Strategic Business Planning Table of Contents Session 2 – Vision, Mission and Business Objectives ……………………………………………………………………….. 3 Vision:…………………………………………………………………………………………………………………………………….. 3 Vision Statement Guidelines…………………………………………………………………………………………………… 3 Summarize Your Vision in a Powerful Phrase ………………………………………………………………………….. How a Vision is Used ……………………………………………………………………………………………………………. 4 The Impact of Vision …………………………………………………………………………………………………………….. 5 Shared Vision ……………………………………………………………………………………………………………………….. 5 The Process for Creating a Vision …………………………………………………………………………………………… Take as Much Space as You Need …………………………………………………………………………………………… 6 Your Vision Statement Should Describe the Best Possible Outcome …………………………………………… 6 Describe Your Vision Statement in the Present Tense ……………………………………………………………….. 7 Make your Vision Statement Emotional …………………………………………………………………………………… Add Sensory Details to Your Vision Statement ………………………………………………………………………… 7 Inner vs. Outer Vision Statements …………………………………………………………………………………………… 7 Updating Your Vision Statement ………………………………………………………………….. ………………………… 7 Perceptions of Ideal Futures: An Exercise in Forming Vision …………………………………………………….. Examples of Vision Statements: ……………………………………………………………………………………………… 9 Mission Statements & Vision Statements …………………………………………………………………………………. 9 Mission:…………………………………………………………………………………………………………………………………. 10 What is Mission?…………………………………………………………………………………………………………………. 0 What does a Mission Statement do? ………………………………………………………………………………………. 10 Mission Statement Creation ………………………………………………………………………………………………….. 10 Examples of Mission Statements: ………………………………………………………………………………………….. 11 Characteristics of good Mission Statements: …………………………………………………………………………… 1 Effective mission statements should be: …………………………………………………………………………………. 11 Developing Effective Vision and Mission Statements ……………………………………………………………… 13 Vision Statements for New and Small Firms …………………………………………………………………………… 13 Mission Statements for New and Small Firms ………………………………………………………………………… 3 Values …………………………………………………………………………………………………………………………………… 15 Values Govern: …………………………………………………………………………………………………………………… 15 Business Objectives ………………………………………………………………………………………………………………… 16 The Nature of Long-Term Objectives…………………………………………………………………………………….. 6 Strategies ……………………………………………………………………………………………………………………………. 16 Annual Objectives ……………………………………………………………………………………………………………….. 17 Popular Business Objectives: ………………………………………………………………………………………………… 17 Page 1 of 19 Strategic Business Planning SMART Business Objectives: ………………………………………………………………………………………………. 7 Reference: ……………………………………………………………………………………………………………………………… 19 Page 2 of 19 Strategic Business Planning Session 2 – Vision, Mission and Business Objectives Vision: “It is the vision that unites people in the common effort, not the charisma of the leader“ – Robert Greenleaf Vision Statements define the organizations purpose. For employees, it gives direction about how they are expected to behave and inspires them to give their best. Shared with customers, it shapes customers’ understanding of why they should work with he organization. Martin Luther King, Jr. said, “I have a dream,” and what followed was a vision that changed a nation. That famous speech is a dramatic example of the power that can be generated by a person who communicates a compelling vision of the future. Management author Tom Peters identified a clear vision of the desired future state of the organization as an essential component of high performance. Widely-read organizational development author Warren Bennis identified a handful of traits that made great leaders great. Among them is the ability to create a vision.
A vision statement is a vivid idealized description of a desired outcome that inspires, energizes and helps you create a mental picture of your target. It is the integration and synthesis of information with dreams Vision statements are often confused with mission statements, but they serve complementary purposes. A vision is a guiding image of success formed in terms of a contribution to society. If a strategic plan is the “blueprint” for an organization’s work, then the vision is the “artist’s rendering” of the achievement of that plan.
