Business Objectives

Business Objectives Chapter 4

Chapter Objectives • The nature and significance of business objectives in the private and public sectors • Decision-making and influences on business objectives

Business Objectives 4.1

Business Objectives • An objective is a target • A good objective will state: • what is to be achieved (e.g. an increase in profit) • how much the business wants it to be (e.g. $25 000) • when it wants this done by (e.g. three years)

Business Objectives • This means a good objective should be: • specific in terms of what the target is • quantifiable (measurable) • time specific in terms of when it should be completed

Business Objectives • A business will have an overall objective • Such as doubling profits within 5 years • Managers will then set departmental targets • Such as the marketing department increasing sales by 40% over an agreed period • The operations management department reducing costs by 20% of the next three years • The human resources department increasing labor productivity by 8% over the same time period • Each individual should also have their own objective

Business Objectives • Corporate objectives • Apply to the entire business • Examples include: • Growth • Expansion • Overall sales objectives

Case study: Tesco’s growth objective takes it to Turkey • Explain how the Tesco employees responsible for its marketing might help the company to achieve its objective of growth in Turkey. • Discuss the extent to which Tesco benefits from its clearly stated business objectives.

Corporate Social Responsibility as a Business Objective • A business may have many objectives relating to different areas • Example, it may want to boost profits but at the same time be aware of the impact on society and the environment • All countries have different laws on how a business should conduct itself within their borders • Minimum wage • Age • Environmental protections

Corporate Social Responsibility • Accepting obligations to society over and above the legal minimum • What do you think this means?

Corporate Social Responsibility • For example, a business may: • believe it should ensure that work is interesting and that employees have a good career path within the organization • believe it has a responsibility to keep people in work as much as possible and therefore be reluctant to force anyone to leave the business • believe that it is important to pay suppliers quickly rather than taking as long as possible and holding on to the money • believe that it should invest in its local community to improve the area and quality of life of the community where it is based.

Examples of Corporate Social Responsibility • Environment: • Businesses, both large and small, have a large carbon footprint • Philanthropy: • Donating to national and local charities • Whether it involves giving money or time, businesses have a lot of resources that can benefit charities and local community programs • Ethical labor practices: • Treating employees fairly and ethically • Especially true of businesses that operate in international locations with labor laws that differ from country to country

Growing Importance of CSR • Areas of CSR include: • environmental concerns • poverty • human rights • animal rights • Businesses are realizing the importance of CSR in attracting and maintaining employees and customers • Stakeholders are demanding that businesses give back to the larger community in which they operate

Toms • “One for one” motto is a well known phrase • They’ve recently upped the ante by donating a portion of their sunglass sales to vision care for children in need • Toms’ employees participate in an annual Shoe Drop where they travel and donate a variety of goods to children • Their careers page specifically calls for employees that want to change lives and be a part of a movement

LinkedIn • One Friday each month LinkedIn’s employees participate “InDay.” • InDay’spurpose is to give back to the community through employee volunteerism and resources. • Each InDay has a different theme allowing diverse departments to come together for a common cause. • InDayactivities range from guest speakers discussing global justice, to initiating global learning programs, and volunteering in local communities

PG&E • PG&E does its part to serve the communities of California • On Earth Day employees help clean and restore 18 state parks • They are exemplary members of Habitat for Humanity and volunteer by providing solar panels on new Habitat homes • Participate in various food programs

Zappos • Zappos is known for a company culture that focuses on the well being of their employees and they are on a mission to make the world a better place • They donate huge amounts of Zappos goods to tons of charitable organizations • Their employees are paid for time off if they are volunteering

Now It’s Your Turn • In pairs, find another example of a company that utilizes CSR. • Give a short presentation to the class

Case Study: Intel Sets Itself Social Objectives in Malaysia • Using examples, explain the difference between mission and objectives. • Evaluate the extent to which Intel benefits from having a widely publicized mission statement.

Mission Statement, Objectives, Strategy and Tactics • The mission of a business is the fundamental reason why it exists • A mission statement sets out the purpose of the business • The mission is a rather general statement and, unlike objectives, whether or not it has been achieved cannot easily be measured.

