1.5.3 Business Objectives

Business Objectives

Key Definitions

Business Objectives: The goals set for the business as a whole by the managers, also known as corporate objectives.

Mission: A business aim expressed in a way that makes it seem more purposeful and motivating to employees.

Aim: A general statement that outlines where the business is heading, or where management intends a business to head. 

Mission Statement: A short, powerfully-expressed phrase that explains the business aims in a motivating, clear manner. 

Delegation: The process of passing the authority for a task down to a worker in a lower position to give them more decision-making power.

Staff Retention: Examines how many staff are 'retained' or kept in the business, usually measured as the number of staff remaining in the workforce at the end of the year as a percentage of the total workforce.

Budgets: An agreed maximum on the monthly expenditure by any department or manager in the business, there are 2 types of budgets: historical and zero budgets. 

Entrepreneur: Someone who looks at business opportunities that currently exist and then turns the idea into something of a reality, but they are not affiliated with a business.

Objectives: Targets that are precise enough to allow praise or blame for the person in charge of setting them. 

Shareholder Value: The mix of shareholder dividends and a rising share price that comes from high and rising profits in the business. 

Strategy: A medium-to-long term plan of how the business aims to achieve its objectives and targets. 

How Objectives are Set

The boss of the company makes a decision on where he or she wants to take the business, giving the business a mission. This mission then gives the basis for targets and objectives to be set for the business to achieve. 

After the objective and targets have been set, the senior managers must decide on how this will happen. This is where the strategy is decided upon and is started to be implemented within the business. The strategy will have to involve the 4 main business functions: marketing, people, finance, and operations. The leader of each of these functions will be expected to come up with their own plan on meeting the overall objective - meaning there will be a marketing plan, people plan, finance plan and an operations plan. 

Having established these plans, the leaders of the 4 functions will need to meet to ensure that everything fits well together. If marketing decides on one plan, but finance decides on another then the process would be useless. Each of the functions need to trust each other and communicate with each other to come to some form of agreement. 

There are also other complications that could come into play in the process. A chief executive may decide to set optimistic objectives, but a series of external factors could come into play and get in the way of success. The most obvious of these factors is the threat of competition coming in and ruining plans.

Mission and Objectives

The mission is the aim for the business that is set for it by the boss (in a small business) or by the Board of Directors (in a large business). The mission takes the aim and puts it into a statement so that it can be used to motivate employees and customers into buying their products. If a business has an exciting aim, it should be expressed as a mission. 'Dull' aims are also often made interesting and they become mission statements, which often mean little to staff. 

The objectives come from the aims or the mission statement, and they are usually SMART - Specific, Measurable, Achievable, Realistic, and Timebound. A good objective is challenging but also achievable. These are set in order to give junior staff the authority to get on with their work and make middle-ranking decisions in the business, sometimes without telling management. If managers are clear on the overall objectives they will feel confident in making decisions that contribute towards achieving the objectives and goals. 

Common Business Objectives

Survival

This is a priority for new, start-up businesses. With survival as the objective managers may avoid actions that look highly profitable but also high-risk, such as launching a new product. Survival is also a priority for the businesses that:

• are caught out by a sudden change in the economy, such as a recession or an unexpected increase in consumers
• have over-expanded, most likely using a bank finance and payments
• have been hit by a whirlwind of competition such as a price war or a new competitive rival emerging on the market. 

Profit Maximisation

This is the attempt by a business to make as much profit as possible, preferably as fast as possible too. Large companies may follow this approach when they suspect a rival is about to try and buy them out - the higher profit they can show, the higher price the company will fetch. This can also be said for companies who are about to 'float' their shares onto the stock market. Small companies may also try to do this, with no concerns about their future. A lot of these businesses may be exposed in the media, on programs such as the BBC's 'Watchdogs', for poor business practice, as they view their customers only as a quick source of finances.

Sales Maximisation

The growing importance of online businesses has put growth as one of the most common business objectives. The logic behind this will say that 'there is only room for one leader in this market, so we need to make sure that's us', and therefore decisions are made that will focus on the rising customer numbers instead of profits. The assumption here is that the growth comes today, bringing the profit tomorrow. 

Market Share

Having a high market share is not only good for the business today (by putting it in a strong position), it helps the business feel secure about its future. This means that, if a new product is launched, there is a very high chance that a supermarket will stock it and most consumers will want to try and buy it. It is also very rare for a business to try and break into a market that is dominated by one business, so it helps provide barriers to entry and protects the business against the threat of new entrants into the market - the new entrant knows that the business will fight to keep its current market share to stop it from becoming a potential rival and removing from its market leader status. 

Cost Efficiency

This is important for large businesses, but it is crucial for small businesses and business start-ups. If the objective is to cut down costs and become more cost efficient it is essential that everyone in the business chips in and practices the same approach - even the junior staff who have been given authority through delegation. This is critical for a business operating in a market where there is low differentiation between products. 

Employee Welfare

On the face of it the only company that would care so much about their staff to put them as a central business objective would be a worker's co-operative, such as the John Lewis Partnership. There are others who understand that good customer service comes from motivated staff. Employee welfare is also important in businesses operating in situations where they are in need of highly skilled workers but there is a shortage - companies need to pay attention to the welfare of their staff in these situations to keep staff retention high. Sadly there are still companies where the cliche "our staff are our most important asset" is just empty words, and the managers of these companies tend to use zero-hours contracts and outsourcing to cut down wages.

Customer Satisfaction

Like employee welfare, customer satisfaction is a goal, but it is rarely a corporate objective. It is necessary but not enough for success. Recently companies have used the term 'customer delight' to emphasize the need for something more than just 'satisfaction'. The real essence of customer satisfaction is that it should be at a high enough level to generate customer loyalty, or even customer dedication. 

Social Objectives

These are easy to find on the company website - whether they have any significance to business decisions is easily debatable, however. Ultimately, the social and ethical objectives only mean something if the business is willing to sacrifice some of its profit or market share along the way. It is always fair to be sceptical about whether social and ethical objectives are ever much more than just used by businesses for the PR and public image. The financial objectives remain the priority for most businesses. Ethical businesses, such as OneWater, do exist but they are rare.