It is a description in words that conjures up a similar picture for each member of the group of the destination of the group’s work together. There is one universal rule of planning: You will never be greater than the vision that guides you. No Olympic athlete ever got to the Olympics by mistake; a compelling vision of his or her stellar performance inevitably guides all the sweat and tears for many years. The vision statement should require the organization’s members to stretch their expectations, aspirations, and performance. Without that powerful, attractive, valuable vision, why bother?
Vision Statement Guidelines The best vision statements for result areas describe outcomes that are five to ten years away, although some look even further out. For projects and goals, the vision statement should focus on the desired outcome of the project/goal at its completion date. Here are some guidelines for writing compelling and powerful vision statements. A Vision Statement should be: Realistic Page 3 of 19 Strategic Business Planning Credible Well articulated Easily understood Appropriate Ambitious Responsive to change A Vision Statement should: Orient the group’s energies Serve as a guide to action.
Consistent with the organization’s values In short, a vision should challenge and inspire the group to achieve its mission Summarize Your Vision in a Powerful Phrase If possible, try to summarize your vision using a powerful phrase in the first paragraph of your vision statement. Capturing the essence of your vision using a simple memorable phrase can greatly enhance the effectiveness of your vision statement. This phrase will serve as a trigger to the rest of the vision in the mind of everyone that reads it. Take for instance Microsoft’s vision of “A personal computer in every home running Microsoft software. This simple yet very powerful phrase can be used throughout the organization (hallways, internal web pages, plaques, etc. ) to remind everyone of the vision. If you are having trouble coming up with your summarizing phrase, try adding after you’ve written the rest of the vision statement. How a Vision is Used John Bryson, the author of Strategic Planning for Public and Nonprofit Organizations, states that typically, a vision is “more important as a guide to implementing strategy than it is to formulating it. This is because the development of strategy is driven by what you are trying to accomplish, your organization’s purposes. A mission statement answers the questions: Why does our organization exist? What business are we in? What values will guide us? A vision, however, is more encompassing. It answers the question, “What will success look like? ” It is the pursuit of this image of success that really motivates people to work together. A vision statement should be realistic and credible, well articulated and easily understood, appropriate, ambitious, and responsive to change.
It should orient the group’s energies and serve as a guide to action. It should be consistent with the organization’s values. In short, a vision should challenge and inspire the group to achieve its mission. Page 4 of 19 Strategic Business Planning The Impact of Vision John F. Kennedy did not live to see the achievement of his vision for NASA, but he set it in motion when he said, “By the end of the decade, we will put a man on the moon. ” That night, when the moon came out, we could all look out the window and imagine…
And when it came time to appropriate the enormous funds necessary to accomplish this vision, Congress did not hesitate. Why? Because this vision spoke powerfully to values Americans held dear: America as a pioneer and America as world leader. In an amazing longitudinal study on goal setting, Yale University surveyed the graduating class of 1953 on commencement day, to determine if they had written goals for what they wanted their lives to become. Only three percent had such a vision. In 1973, the surviving members of the class of 1953 were surveyed again.
The three percent who had a vision for what they wished their lives would become had accumulated greater wealth than the other 97 percent combined. Great wealth, a man on the moon, brother and sisterhood among the races of the globe… what is your organization’s vision? Shared Vision To a leader, the genesis of the dream is unimportant. The great leader is the servant of the dream, the bearer of the myth, the story teller. “It is the idea (vision) that unites people in the common effort, not the charisma of the leader,” writes Robert Greenleaf in Leadership Crisis.
He goes on to write: Optimal performance rests on the existence of a powerful shared vision that evolves through wide participation to which the key leader contributes, but which the use of authority cannot shape…. The test of greatness of a dream is that it has the energy to lift people out of their moribund ways to a level of being and relating from which the future can be faced with more hope than most of us can summon today. The Process for Creating a Vision Like much of strategic planning, creating a vision begins with and relies heavily on intuition and dreaming.
