What it is: The purpose or objective organization (organizational objectives) are the steps that need to be taken by an organization to meet objectives (goals) in its entirety. Establishing them is the first task before management designs policies and strategies and allocates organizational resources. It gives them clear direction on what policies, strategies and actions they should take to achieve them.
Setting objectives not only involves upper management, but it also involves lower management. It is then divided into several levels, where the lower objective describes and specifies the upper objective. In other words, they must be connected and mutually supportive.
Why are organizational objectives important?
Several reasons explain why organizational objectives are important to business , including:
- Helping businesses to have a clear direction by setting out what they should be in the future.
- Map out what the company must do now and in the future to achieve the target.
- Allows management to have priority to allocate resources appropriately, ensuring they are properly routed to the final destination.
- Assist management in designing appropriate and detailed strategies and action plans.
- Control and review whether the strategy is successful? And do the business activities support the goals?
- Evaluate the company’s strategy to keep it relevant to the business environment.
Should the organization’s objectives be formalized?
Do company objectives require formality or not? It depends on the business organization. In small business organizations such as sole proprietorships, it may be implied, not written down and formalized. Nonetheless, owners should have a clear idea of what they want to achieve as it guides them in making business decisions.
In partnerships, where there are several partners, they must agree on the direction the business should take. Formalized objectives become a way of avoiding future disputes.
Then, in a limited liability company, the objectives are usually formalized and stated in their articles of association. Even so, it may not be in detail.
What is the difference between an organization’s aim (aim) and objective?
Purpose (aim) and objectively provide business direction and gives purpose to what is done by the business, so that all businesses should have it. Although they look similar, the two are different.
- The aim (aim) is the overall target or goal of the business. It doesn’t detail how it was achieved. Sometimes also called the goal (goal). For example, the company intends to make a profit of $120 million.
- Objectives describe how the business meets these goals. For example, to achieve a profit of $120 million, the company aims to increase revenue by 10% and streamline operations by lowering costs by about 10% in the next year. Thus, the company can achieve a profit of $120 million in the next year.
What are the types of organizational objectives?
Types of organizational objectives can be divided according to where they are to be achieved at the hierarchical level, whether at the top, at the middle level and at the bottom level. It has the following three levels:
Strategic objective (strategic objective) – about where the organization wants to be in the future. Top management determines them, guides them in operating the business. It focuses on general, broad and long-term issues. Lastly, it affects the entire company and serves as a guide in setting the objectives under it.
Objective tactical (tactical objectives) – about what you want to achieve major divisions and departments. Middle managers design and define them to focus efforts on supporting and achieving strategic objectives. They map out how their division or department contributes to achieving strategic goals and what they must do and achieve. So, it specifically only affects a division or department.
Operational objective (operational objectives) – about what specific results expected to be achieved by teams and individuals. It is set by lower-level managers to address short-term problems and to achieve tactical objectives.
What are the criteria for good organizational objectives?
The objectives of a good organization must meet the SMART criteria: specific, measurable, achievable, realistic, time specific.
Specific (specific) – the objective must specify on what should be achieved, whether it is related to market share, revenue, quality of output or production volume. For example, the company targets sales of product ABC and product XYZ to increase.
Measurable (measurable) – objectively as possible should be quantified. For example, the company targets sales of ABC products to increase 10% and XYZ products to increase 5%.
Can be achieved (achievable) – the objective must be within the limits of the company’s internal capabilities, not too easy nor too difficult to achieve. For example, targeting a 120% increase in sales of ABC products may not be achievable, as the company must at least post a sales increase of around 10% every month, moreover, market demand is down.
Realistic (realistic) – the objective must be in accordance with the conditions in which it must be achieved – taking into account market conditions and competition, capabilities, and company resources. For example, the company targets a high sales increase because the economy is prospering. That percentage is unlikely to be reached if a recession hits.
Time -specific – it requires the company to determine when to hit the target. For example, the company targets sales of ABC products to increase 10 percent and XYZ products to increase 5 percent next year.