WThe primary, overall purpose of an organization—its expressed reason for existence—is referred to as its mission. Objectives are formulated to attain the mission
wImportance of Mission. The importance of having a suitable mission that is formally expressed and effectively communicated to the organization's people cannot be overstated. The objectives derived from it serve as criteria for all subsequent managerial decision making. If managers do not know what their organization's basic purpose is, they have no logical reference point for deciding which alternative is best.
wThe mission details the firm's identity and provides direction and guidelines for constructing goals and strategies at various organizational levels. The statement of mission of an organization must convey the following:
w1. The purpose of the firm in terms of its basic service or products, its primary markets, and its major technologies. Simply, what business is the firm in?
w2. The external environment that determines the operating philosophies of the firm.
w3. The organizational culture. What type of working climate exists within the firm? What type of people does this climate attract?
wBy seeing its mission in terms of defining fundamental customer needs and meeting them effectively, management in effect creates customers to support the organization in the future. As Peter F. Drucker has said, "There is only one valid definition of business purpose: to create a customer." If a business makes its mission the creation of customers, it will also make the profit it needs to survive, barring mismanagement in execution.
wSelecting a Mission. Many managers never bother to select and state their organization's mission. Often the mission seems obvious to them. If you ask a typical small-business person what his or her mission is, the reply probably would be, "To make a profit, of course." But if you think through the matter, the inadequacy of profit as the overall mission becomes apparent, even though it is, indeed, an essential objective.
wProfit is wholly internal to the enterprise. Because an organization is an open system, it can survive in the long run only by meeting some need outside of itself. To earn the profit it needs to survive, the firm must look to the environment in which it operates. The environment therefore is where management seeks the overall purpose of the organization. In order to select a suitable mission, management has to answer two questions: "Who are our customers?" and "What needs of these customers are we able to fulfill?" A customer, in this context, is anyone using the output of the organization.
wThe need for a mission was recognized by exceptional managers long before the development of systems theory. Henry Ford, a very profit-conscious manager, defined Ford's mission as providing the public with low-cost transportation. He correctly observed that if one does this, one can hardly get away from profits.
wSelecting an organization mission that is too narrow, such as profits, hinders management's ability to explore feasible alternatives in decision making. As a result, key factors may not be considered and the subsequent decisions may result in a low level of effectiveness for the organization.
Characteristics of Objectives
wSpecific and Measurable Objectives. By stating its objectives in specific, measurable terms, management provides a clear reference point for subsequent decisions and for evaluation of progress. Middle managers have guidance in deciding whether to allocate more effort to employee training and development. It also is easier to determine exactly how well the organization is doing with respect to its objectives. As we shall learn, this becomes important when performing the control function.
Characteristics of Objectives
wTime-Oriented Objectives. A specific time horizon is another characteristic of effective objectives. They should specify not only exactly what the organ' zation wants to accomplish but also generally when the result is to be attained. Objectives typically are set for time spans ranging from long to short. A long-range objective has a time horizon of roughly five years sometimes longer for technically advanced companies. A short-range objective, in most cases, is one of the organization plans to attain within a year Medium-range objectives have a one- to five-year time horizon. Long-range objectives typically are broad in scope. The organization formulates them first. Medium- and short-range objectives are then developed to support the longer-range objectives.
wFor example, a long-range productivity objective may be "to increase overall productivity by 25 percent within five years." Consistent with this, management would set medium-range objectives of increasing productivity by 10 percent within two years. It would also establish short-range objectives in such specific areas as inventory costs, employee training, plant improvement, more efficient use of existing facilities, management development, union negotiations, and so forth. These must support the long-range objectives, to which they are directly related, and other objectives of the organization.
wAttainable Objectives. An objective must be attainable if it is to make an organization more effective. Setting an objective beyond the organization's capabilities, either due to insufficient resources or external factors, can have disastrous consequences. If objectives are not attainable, employees' needs for achievement may be frustrated and their motivation reduced. Since it is common practice to link compensation and promotions to goal attainment, unattainable objectives may make the means that an organization uses to motivate its people less effective.
wMutually Supportive Objectives. Lastly, to be effective, the organization's multiple objectives must be mutually supportive—that is, actions and decisions required to attain one objective should not detract from the attainment of others. For example, an objective of maintaining inventory at a level of 1 percent of sales would not, for most firms, support an objective of fulfilling all orders within two weeks. Failure to make objectives mutually supportive tends to cause conflict between the units of the organization responsible for attaining the stated objectives.
After establishing its mission and objectives, management must begin the diagnostic phase of the strategic planning process. The first step in diagnosis is examining the environment. Managers evaluate the environment for three reasons:
w1. To assess changes that affect aspects of current strategy. For example, increases in jet fuel prices have created a variety of problems for the airlines. They must constantly assess fuel price trends as part of the strategic planning process.
w2. To determine what factors present threats to the current strategy of the firm. Monitoring the activities of competitors keeps management alert to potential threats.
w3. To determine what factors present greater opportunities for achieving corporate objectives by adjusting the strategic plan.
wEnvironmental analysis is the process by which strategic planners monitor factors external to the organization to determine opportunities and threats to the firm.
wEnvironmental analysis has several important benefits. It gives the organization time to anticipate opportunities, time to plan for contingencies, time to develop an early-warning system for possible threats, and time to develop strategies that can turn threats into opportunities.
wIn terms of evaluating these threats and opportunities, the role of environmental analysis in the strategic planning process basically responds to three specific questions:
w1. Where is the organization now?
w2. Where does top management want the firm to be in the future?
w3. What must management do to get the firm from where it is now to where it wants to be?
wSizing up a firm's resource strengths and weaknesses and its external opportunities and threats, commonly known as SWOT analysis, provides a good overview of whether a firm's business position is fundamentally healthy or unhealthy. SWOT analysis is grounded in the basic principle that strategy-making efforts must aim at producing a good fit between a company's resource capability and its external situation. A clear view of a company's resource capabilities and deficiencies, its market opportunities, and the external threats to the company's future well-being is essential. Otherwise, the task of conceiving a strategy becomes a chancy proposition indeed.
•In previous parts of our course we saw that specialized division of labor can greatly increase the work output of a group of people.
•However, unless the relationships between people and organizational units are clearly established and their work is coordinated, the efficiencies of specialization will be lost.
•Delegation is the primary process by which managers establish formal relationships among people in an organization. Through delegation of authority and tasks, managers match people with work and decide which people will work together in a superior-subordinate relationship. Further we will discuss delegation and the nature of authority in organizations.