As part of the process, you may talk about and write down the values that you share in pursuing that vision. Different ideas do not have to be a problem. People can spur each other on to more daring and valuable dreams and visions -dreams of changing the world that they are willing to work hard for. The vision may evolve throughout a strategic planning process. Or, it may form in one person’s head in the shower one morning! The important point is that members of an organization without a vision may toil, but they cannot possibly be creative in finding new and better ways to get closer to a vision without that vision formally in place.
Nonprofit organizations, with many of their staff and board members actively looking for ways to achieve a vision, have a powerful competitive and strategic advantage over organizations that operate without a vision. Page 5 of 19 Strategic Business Planning Take as Much Space as You Need Vision statements can be much longer than mission statements. The purpose is to create a mental picture charged with emotion that can serve to energize and inspire you and your team. Take as much space as you need to accomplish this goal.
Your Vision Statement Should Describe the Best Possible Outcome In general, you should base your vision statements on the best possible outcome. In fact, you might want to envision something even better than what you consider to be the best possible outcome. Remember that the purpose of the vision statement is to inspire, energize, motivate, and stimulate your creativity, not to serve as a measuring stick for success; that is the job of your objectives and goals. I once attended a training seminar where one of the exercises was to come up with as many ideas as we could for earning ten dollars by the end of the day.
This was supposedly an exercise in brainstorming. After a few minutes, the instructor polled the audience for some of their ideas. Some ideas were better than others, but everyone agreed that even the bad ones could have earned someone ten dollars in a day. The instructor then asked if any of the ideas presented so far could earn someone a million dollars. The consensus was that the vast majority of ideas had absolutely no chance to make anyone a million dollars, and a select few had only a very slim chance. At the end of the exercise, the instructor simply said, “You don’t get million dollar ideas from a ten dollar vision. In other words, the quality of your vision determines the creativity, quality and originality of your ideas and solutions. A powerful vision statement should stretch expectations and aspirations helping you jump out of your comfort zone. Some people may object to the use of such an optimistic or unrealistic vision statement because others may consider it a failure when they fall short of the best possible outcome, even if they meet all the goals/objectives. Unfortunately, this is a very valid concern in many organizations.
If this is the case, you can still gain the benefits of a powerful and compelling vision statement by creating two versions: an idealized version to inspire and motivate, and a watered down “realistic” version that you can use as a target. Just keep in mind that, back in the early 80’s, Microsoft’s vision of “a PC in every home running Microsoft software” would have been considered by most to be highly unrealistic. I think it is safe to say that, even now, not every home has a PC in it and not every PC runs Microsoft software, but that doesn’t mean Microsoft has failed!
It just means they still have room for improvement. Remember that the purpose of the vision statement is not to serve as a “real” target that you are going to measure against to determine if you have succeeded or failed. You should use your goals and objectives to do that. Instead, the purpose of the vision statement is to open your eyes to what is possible. Albert Einstein said, “Imagination is more powerful than knowledge. ” I believe this is true in many respects because while knowledge allows you to see things as they are, imagination allows you to see things as they could be. Page 6 of 19
Strategic Business Planning When we become aware of what is possible, we begin to realize that dreams can be achieved, that challenges can be conquered, and that problems can be solved. In doing so we open up a completely new set of avenues and possibilities, which by itself is a tremendous source of passion and energy. As Les Brown puts it, “Shoot for the moon! Even if you miss, you’ll still be among the stars. ” Describe Your Vision Statement in the Present Tense Describe your vision statement in present tense as if you were reporting what you actually see, hear, think and feel after your ideal outcome was realized.
Make your Vision Statement Emotional Your vision statement should describe how you will feel when the outcome is realized. Including an emotional payoff in your vision statement infuses it with passion and will make it even more compelling, inspiring, and energizing. Add Sensory Details to Your Vision Statement The more sensory details you can provide, the more powerful your statement becomes. Describe the scenes, colors, sounds, and shapes. Describe who is there and what everyone is doing. These sensory details will help you build a more complete and powerful mental image of your ideal outcome.
