Estimated time of reading: 30 minutes
1.4 Business objectives
A fundamental stage in the process of management and administration of the company is the establishment of objectives. If the objectives to be achieved are not clearly established, it will be difficult to direct and coordinate the company’s resources, it will be difficult to compete with other companies in the sector and, in short, to have a minimum chance of success.
Before going deeper into the study of business objectives, it is convenient to understand other related concepts, such as mission and vision. The objectives are presented as a commitment of the organization to produce specific results in a given time horizon, by means of which the progress towards its vision can be measured.
The objectives are “a measure of the efficiency of the resource conversion process”. The specification of how much and when they are especially important, as Peter Drucker (1975) stated:
“You cannot manage what cannot be measured and what cannot be described cannot be measured”.
The set of objectives constitutes a pyramid that ranges from the most global and long-term, to more concrete and short-term objectives whose integration and coordination allow the achievement of the vision and mission of the company.
For these to be effective they must meet the following characteristics:
1. They should be a challenge, but be realistic. That is, they have to adjust to reality, to achievable parameters.
2. They should be a challenge, but be realistic. That is, they have to adjust to reality, to achievable parameters.
3. They must be established in specific and quantifiable terms.
4. They must be supported by superiors.
5. They should be discussed regularly in meetings.
6. They must be put in writing.
7. They must generate enthusiasm in subordinates. The objectives are a fundamental element for the commitment of the people with the organization.
Types of objectives
Economic financial objectives
Profitability: This objective aims, both in the short and long term, to increase the relationship between the profit obtained by the company and the capital invested in it. This objective is pursued by all companies, although it acquires a more relevant role in private companies and with a certain size. In public companies, the objectives of social interest tend to be put forward.
Growth: This objective is usually translated into structural changes and consequent increases in size or dimension that makes the company different from its previous state and that increases its market power as a mechanism to ensure the obtaining of future and better benefits.
- Increase in production and sales figures.
- Development both vertically (integration of activities in the same economic sector) and horizontally
- Absorption and participation to exercise control of other companies,
- Survival. This is concrete in the stability and adaptability of the company with respect to the environment. This will be possible if the vulnerability of the company can be reduced in the face of temporary variations, which entails problems of size, technological level or financial solvency, among others.
In this practical talk, Doerr shows us how we can get back on track with “Objectives and Key Results,” or OKRs — a goal-setting system that’s been employed by the likes of Google, Intel and Bono to set and execute on audacious goals.
Socioeconomic objectives
Workers
The workers set their objectives in terms of achieving the maximum effective remuneration rate, although weighted by the degree of security in employment and the expectations of professional promotion.
Directors
Managers pursue that the company they manage to achieve benefits, provided that a balanced and constant growth of this is achieved, as this translates into greater recognition and prestige over their work as a professional management and allows to defend their power or control internal
Owners of the capital
Within this group we can differentiate the owners with control spirit and the simple investors. The latter act, simply, as financial investors whose objective is to obtain the maximum short-term benefit of their capital, conditioned by liquidity issues and the security of their investment.
Suppliers
Comply with the payment commitments made with these and, on the other, ensure the necessary link with the company’s activities to avoid problems in its operation. Efficiency and flexibility (Lean Management) relationships with suppliers that have changed substantially transforming into long-term relationships governed by collaboration, where both company and supplier share benefits.
- Joint investments with these business partners.
- Commitment of the suppliers with the reduction of annual costs of the company.
- Direct involvement of suppliers in the design of new products or services
Clients
- Get your satisfaction with the product or service purchased
- Quality of your after-sales service
- Obtain information about changes in your wishes and needs
Local community
Social responsibility of the company
- Minimization of waste generation
- Patronage exercise
- Supply management according to quality and environmental certification of suppliers
- Promotion of gender equality
Value creation goals
Measures the return on assets or investments and is calculated as a ratio between the profit before interest and taxes.
Financial profitability (RFP) includes the return on equity, that is, the quotient between net profit and equity. It’s the profitability that the owners of the company get.
- The effect of financial leverage
- The fiscal effect