- Types of objectives –
- Strategic objectives- they are also called corporate objectives and are evolved from the mission statement. It reflects the firm’s aim and is the goal of the whole enterprise. It helps in bringing commitment of the organization towards direct efforts and the outcome is greater competitiveness and strong market position.
- Business process objective- The corporate objectives form the basis of business process objectives. Business process objective are specific and measureable and are developed at all levels of the enterprise. These are generally short term with one or three years range. For example: top management sets the objective of launching new products, though it is a strategic objective of the firm, it will be a strategy of the production department. There are six categories of business process objectives- (a) FINANCIAL– Profitability, Gross profit, return on assets, etc. (b) MARKETING & SALES– Can be measured in terms of sales volume, sales growth rate, market dominance, market share, etc. (c) PRODUCT/SERVICE– It can be quality of products and service, new products introduced or customer satisfaction. (d) OPERATIONS– To measure efficiency, productivity or cost reduction. (e) HUMAN RESOURCES– Measuring employee benefits, employee satisfaction, training and employee turnover. (f) Community– It can deal with non pollution of air or water, employee, etc.
- Key result area – These are also called operational objectives. They have a time horizon of one to two years and are received periodically. They form the bread and the butter of the organization. These are the areas where the performance is essential for the success of the enterprise.
Role of objectives
- Provide direction for decision making- (planning, motivation and coordination)
- Performance standards
- Basis for decentralization
- Integrates the organization, group and individuals (like customers suppliers, creditors etc.)
Factors affecting objective setting
- Forces in environment – it refers to various stake holders of the organization. They may be shareholders other financers, employees, customers, supplier, government and society.
- Organization resources and internal power relationships – Resources include human and non-human resources- financial and physical internal power relationships refer to power of different strategists or group of strategists. These strategists try to impose their views on important strategic issues.
- Value system of top executives – It is the philosophy that the top management holds in general and objectives in particular values are in the form of convictions.
- Awareness by management – Awareness by management of the past objectives of the organization and achievement of these plays crucial role in setting objectives and priority to different objectives. They set objectives based on past with incremental changes rather than radical change.
Issues in objective setting
- Specificity : clear
- Multiplicity : It deals with respect to organizational levels, importance (primary or secondary, ends growth or survival), functional (various departments) and nature (organizational or individual)
- Periodicity : They can be set for different time periods
Characteristics of Objectives
- Concrete and measurable
- Strictly time bound
- Correlated with each other
- Set within constraints (constraints- omnipresent, always pervasive in objectives like shortage of time, finance, resources)