Have questions related to writing a vision statement? Want help, advice, or feedback for a vision statement you are developing? Inner vs. Outer Vision Statements When creating vision statements it is often useful to separate the inner and outer aspects. This is particularly true for vision statements related to your life areas, and less important for project/goal vision statements. An outer vision statement refers to your physical sensory experience (what you would see, hear, do, etc. ). An inner vision statement refers to your internal thoughts, emotions and feelings.
In a business setting, you can think of outer vision statements as the way you would like “outsiders” such as your customers, suppliers and the community to view and behave towards your company. An inner vision statement would describe the way you would like your employees, owners and other insiders to view your company. While developing the Achieve goal setting software, we decided to include the concepts of inner vs. outer vision statements at the result area level, but not for the project vision in project plans.
Updating Your Vision Statement Since vision statements are usually focused on the long-term, they don’t have to be updated or reviewed as frequently as mission statements. Page 7 of 19 Strategic Business Planning My personal preference is to review vision statements at least once a month. You can also review them whenever you need a jolt of inspiration or an energy recharge. A quarterly review is also an excellent time to determine if your vision statement is still describing the ideal outcome you want for each result area.
Sometimes you will find that your vision can remain consistent with what you want for a long time, and other times you have an epiphany and have to rewrite your statement from scratch. Perceptions of Ideal Futures: An Exercise in Forming Vision This section outlines an exercise you may employ to assist your organization in defining its own vision. By using this exercise to develop your organizational vision, you may be better assured that the vision statement that is developed is a shared vision. At a retreat, or even at a board meeting or staff meeting, take an hour to explore your vision.
Breaking into small groups helps increase participation and generate creativity. Agree on a rough time frame, say five to ten years. Ask people to think about the following questions: How do you want your community to be different? What role do you want your organization to play in your community? What will success look like? Then ask each group to come up with a metaphor for your organization, and to draw a picture of success: “Our organization is like … a mariachi band – all playing the same music together, or like a train – pulling important cargo and laying the track as we go, or …. The value of metaphors is that people get to stretch their minds and experiment with different ways of thinking about what success means to them. Finally, have all the groups share their pictures of success with each other. One person should facilitate the discussion and help the group discuss what they mean and what they hope for. Look for areas of agreement, as well as different ideas that emerge. The goal is to find language and imagery that your organization’s members can relate to as their vision for success. Caution: Do not try to write a vision statement with a group. Groups are great for many things, but writing is not one of them! ). Ask one or two people to try drafting a vision statement based on the group’s discussion, bring it back to the group, and revise it until you have something that your members can agree on and that your leaders share with enthusiasm. Page 8 of 19 Strategic Business Planning Examples of Vision Statements: SIBM: To become a premier business school recognized globally for its excellence in academics, intercultural, solidarity, and understanding and for its valuable contributions to industry, society, and students.
IIM CALCUTTA: To be an international centre of excellence in all aspects of management education. SAIL: “To be a respected world class corporation and the leader in Indian steel business in quality, productivity, profitability, and customer satisfaction” WIPRO: With utmost respect to human values, we promise to serve our customers with integrity through innovative, value for money solutions, by applying thought day after day. ASIAN PAINTS: aims to become one of the top five Decorative coatings companies world-wide by leveraging its expertise in the higher growth emerging markets.
