8 Steps, How to Set Business goal

Introduction

Objective are the aims of an organisation. The objective can be short term, medium term and long term. Generally, the objectives of a business unit include: sales, market share, profits, corporate image, and so on.

 

Steps in Setting Business Objectives

Objectives are to be set in all areas, which have a bearing on the growth of the firm. To set objectives, the organisation needs to consider the following factors/Steps :

1. Analyse Internal Environment

              The organization needs to analyse the internal environment. 

               The internal environment analysis involves analysis of: 

• Physical resources such as materials, machines.
• Financial resources such as sources and application of funds.
• Human resources in terms quality (competence and capabilities) and quantity of manpower.
• Policies and strategies of various functional areas such as production, marketing, human resources, finance.
• Working conditions, and welfare facilities        
• Management - labour relations.      

The  analysis of the internal environment would reveal strengths and weaknesses of the organisation. The organisation needs to make every possible effort to correct weaknesses and to improve on the strength of the organisation.

For example, if employees are not committed or motivated, there is a need for motivation and training. And if the machines are outdated, the company may replace them with new ones.

2.  Analyse External Environment:

    The company needs to analyse the external environment that affect the working of the firm. Analysis of the external environment involves analysis of:

• Government Policies.
• Competitors' strategies.
• Consumer tates and preferences.
• Events in the international environment.
• Technological development in the industry, etc.

   The analysis of the external environment reveals opportunities and threats. This analysis helps the organisation to grab the opportunities and to minimize or defuse the threats.

3. Values and Beliefs of Top Management:

    

   The values and beliefs of the top management influence setting of objectives.

     

  For instance, in some organizations, the top executive may value quality and         innovation and as such they may allocate more funds for R&D. In other                 organizations, the top executive may believe in volumes and not quality

   and they may not go for innovation, as it involves huge expenditure.

     

     At this stage, the management may frame mission statement. If mission           statement is in existence; management may analyse the same. Mission   statement becomes the basis of setting objectives in professional     business firms.  

4. Involvement of Employees:

    

   There is need to involve employees in setting objectives. The company may adopt the technique of Management by Objectives (MBO). Under MBO approach, the managers and the subordinates jointly define and set the goals.

Involvement of the subordinates in goal-setting helps to gain cooperation and commitment of the subordinates in implementing the various activities to  achieve the goals.

5. Past performance of the firm:

    Awareness of the past objective and performance of the firm provides direction 

in setting objectives. Normally, a firm does not deviate too much in setting objectives as compared to the past objectives. Therefore, while setting objectives,

the managers need to consider the past objectives and developments of the firm.

6. Setting of Objective:

    

   The management needs to set the objective in all the functional area production, marketing, finance and HRM. The firm should set the long-range as well as the short-range as well as the short - range objectives.

While setting objective, certain essential need to be considered such as:

• Specific and well defined.
• Measurable against standards.
• Attainable with the given resources.
• Realistic (neither too high nor too low)
• Time bound - definite time limit to achieve.
• Priority of objectives, etc.

7. Implementation:

    

    After setting objectives, the management must plan and  implement the targets. Implementation of activities involves:

• Organising resources.
• Directing subordinates.
• Motivating subordinates.

8. Review:

    

    There must be periodic review of activities. This would enable the firm out whether the listed objectives are achieved or not. If the deviations take place, corrective measures need to be taken including of the objectives.

Periodic review may also help to change the order of priority of objectives depending on the situation.