Organizational objectives are...
What an organization wants to do.
The main objectives for the whole organization like profit and customer satisfaction.
Objectives to achieve the primary objectives (e.g. to increase production or decrease costs).
Here is an example:
To increase profits p.a. by 10% by delighting customers.
To increase customer satisfaction by 10% p.a. through fewer complaints and better after-sales service.
To improve production and product quality by 10% p.a.
To have at least one new product a year.
To increase their productivity (output per employee) by 10% p.a.
How to be successful with objectives
1. Be SMART
The best objectives are described by the acronym, SMART:
related to something worthwhile like satisfying customers.
- Measurable - measuring how
well the objective has been achieved.
- Achievable – objectives must be challenging (so people are
stretched) but achievable.
- Realistic –
having the resources (money, (wo)men, materials and machines) to achieve the objectives.
- Time-related – objectives can
be short-term (up to a year as in budgets – see budgeting and
cost control), medium-term (one year to five years) and long-term (over five years).
2. Think about your stakeholders
Objectives should aim to satisfy the organization’s stakeholders – groups who are directly
affected by what the organization does.
These are in order of importance (with their needs/aims in brackets):
- Customers (quality and innovation).
- Employees (motivation and empowerment).
- Suppliers (delivering quality supplies at the lowest possible cost).
- Creditors (cash for repayment of debts).
- Society including government, pressure groups and the local
community (socially responsible and ethical strategy).
3. Mission statement
This should clearly state the organization’s purpose with reference to:
- The customers it’s aiming at.
It should also be short enough to inspire employees.
- Wal-Mart stores – “To give ordinary folk the chance to buy the same things as rich
- Merck (the American drug company) – “To preserve and improve human life”.
- British Airways – “To be the world’s favourite airline”.
- A school – “To provide the best possible education and career opportunities for our
Top managers must have a vision (a future ideal) for the organization and communicate it
effectively to every employee.
It may be as vague as a dream, or the same as a mission statement.
- Walt Disney (pictured
right) – “To bring happiness to millions”.
- Honda – “Quality for the world from our hands and minds”.
- Save The Children – “The future of the world rests with the child”.
- Wikipedia - Imagine a world in which every single person on the planet is given free
access to the sum of all human knowledge. That’s what we’re doing.
5. Management by objectives (MbO)
This is Peter Drucker’s (pictured right) term for setting complementary objectives at all levels of the
organization from the individual to the organization as a whole.
- inspire people to do great things, so objectives must satisfy their needs.
- be consistent with their values (e.g. love and honesty).
People must believe in what the organization is doing and its vision and mission.
Key quotes explained
“The purpose of a business is to create and keep a
Levitt , American marketing professor (pictured
Levitt also added that bad work in the pursuit of customer satisfaction is better than good work on the wrong
"If you don't know where you're going, any road will take you there", wrote Lewis
Carroll in Alice in Wonderland
“Our strength is our unity of purpose”
- Franklin D. Roosevelt
,American president (pictured right)
In the best organizations everyone works together to achieve customer satisfaction.
“To pursue the unattainable is insanity”
emperor and philosopher (pictured right).
Impossible aims will turn people off, because they can’t achieve them.
But visionary aims (challenging with some hope of achievement) can inspire people to do great things.
“It is not because things are difficult that we do not dare, it is because
we do not dare that they are difficult”, the Greek philosopher, Seneca, said.
“Keep your eyes on the stars, and your feet on the
- Theodore Roosevelt
, American president (pictured right)
Idealistic ambition must be mixed with practical realism.
Peter Drucker, The Practice of Management (1954)
An organization’s main objective is creating customers and so the whole business
must be seen from their point of view.
Profit is the result of achieving your objectives in marketing (i.e.
customer satisfaction), innovation and productivity.
Management by objectives (MBO) is vital (see point 5 above).
(For more detail see The Practice of
Management in the Business Books section).
Jim Collins (pictured right)
and Jerry Porras (pictured
right below) , Built to Last (1995)
The best companies have challenging, visionary, customer oriented objectives – Big Hairy Audacious Goals
(For more detail see Built to
Last in the Business Books section).
Gary Hamel (pictured right)
and C.K. Prahalad (pictured right below) , Competing
for the Future (1994)
The best companies have:
- strategic intent (challenging, customer oriented objectives).
- stretch (stretching employees to work incredibly hard to satisfy customers).
(For more detail see Competing for the Future in the
Business Books section).
Andrew Campbell (pictured
right) , Marion Devine and David Young, A Sense of Mission (1990)
Like the Bible, mission statements are useful only if they are believed and people are totally dedicated to
carrying them out.
Alan Fox (pictured right)
, Industrial Sociology and Industrial Relations (1966 article)
There are two ways of looking at the relationship between management and employees (called “frames of
- Unitary – views the organization as a team unified by a common
purpose and allegiance towards it( i.e. the interests of management and employees coincide).
- Pluralistic – views the organization as a coalition of different interests leading to
areas of conflict in organizations e.g. higher profits leading to lower wages.
Richard Cyert (pictured
right) and James March(pictured right below), A Behavioural Theory of the
Decisions in organizations are based on
the interests of different groups
(owners, employees, managers, suppliers, etc).
Satisficing was first proposed by Herbert
Simon's Administrative Behaviour (1947)