maintain and improve the health of all residents.
McDonald’s Restaurants:
VISION = Where the world buys more McDonald’s than any other fast food.
MISSION = McDonald’s aims to be the world’s best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness and value so that we make every customer in every restaurant smile.
Below are some arguments that can be used to evaluate different mission statements:
● They quickly inform groups outside the business what the central aim and vision are.
● They help to motivate employees, especially where an organisation is looked upon, as a result of its mission statement, as a caring and environmentally friendly body. Employees will then be associated with these positive qualities.
● Where they include ethical statements, they can help to guide and direct individual employee behaviour at work.
● They help to establish in the eyes of other groups ‘what the business is about’.
On the other hand...:
● They are too vague and general so that they end up saying little which is specific about the business or its future plans.
● They are based on a public relations exercise to make stakeholder groups ‘feel good’ about the organisation.
● They are virtually impossible to analyse or disagree with.
● They are rather ‘woolly’ and lacking in specific detail, so it is common for two completely different businesses to have very similar mission statements.
Interrelated objectives, strategies and tactics
Corporate objectives relate to the whole organisation. They need to be broken down into specific tactical or operational objectives for separate divisions.
Tactical or operational objectives - short or medium-term goals or targets which must be achieved for an organisation to attain its corporate objectives
Divisional, operational objectives are set by senior managers to ensure:
● Co-ordination between all divisions – if they do not work together, the focus of the organisation will appear confused to outsiders and there will be disagreements between departments
● Consistency with strategic corporate objectives
● Adequate resources are provided to allow for the successful achievement of the objectives.
A business aim helps to direct, control and review the success of business activity. In addition, for any aim to be successfully achieved, there has to be an appropriate strategy – or detailed plan of action – in place to ensure that resources are correctly directed towards the fi nal goal. This strategy should be constantly reviewed to check whether the business is on target to achieve its objectives. Both the aims of an organisation and the strategies it adopts will often change over time. Indeed, a change of objective will almost certainly require a change of plan too. A poor plan or strategy will lead to failure to reach the target. The most effective business objectives usually meet the following SMART criteria:
S – Specific Objectives should focus on what the business does and should apply directly to that business. For example, a hotel may set an objective of 75% bed occupancy over the winter period – the objective is specifi c to this business.
M – Measurable Objectives that have a quantitative value are likely to prove to be more effective targets for directors and staff to work towards, for example to increase sales in the south-east region by 15% this year.
A – Achievable Objectives must be achievable...obviously. Setting objectives that are almost impossible to achieve in a given time will be pointless. They will demotivate staff who have the task of trying to reach these targets.
R – Realistic and relevant Objectives should be realistic when compared with the resources of the company, and should be expressed in terms relevant to the people who have to carry them out. For example, informing a factory cleaner about ‘increasing market share’ is less relevant than a target of reducing usage of cleaning materials by 20%.
T – Time-specifi c A time limit should be set when an objective is established. For example, by when does the business expect to increase profits by 5%? Without a time limit it will be impossible to assess whether the objective has actually been met.
Aims, objectives strategies
Aim - the general and long-term goals of an organisation. They are broadly expressed as vague and unquantifiable statements,
serve to give a general purpose and direction for an organisation and are often expressed in a mission statement. They are usually set by the senior directors of the organisation.
Objective - the short-to-medium and specific targets and organisation sets in order to achieve its aims. They are more specific and quantifiable. Objectives must be consistent with the firm's aims and can be set by managers and their subordinates.
Strategy - the plans of action to achieve the strategic objectives of an organisation. Tactics are short-term (day-to-day) methods used to achieve an organisation's tactical objectives.
Levels of business strategy include:
1. Operational strategies - day-to-day methods used to improve the efficiency of an organisation
2. Generic strategies - those that affect the business as a whole
3. Corporate strategies - targeted at the long-term goals of a business i.e. they are used to achieve the strategic objectives of an organisation.
Corporate aims are the long-term goals which a business hopes to achieve. The core of a business’s activity is expressed in its corporate aims and plans. A typical corporate aim is: ‘To increase shareholder returns each year through business expansion.’ This example demonstrates a typical corporate aim. It tells us that the company aims to give shareholders maximum returns on their investment by expanding the business.
Corporate aims have several benefits:
● They become the starting point for departmental objectives on which effective management is based.
● They can help develop a sense of purpose and direction for the whole organisation if they are clearly and unambiguously communicated to the workforce.
● They allow an assessment to be made, at a later date, of how successful the business has been in attaining its goals.
● They provide the framework within which the strategies or plans of the business can be drawn up.
A business without a long-term corporate plan or aim is likely to drift from event to event without a clear sense of purpose.
Some common objectives include:
● Profit maximisation
● Profit satisficing
● Growth
● Increasing market share
● Survival
● Corporate social responsibility (CSR)
● Maximising short-term sales revenue
● Maximising shareholder value
Corperate objectives differ between organsations because of:
● Corporate culture i.e. the code of behaviour and attitudes that influence the decision-making style of the managers and other employees of the business
● Size and legal form of the business
● Public or private sector businesses
● Well-established businesses
Issues relating to corperate objectives:
● They must be based on the corporate aim and should link in with it.