Simultaneously, the company intends to build long term value in the Industrial coatings business through alliances with established global partners. Mission Statements & Vision Statements Vision Statements and Mission Statements are the inspiring words chosen by successful leaders to clearly and concisely convey the direction of the organization. By crafting a clear mission statement and vision statement, you can powerfully communicate your intentions and motivate your team or organization to realize an attractive and inspiring common vision of the future. Mission Statements” and “Vision Statements” do two distinctly different jobs. A Mission Statement defines the organization’s purpose and primary objectives. Its prime function is internal – to define the key measure or measures of the organization’s success – and its prime audience is the leadership team and stockholders. Vision Statements also define the organizations purpose, but this time they do so in terms of the organization’s values rather than bottom line measures (values are guiding beliefs about how things should be done. The vision statement communicates both the purpose and values of the organization. For employees, it gives direction about how they are expected to behave and inspires them to give their best. Shared with customers, it shapes customers’ understanding of why they should work with the organization. Page 9 of 19 Strategic Business Planning Mission: “If you don’t set your goals based upon your Mission Statement, you may be climbing the ladder of success only to realize, when you get to the top, you’re on the WRONG BUILDING. “ – Stephen Covey What is Mission? • • • A sentence describing an organization’s function, markets and competitive advantages; a short written statement of your business goals and philosophies A mission statement defines what an organization is, why it exists, its reason for being A brief description of a company’s fundamental purpose – It answers the question, “Why do we exist? ” Broadly describe an organization’s present capabilities, customer focus, activities, and business makeup What does a Mission Statement do? • • • • Serves as a filter to separate what is important from what is not
Clearly states which markets will be served and how Communicate a sense of intended direction to the entire organization The mission statement can be as short as a few words or as long as several sentences or short paragraphs Mission Statement Creation • To create your mission statement, first identify your organization’s “winning idea”. This is the idea or approach that will make your organization stand out from its competitors, and is the reason that customers will come to you and not your competitors (see tip below). • • Next identify the key measures of your success. Make sure you choose the most important measures (and not too many of them! ) Combine your winning idea and success measures into a tangible and measurable goal. Refine the words until you have a concise and precise statement of your mission, which expresses your ideas, measures and desired result. Example: Take the example of a produce store whose winning idea is “farm freshness”. The owner identifies two keys measures of her success: freshness and customer satisfaction.
She creates her mission statement – which is the action goal that combines the winning idea and measures of success. The mission statement of Farm Fresh Produce is: “To become the number one produce store in Main Street by selling the highest quality, freshest farm produce, from farm to customer in under 24 hours on 75% of our range and with 98% customer satisfaction. ” Page 10 of 19 Strategic Business Planning Examples of Mission Statements: • • • • • • Wal-Mart – “To always provide low prices, always. ” Disney – “To make people happy. Nike – To bring inspiration and innovation to every athlete in the world. ” Microsoft – To enable people and businesses throughout the world to realize their potential. ” SIBM: To make SIBM better and better in terms of excellence in education, research, service to industry, society and students. IIM CALCUTTA: The mission of the Institute is to develop innovative and ethical future leaders capable of managing change and transformation in a globally competitive environment and to advance the theory and practice of management. • • Unilever’s mission is to add Vitality to life. We meet everyday needs for nutrition, hygiene, and personal care with brands that help people feel good, look good and get more out of life. Amazon – “Amazon. com seeks to be the world’s most customer-centric company, where customers can find and discover anything they want to buy online at a great price. ” Studio67 – “Studio67 is a great place to eat, combining an intriguing atmosphere with excellent, interesting food that is also very good for the people who eat there.
We want fair profit for the owners, and a rewarding place to work for the employees. ” Characteristics of good Mission Statements: Mission statements can and do vary in length, contend, format, and specificity. Most practitioners and academicians of strategic management consider an effective statement to exhibit nine characteristics or components. Because a mission statement is often the most visible and public part of the strategic management process, it is important that it includes all of these essential components. Effective mission statements should be: • • • • • • • • • • • Broad in scope Generate range of feasible strategic alternatives Not excessively specific Reconcile interests among diverse stakeholders Finely balanced between specificity & generality Arouse positive feelings and emotions Motivate readers to action Generate the impression that firm is successful, has direction, and is worthy of time, support, and investment Reflect judgments re: future growth Provide criteria for selecting strategies Basis for generating & screening strategic options Are dynamic in orientation
Page 11 of 19 Strategic Business Planning Components and corresponding questions that a mission statement should answer are given here. • • • • • • • • • Customer: Who are the firm’s customers? Products or services: What are the firm’s major products or services? Markets: Geographically, where does the firm compete? Technology: Is the firm technologically current? Concern for survival, growth, and profitability: Is the firm committed to growth and financial soundness?
