Organisational Objectives

1.3 p42

Organisational Objectives

• Decision making involves management considering the following questions:

• Where are we now?• Where do we want to get to?• How to get there?• How to know when we are there? • Organisational objectives have 3 functions:• To control- set plans and boundaries for business activity• To motivate- inspire managers and employees to reach goals• To direct- provide an agreed focus for all individuals and

departments

Stakeholder objectives

• Stakeholders: people or organisations with an interest in the business

• Objectives will be different for all stakeholders in a firm• Directors e.g. Max. Profit Growth • Shareholders e.g. Max. share value• Managers e.g. Expansion, product development, market share • Employees e.g. Rewards, security• Suppliers e.g. Secure lucrative contracts, continuity • Government e.g. Corporate tax revenue, employment, exports• Public sector business objectives will be different from the

private sector e.g. Service levels, cost management- not profit

Importance of objectives

• Give a business direction, purpose and unity• Form the foundation for decision-making• Encourage strategic i.e. long –term thinking• Provide a basis for measurement and control of

the workforce • Business objectives may be set at different

levels- a hierarchy of objectives:

AIMS of Business

1

•Corporate objectives

•e.g. Profit maximisation

2

•Departmental objectives

•e.g. Sales revenue/contribution

3

•Individual objectives

•e.g. Staff performance appraisalAt all levels, the objectives should be consistent with the overall aim

of the business.

Mission Statements (Vision statements)

• A Vision or Mission statement outlines the business’s aspirations for the future e.g. “To be the leading manufacturer of personal transport in the next 20 years”. Adidas is “To be the leading sports wear brand in the world”.

• Having a mission statement means to have a clear purpose, It declares what the business is trying to achieve and the organisation’s values. Mission statements are often found in the company annual report and corporate web site. They are used to communicate the business mission to the publics, and will tend to be qualitative rather than quantitative statements. They should also be realistic and achievable, and unify the people in an organisation to assist in achieving the vision.

Mission Statements (Vision statements)

• Vision statements will be long term.• Mission statements will focus on the medium term• Vision statements will tend not to have quantifiable

targets- rather show people what could be…. • But…..• Often seen cynically as PR exercises• Can be very time consuming and introspective• May not reflect individual’s beliefs and behaviours. • Task: 1.3.1 Vision and Mission statements

Aims and objectives

• Aims are the long–term goals of an organisation. Aims tend to be unquantifiable, but serve to give a purpose to the general direction of a business. E.g. KWC to become the leading IB school in the World.

• Objectives are more short term and more specific goals- usually measurable e.g. To obtain 100% IB diploma pass rate at KWC in 201x.

• Short v long-term objectives• Strategy is used to refer to a plan to achieve long-term aims of

business- strategic objectives.• Tactics are short-term ways that a firm can achieve their aims

and objectives.

Aims and objectives 2• Once a business decides its short and long term objectives it must

decide on the ways that these objectives can be attained• There may be:• Operational strategies (day to day methods to achieve increased

efficiency)• Generic strategies (Ref: Porter Generic strategies Unit 1.7)- ways to

obtain competitive advantage e.g. Cost leadership, Differentiation of product, or Focus on particular market segments

• Corporate strategies are aimed at the long term objectives of the business e.g. Market dominance- leading to a strategy of takeover of major competitors in a market

• Tactical objectives are short term. They are used to guide the operation of the business.

Aims and objectives 3• Strategic objectives usually longer term aims e.g. over the next 5-10 years and may

include:• Profit maximisation- • the incentive for entrepreneurs and shareholders as a long-term aim for the business• Growth-.• Increase in sales revenue or by market share, achieving:• Economies of scale by growing larger, or market power- thereby controlling prices in a

market for a product• Reduced risk- achieved through scale of business and diversification into other markets• Image and Reputation (Market standing)• E.g. Customer satisfaction, employee motivation and image of a business will be linked

to the status and reputation of a firm.• A company with reputation for its products or service will be more highly trusted and

valued. Examples such as Microsoft, Apple, Virgin and BMW all enjoy high market standing and reputation among customers, suppliers and employees.

Aims and objectives 4

• E.g. Tactical objectives• To achieve sales of £x m in the next 3 months.• To reduce the cost per unit of a product to £xx in the

next 6 months in the production department• To achieve labour reduction of 10% in the next year

through voluntary redundancy• Launch 2 new products in 6 months • A tactical objective for most new business is survival-

short term- to gain a contract, to avoid takeover, or create cash flow.

To do

• Task: Question 1.3.2 Lenovo Hoang p47 • Group Exercise: Develop a Mission

statement, Strategic, and Tactical objectives for KWC over the next few years aimed at improving the school revenues (work in groups).