● They should be achievable and measurable if they are to motivate employees.
● They need to be communicated to employees and investors in the business. Unless staff are informed of the objectives and their own targets that result from these, then the business is unlikely to be successful.
● They form the framework for more specific departmental or strategic objectives.
● They should indicate a time scale for their achievement – remember SMART!
Mission and vision statments
A mission statement is an attempt to condense the central purpose of a business’s existence into one short paragraph. It is not concerned with specific, quantifiable goals but tries to sum up the aims of the business in a motivating and appealing way. It can be summed up as a statement about ‘who we are and what we do’. In simplier terms:
Mission statement - a statement of the business’s core aims, phrased in a way to motivate employees and to stimulate interest by outside groups
Vision statement - a statement of what the organisation would like to achieve or accomplish in the long term
Here are some examples of mission statements:
● College offering IB and A Level qualifications – ‘To provide an academic curriculum in a caring and supportive environment’.
● BT – ‘To be the most successful worldwide telecommunications group’.
● Nike, Inc. – ‘To bring inspiration and innovation to every athlete in the world’.
● Microsoft – ‘To enable people and businesses throughout the world to realise their full potential’.
● Google – ‘To organise the world’s information and make it universally accessible and useful’.
Minnesota Health Department (USA):
VISION = Keeping all residents healthy.
MISSION = To protect, maintain and improve the health of all residents.
McDonald’s Restaurants:
VISION = Where the world buys more McDonald’s than any other fast food.
MISSION = McDonald’s aims to be the world’s best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness and value so that we make every customer in every restaurant smile.
Below are some arguments that can be used to evaluate different mission statements:
● They quickly inform groups outside the business what the central aim and vision are.
● They help to motivate employees, especially where an organisation is looked upon, as a result of its mission statement, as a caring and environmentally friendly body. Employees will then be associated with these positive qualities.
● Where they include ethical statements, they can help to guide and direct individual employee behaviour at work.
● They help to establish in the eyes of other groups ‘what the business is about’.
On the other hand...:
● They are too vague and general so that they end up saying little which is specific about the business or its future plans.
● They are based on a public relations exercise to make stakeholder groups ‘feel good’ about the organisation.
● They are virtually impossible to analyse or disagree with.
● They are rather ‘woolly’ and lacking in specific detail, so it is common for two completely different businesses to have very similar mission statements.
Interrelated objectives, strategies and tactics
Corporate objectives relate to the whole organisation. They need to be broken down into specific tactical or operational objectives for separate divisions.
Tactical or operational objectives - short or medium-term goals or targets which must be achieved for an organisation to attain its corporate objectives
Divisional, operational objectives are set by senior managers to ensure:
● Co-ordination between all divisions – if they do not work together, the focus of the organisation will appear confused to outsiders and there will be disagreements between departments
● Consistency with strategic corporate objectives
● Adequate resources are provided to allow for the successful achievement of the objectives.
Changing business objectives
Businesses can change their corporate objectives over time. These changes will be in response to internal factors, such as resource constraints, or external factors, such as changes in the social and economic environment.
The need for changing objectives:
● Corporate culture (the accepted norms and customs of a business) - firms with a flexible and adaptable organisational cultures are more likely to have innovative objectives over time
● Type and size of organisation - any change in the legal structure of a business is likely to cause a change in its objectives. With seperation of ownership and control, such as in public limitied companies, various stakeholder objectives need to be considered, including managerial objectives (e.g. higher bonuses) and shareholder objectives (e.g. higher profits)
● Private vs. public sector organisations - unlike most private sector firms, public sector businesses do not strive for profit maximisation but to provide a service to the general public
● Age of business - newly established firms tend to have break-even and survival as their key objectives. Established businesses might strive for growth and higher market share
● Finance - the amount of available finance will determine the scale of a firm's objectives e.g. a huge sum of money is needed if the objective is to expand into overseas markets
● Risk profile - if managers and owners have a relatively high willingness and ability to take risks, then more ambitious objectives are likely to bet set, such as the pursuit of new innovations
● Crisis management - businesses may face internal crises such as unexpectedly high rates of staff absenteeism and staff turnover, falling productivity and motivation problems, liquidity problems or issues about quality standards.
Ethical objectives
Ethical objectives are targets based on a moral code for the business, for example ‘doing the right thing’. The growing acceptance of corporate social responsibility has led to businesses adopting an ‘ethical code’ to influence the way in which decisions are taken.
Most decisions have an ethical or moral dimension. For example:
● Should a toy company advertise products to young children so that they ‘pester’ their parents into buying them?
● Is it acceptable to take bribes in order to place an order with another company?
● Should a bank invest in a company that manufactures weapons or tests new chemicals on animals?
● Is it acceptable to feed genetically modified food to cattle?
● Do we accept lower profits in the short term by purchasing less-polluting production equipment?
● Should directors receive substantial pay rises and bonuses when other workers in the business might be being made redundant?