Philosophy: What are the basic beliefs, values, aspirations, and ethical priorities of the firm? Self-concept: What is the firm’s distinctive competence or major competitive advantage? Concern for public image: Is the firm responsive to social, community, and environmental concerns? Concern for employees: Are employees a valuable asset of the firm? Page 12 of 19 Strategic Business Planning Developing Effective Vision and Mission Statements – By Jay Ebben, Ph. D. “It is awfully important to know what is and what is not your business. — Gertrude Stein In one of my first jobs out of college, the Fortune 500 company that hired me had its mission posted in every cubicle: “To continuously exceed our customers’ increasing expectations. ” I remember looking at it the first day. It sounded ambitious, but raised a lot more questions for me than it answered. Who are our customers? What expectations do they have? How can I contribute to fulfilling this mission? And how long did it take a group of our highly paid executives to choose that particular mission statement over “To be the number one company in our industry” or “To be recognized as a worldwide leader in excellence”?
Unfortunately, in recent years vision and mission statements have become watered down in the corporate world to the point where they are essentially meaningless (bringing a case of beer along on sales calls may exceed customer expectations but not necessarily help a business achieve its goals). Because of this, vision and mission have been largely branded with negative connotations. However, when used properly, vision and mission statements can be very powerful tools, especially for new and small firms.
Just as a successful coach has a vision for putting a team together and game plans for successful execution, vision and mission provide direction for a new or small firm, without which it is difficult to develop a cohesive plan. In turn, this allows the firm to pursue activities that lead the organization forward and avoid devoting resources to activities that do not. Vision Statements for New and Small Firms Vision statements and mission statements are very different. A vision statement for a new or small firm spells out goals at a high level and should coincide with the founder’s goals for the business.
Simply put, the vision should state what the founder ultimately envisions the business to be, in terms of growth, values, employees, contributions to society, and the like; therefore, self-reflection by the founder is a vital activity if a meaningful vision is to be developed. As a founder, once you have defined your vision, you can begin to develop strategies for moving the organization toward that vision. Part of this includes the development of a company mission. Mission Statements for New and Small Firms
The mission statement should be a concise statement of business strategy and developed from the customer’s perspective and it should fit with the vision for the business. The mission should answer three questions: What do we do? How do we do it? For whom do we do it? Page 13 of 19 Strategic Business Planning What do we do? This question should not be answered in terms of what is physically delivered to customers, but by the real and/or psychological needs that are fulfilled when customers buy your products or services.
Customers make purchase decisions for many reasons, including economical, logistical, and emotional factors. An excellent illustration of this is a business in the Twin Cities that imports hand-made jewelry from east Africa. When asked what her business does, the owner replied, “We import and market east African jewelry. ” But when asked why customers buy her jewelry, she explained that, “They’re buying a story in where the jewelry came from. ” This is an important distinction and answering this question from the need-fulfilled perspective will help you answer the other two questions effectively.
How do we do it? This question captures the more technical elements of the business. Your answer should encompass the physical product or service and how it is sold and delivered to customers, and it should fit with the need that the customer fulfills with its purchase. In the example above, the business owner had originally defined her business as selling east African jewelry and was attempting to sell it on shelves of boutique retail stores with little success. After modifying the answer to the first question, she realized that she needed to deliver the story to her customers along with the product.
