January 22, 2018

Objectives and Goals - Review Notes

Koontz and O'Donnell state that they used objectives and goals as synonymous terms in the book.

Different authors provide different explanations for these concepts. I like the explanations that I studied. The explanation I narrate in this article is based on the treatment of the concepts in the book “Strategy and Policy: Concepts and Cases” by Thompson and Strickland, Business Publications, Texas, 1978.


Objectives specify the results sought through the ongoing, long-run operations of the organization. These outcomes may consist not only of the desired results insofar as the organization's customer is concerned but also of what the organization perceives as the long range results it intends to achieve internally.

To have meaningful impact, objectives must be capable of being converted into specific targets and specific actions. They must give direction to the activity of the organization. They must set forth long-run organizational priorities. They must become the basis for work and for achievement. They must serve as standards against which performance is to be measured.

Since the role of objectives is to guide the concentration of resources and effort towards the desired ends, objectives should be selective. Objectives are needed in all areas on which the long-term survival and success of the organization depend. The important areas are:

1. Market
2. Technology
3. Innovation
4. Profitability
5. Efficiency
6. Resources
7. Social responsibility

The objectives of an organization may undergo revision over a period of time to meet changing circumstances.

Mission or Purpose

A business is defined by the want the customer satisfies when he buys a product or a service from a business organization.

To satisfy the customer (means to satisfy a specific want of the customer) is the mission and purpose of every business.

The question "What is our business?" can be answered only by looking at the business from the outside, from the view point of customer and market.

The purpose of a company has to be one of the wants of customers in the market.

The customer is not attached to any product, service or company. He wants to know what the product or service will do for him tomorrow. He is interested in his own wants, his values and his desires and world as he sees it. Therefore any serious attempt to define "what our business is" must start with the customer, his wants, his situation, his behavior, his expectations, and his values.

Therefore a searching enquiry needs to carried out to answer questions such as:

Who is our customer and what are his needs?
Where is the customer?
What does the customer buy?
Is it status? Comfort? Satisfaction of a physical need? An ego need? Security?

What is value to the customer?
Is it price? Function? Quality? Service? Economy of use? Durability? Styling? Convenience?

These questions plainly need to be posed and answered at the inception of a business and whenever it gets into trouble.

But even when the business is successful, the organizations have to examine their business purpose as the definition may become obsolete in the context of changes in the products and markets. The periodical examination of purpose in the light of customer studies and research will help the organization to look ahead and anticipate the impact of changes in the environment.

At any point of time, the purpose stated by the company has to be the answer to the question "What should our business be?" This question is periodically answered by the top management as a part of its setting the strategy for the future period.

A Hierarchy of Objectives

Objectives of an organization form a hierarchy. The zenith of the hierarchy is the socioeconomic purpose of society, that requires the organization to contribute to the welfare of the people by providing goods and services at a price that is affordable or people are willing to buy.

Objectives of an Organization - Explanation




The goals of an organization are the intermediate quantitative and qualitative "performance targets" which management seeks to attain in moving toward organizational objectives.

Thus whereas objectives are long range in nature, goals are short range. They serve to indicate the speed and momentum which management seeks to maintain in accomplishing the organization's objectives.

They direct the attention of both management and employees toward the desired standards of performance and behavior in the near term.

Illustrations of goals:

1. Our target is to have market share of 15 percent this year and 17.5 percent next year.

2. We seek to gain enough accounts this year to reach our goal of $50 million in assets under management.

Goals become the rallying point for coordinating the activities of subunits as they act as a basis for establishing common goalposts.

Acceptance of the objectives of the organization and goals derived there from promotes teamwork and a united approach to the working of the organization.

Updated 23 January 2018, 22 July 2014

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