● Is it acceptable to close a factory to save costs and increase profi ts even though many jobs will be lost and workers may find it hard to get other jobs?
● If legal controls and inspections are weak in a country, is it acceptable to pay very low wages for long hours of work as this policy will reduce the firm’s costs?
● Should a business employ child labour to reduce costs compared with employing adults?
● Should a business continue to produce potentially dangerous goods as long as ‘no one finds us out’?
Evaluating ethical objectives
Adopting and keeping to a strict ethical code in decisionmaking can be expensive in the short term. For example:
● Using ethical and Fairtrade suppliers can add to a business’s costs.
● Not taking bribes to secure business contracts can mean losing out on significant sales.
● Limiting the advertising of toys and other childrelated products to an adult audience to reduce ‘pester power’ may result in lost sales.
● Accepting that it is wrong to fix prices with competitors might lead to lower prices and profits.
● Paying fair wages – even in very low-wage economies – raises costs and may reduce a firm’s competitiveness against businesses that exploit workers.
However, in the long term there could be substantial benefits from acting ethically. For example:
● Avoiding potentially expensive court cases can reduce costs of fines.
● While bad publicity from being ‘caught’ acting unethically can lead to lost consumer loyalty and long-term reductions in sales, ethical policies will lead to good publicity and increased sales.
● Ethical businesses attract ethical customers and, as world pressure grows for corporate social responsibility, this group of consumers is increasing.
● Ethical businesses are more likely to be awarded government contracts.
● Well-qualified staff may be attracted to work for companies that have ethical and socially responsible policies.
AUDITS..?
Businesses can change their corporate objectives over time. These changes will be in response to internal factors, such as resource constraints, or external factors, such as changes in the social and economic environment.
The need for changing objectives:
● Corporate culture (the accepted norms and customs of a business) - firms with a flexible and adaptable organisational cultures are more likely to have innovative objectives over time
● Type and size of organisation - any change in the legal structure of a business is likely to cause a change in its objectives. With seperation of ownership and control, such as in public limitied companies, various stakeholder objectives need to be considered, including managerial objectives (e.g. higher bonuses) and shareholder objectives (e.g. higher profits)
● Private vs. public sector organisations - unlike most private sector firms, public sector businesses do not strive for profit maximisation but to provide a service to the general public
● Age of business - newly established firms tend to have break-even and survival as their key objectives. Established businesses might strive for growth and higher market share
● Finance - the amount of available finance will determine the scale of a firm's objectives e.g. a huge sum of money is needed if the objective is to expand into overseas markets
● Risk profile - if managers and owners have a relatively high willingness and ability to take risks, then more ambitious objectives are likely to bet set, such as the pursuit of new innovations
● Crisis management - businesses may face internal crises such as unexpectedly high rates of staff absenteeism and staff turnover, falling productivity and motivation problems, liquidity problems or issues about quality standards.
Ethical objectives
Ethical objectives are targets based on a moral code for the business, for example ‘doing the right thing’. The growing acceptance of corporate social responsibility has led to businesses adopting an ‘ethical code’ to influence the way in which decisions are taken.
Most decisions have an ethical or moral dimension. For example:
● Should a toy company advertise products to young children so that they ‘pester’ their parents into buying them?
● Is it acceptable to take bribes in order to place an order with another company?
● Should a bank invest in a company that manufactures weapons or tests new chemicals on animals?
● Is it acceptable to feed genetically modified food to cattle?
● Do we accept lower profits in the short term by purchasing less-polluting production equipment?
● Should directors receive substantial pay rises and bonuses when other workers in the business might be being made redundant?
● Is it acceptable to close a factory to save costs and increase profi ts even though many jobs will be lost and workers may find it hard to get other jobs?
● If legal controls and inspections are weak in a country, is it acceptable to pay very low wages for long hours of work as this policy will reduce the firm’s costs?
● Should a business employ child labour to reduce costs compared with employing adults?
● Should a business continue to produce potentially dangerous goods as long as ‘no one finds us out’?
Evaluating ethical objectives
Adopting and keeping to a strict ethical code in decisionmaking can be expensive in the short term. For example:
● Using ethical and Fairtrade suppliers can add to a business’s costs.
● Not taking bribes to secure business contracts can mean losing out on significant sales.
● Limiting the advertising of toys and other childrelated products to an adult audience to reduce ‘pester power’ may result in lost sales.
● Accepting that it is wrong to fix prices with competitors might lead to lower prices and profits.
● Paying fair wages – even in very low-wage economies – raises costs and may reduce a firm’s competitiveness against businesses that exploit workers.
However, in the long term there could be substantial benefits from acting ethically. For example:
● Avoiding potentially expensive court cases can reduce costs of fines.
● While bad publicity from being ‘caught’ acting unethically can lead to lost consumer loyalty and long-term reductions in sales, ethical policies will lead to good publicity and increased sales.
● Ethical businesses attract ethical customers and, as world pressure grows for corporate social responsibility, this group of consumers is increasing.
● Ethical businesses are more likely to be awarded government contracts.
● Well-qualified staff may be attracted to work for companies that have ethical and socially responsible policies.
AUDITS..?