She began organizing wine parties that included a slide show of east Africa, stories of personal experiences there, and pictures and descriptions of the villagers who make the jewelry. This method of delivery has been very successful for her business. For whom do we do it? The answer to this question is also vital, as it will help you focus your marketing efforts. Though many small business owners would like to believe otherwise, not everyone is a potential customer, as customers will almost always have both demographic and geographic limitations.
When starting out, it is generally a good idea to define the demographic characteristics (age, income, etc. ) of customers who are likely to buy and then define a geographic area in which your business can gain a presence. As you grow, you can add new customer groups and expand your geographic focus. An additional consideration with mission statements is that most businesses will have multiple customer groups that purchase for different reasons. In these cases, one mission statement can be written to answer each of the three questions for each customer group or multiple mission statements can be developed.
Also, as a final thought, remember that your vision and mission statements are meant to help guide the business, not to lock you into a particular direction. As your company grows and as the competitive environment changes, your mission may require change to include additional or different needs fulfilled, delivery systems, or customer groups. With this in mind, your vision and mission should be revisited periodically to determine whether modifications are desirable. Page 14 of 19 Strategic Business Planning Values
Values are beliefs which your organization’s members hold in common and endeavor to put into practice. The values guide your organization’s members in performing their work. Specifically, you should ask, “What are the basic beliefs that we share as an organization? ” Examples of values include: a commitment to excellent services, innovation, diversity, creativity, honesty, integrity, and so on. Values may include beliefs such as: “Eating vegetables is more economically efficient and ecologically responsible than eating beef. (Vegetarian Association) Marvin Weisbord writes in Productive Workplaces that values come alive only when people are involved in doing important tasks. Ideally, an individual’s personal values will align with the spoken and unspoken values of the organization. By developing a written statement of the values of the organization, group members have a chance to contribute to the articulation of these values, as well as to evaluate how well their personal values and motivation match those of the organization. Values Govern: • • • Our relationship with customers Our interactions with team members Our relationship with the society Our commitment to excellence Examples: • • • • • We have trust and respect for individuals We focus on a high level of achievement & contribution We conduct our business with uncompromising integrity We achieve our common objectives through teamwork We encourage flexibility and innovation Page 15 of 19 Strategic Business Planning Business Objectives Objectives can be defined as specific results that an organization seeks to achieve in pursuing its basic mission.
Long-term objectives represent the results expected from pursuing certain strategies. Strategies represent the actions to be taken to accomplish long-term objectives. The time frame for objectives and strategies should be consistent, usually from two to five years. Objectives are essential for organizational success because they state direction; aid in evaluation; create synergy; reveal priorities; focus coordination; and provide a basis for effective planning, organizing, motivating and controlling activities. Objectives should be challenging, measurable, consistent, reasonable, and clear.
In a multidimensional firm, objectives should be established for the overall company and for each division. The Nature of Long-Term Objectives Objectives should be quantitative, measurable, realistic, understandable, challenging, hierarchical, obtainable, and congruent among organizational units. Each objective should also be associated with a time line. Objectives are commonly stated in terms such as growth in assets, growth in sales, profitability, market share, degree and nature of diversification, degree and nature of vertical integration, earnings per share, and social responsibility.
Clearly established objectives offer many benefits. They provide direction, allow synergy, aid in evaluation, establish priorities, reduce uncertainty, minimize conflicts, stimulate exertion, and aid in both the allocation of resources and the design of jobs. Long-term objectives are needed at the corporate, divisional, and functional levels in an organization. They are an important measure of managerial performance. Clearly stated and communicated objectives are vital to success for many reasons.
First, objectives help stakeholders understand their role in an organization’s future. They also provide a basis for consistent decision making by managers whose values and attitudes differ. By reaching a consensus on objectives during strategy-formulation activities, an organization can minimize potential conflicts later during implementation. Objectives set forth organizational priorities and stimulate exertion and accomplishment. They serve as standards by which individuals, groups, departments, divisions, and entire organizations can be evaluated.