Mission Statement, Objectives, Strategy and Tactics • Once these targets have been set the business has to decide how to achieve them most effectively • The long-term plan to achieve an objective is known as a strategy. • The strategy has to be put into action. • The shorter-term action plans that combine to make up the strategy are known as tactics.

From Mission to Tactics • A mission statement sets out the overall purpose of a business. • An objective is a target that is measurable and has a given timescale. • Strategy is a long-term plan to achieve the objective of the business. • Tactics are short-term actions needed to implement the strategy.

Mission Statement • A mission sets out the purpose of the business • Example: An airline company may exist to be the “best airline in the world” • Mission is determined by the owners of the business

Objectives • Objectives are measurable targets that are given a timescale

Strategy • Long-term plan to reach an objective

The Importance of Business Objectives • Business objectives set out what the business wants to achieve • This provides a focus for all decisions • Everyone in the business should know what their role is to lead the company to achieve those objectives • Objectives can: • motivate employees by providing a target • provide a measure of control as progress can be reviewed against the target

The Role of Objectives in the Stages of Business Decision-Making 4.2

The Role of Objectives in the Stages of Business Decision-Making • Managing a business involves many different decisions • Making right decisions is important

Decision Making Involves • Setting objectives: A success of a plan can only be judged against the objectives that were set. • Gathering information: You need information on where you are at the moment, what is happening and your opinion to analyze the situation. • Selecting a suitable strategy: Figuring out the best strategy • Implementing the strategy: Put your tactics to work • Reviewing: Essential to see how you have got on and what if anything needs to change. Can also change targets at this point.

How Objectives Might Change Over Time • Internally: A business may have new owners or managers who want to achieve different things • Example: more concerned about environmental record, faster growth, etc. • Externally: Perhaps the economy has changed so the business needs to change their targets • If the economy is in decline, growth targets will be reduced • New competitors would affect profit targets • Decision-making is a continuous process that changes as new objectives are set

Turning Objectives Into Targets and Budgets • With each objective there should be a strategy of how it is to be achieved and specific tactical targets showing the details of the activities that need to be undertaken • A plan will show: • Who is in charge of what • What they have to do • When it must be done • How much do they have to spend (a budget) • A budgetis a financial plan

The Communication of Objectives • There needs to be a discussion with people who will be responsible for achieving the objectives • Having objectives can be motivating for employees because it provides a sense of direction • Also could be demotivating if the objectives are unrealistic and if there is no one that believes in them

How Ethics May Influence Business Objectives • Ethical behavior is behavior that is thought to be morally correct, and not necessarily the most profitable • How businesses consider right or wrong in terms of business behavior • Should we produce a product that is harmful to the environment even though it is much cheaper for us? • Example: plastic bags. Many businesses have stopped using plastic bags and make you purchase reusable bags • Sometimes objectives can encourage unethical behavior: • If the objectives are set too high • Sales objectives for example, might encourage the sales team to trick customers or pressure them into buying something they don’t want or need

Encouraging Ethical Behavior • Beyond written codes of ethics, organizations have unique cultures—ways of doing things that evolve through shared values and beliefs • Subordinates look to their supervisors as role models of ethical behavior

Ethical Issues: Bribes • Bribery is the act of giving money, goods, or other forms of compensation to a recipient in exchange for an alteration of their behavior • Akickback is a form of negotiated bribery in which a commission is paid to the bribe-taker in exchange for services rendered

Ethical Issues: Conflict of Interest • An ethical challenge that occurs when an individual or organization is involved in multiple interests that are at odds with one another • Self-dealing: Officials enter into a deal benefiting them personally • Outside employment: The interests of one job may contradict another • Family interests: Officials employ or purchase goods from a relative. Abuse of this type is called nepotism • Gifts from friends who also do business with the person receiving the gifts

Case Study: Ethics at Texas Instruments (TI) • Explain why TI sets out its ethical objectives on its website. • Discuss the case for and against TI operating with ethical behavior as a key objective at all levels in the business.

Practice Question You are on a committee interviewing applicants for a position. A friend has applied. What should you do? • Inform the head of the hiring committee that you know one of the applicants and ask whether you should remove yourself from considering her application • Look at your employee code of conduct • Advocate for your friend. You would enjoy working together

Business Objectives