- 1.1 Chapter Topic
- 1.2 Key Corporate Participants
- 1.3 Management Steps Required to Execute the Approach
- 1.4 Solving the Right Problem
- 1.5 Developing an Understanding of the Problem
- 1.6 Defining Goals and Objectives of a Company or Organization
- 1.7 Defining the Framework for the Decisions Being Made
- 1.8 Metrics for Measuring Success
- 1.9 Definition of a Metric
- 1.10 Developing Decision Criteria and Metrics
- 1.11 Data Used to Support Metrics
- 1.12 Structure and Definition of the Problem
- 1.13 Key Concepts in Defining the Objectives
This chapter is from the book
This chapter is from the book
This chapter is from the book
1.6 Defining Goals and Objectives of a Company or Organization
You can use a number of different methods and approaches to define corporate goals and objectives, using formal and informal procedures. Doing this can provide the organization with a definition of its goals and objectives that represent its current thinking. These goals and objectives can then be integrated into the decision-making process so that decisions made with the decision model are structured to impact all levels of the organization and are quantifiable and defensible.
In establishing corporate goals and objectives, consider using management to get a group consensus. Available group decision-making techniques vary in degrees of formality and you can use them to facilitate this process. Techniques range from simple brainstorming to more sophisticated methods. The end result should be a clear definition of what a corporation views as its goals and objectives. When defined, these goals and objectives can then be built into the decision process. Following is a sequence of steps that you can use to establish the goals and objectives of an organization.
1.6.1 Establish Goals and Objectives
The first step involves establishing the objectives for the organization. Primary decision makers should meet together to ensure that all the components of the organization are represented in the decision process and are represented in the objectives. One approach is to provide to the group a "straw man" list of corporate objectives as a starting point in the development of the final list of objectives. The straw man list is based on the objectives that have historically been deemed important to the group and may include objectives such as maximizing profitability, minimizing risk, minimizing cost, or maximizing growth. The executive group can then use these as a starting point and brainstorm to add or delete from the list. As part of this process, the group should also provide a high-level definition of the objectives so that all involved understand what is meant by them.
Another method, the Nominal Group Technique (NGT), which utilizes a written form for the generation of ideas, is a more formalized method that you can use to develop corporate objectives. This method attempts to minimize conforming influences and maintain social-emotional relationships in the process. It provides for equality of participation and for all members to influence the group decision through voting and ordering of priorities. Appendix A, "Overview of Methodologies," provides a description of this method, along with several others that can be used in this process.
Managers may not have the authority to affect high-level decisions; however, the establishment of these objectives and the development of the subsequent decision criteria and metrics give managers a defensible position in their decisions. The objectives established in this manner can provide the building blocks for establishing the decision criteria and metrics used within the decision model.
It is also beneficial to establish a mission statement for the organization. A mission statement is a succinct statement, typically one sentence that summarizes the purpose of the organization. A mission statement describes why the organization is in business and what it wants to accomplish.
When any group of individuals meets to conduct activities such as this, it is difficult to arrive at complete agreement. You need to understand upfront that this may be the case. In this process, you must leave the latitude to "agree to disagree." That is, it is okay if there is not complete agreement on all the objectives. Not all objectives may have the same importance to each function of an organization. Weighting the objectives, as described in the next section, provides a means to address that not all individuals may feel the same about the importance of each objective, which can be handled in the modeling process.
Examples of corporate objectives by different industries are shown here.
- Service companies
- Improve contract performance.
- Minimize operating costs.
- Improve customer management.
- Manufacturing companies
- Minimize manufacturing costs.
- Maximize customer service.
- Minimize distribution costs.
- Distribution companies
- Minimize operating costs.
- Reduce inventory levels.
- Improve operating cycle time.
- Insurance companies
- Maximize customer service.
- Streamline information technology.
- Improve service delivery margin.
- Food Industry companies
- Improve profitability.
- Increase market share.
- Increase sales.
- Reduce manufacturing costs.
- Reduce distribution costs.
These objectives are broad in nature and can focus management on organizational-level goals. Objectives are weighted to further focus corporate management on key operating areas within the company. Specific decision criteria and metrics further refine the key attributes that constitute the corporate measurement of the objectives. The objectives provide the starting point for the decomposition of strategic goals into actionable activities and problem solving.
1.6.1.1 Expert Judgment/Group Participation
The problem of group decision making can be broadly classified into two categories in this field: expert judgment and group consensus. The expert judgment process entails making a decision by using expertise gained through experience. Specifically, it is concerned with making judgments and constructing new solutions to the problem. On the other hand, the group consensus process involves groups that have common interests, such as executive boards and organizations, making a decision.
Expert judgment and group consensus methods involve methods commonly utilized in the group decision-making process. Creative methods used to extract, generate, and stimulate new ideas may include brainstorming, brainwriting, or Nominal Group technique. Techniques that are used to explore and clarify existing issues might include surveys, conferences, and the Successive Proportional Additive Numeration (SPAN) technique. For planning and execution, you can use techniques such as Gantt charts, PERT, and CPM. (Refer to Appendix B, "Detailed Methodologies," for a detailed description of methods.)
1.6.1.2 Weight the Objectives to Determine Their Importance
Many times goals and objectives can be stated as being important to an organization but the relative importance of them is not quantified. In addition, there are typically conflicting objectives in which the improvement in one area may adversely impact another area. For example, improvements in information technology may also lead to increases in capital costs. This step is to generate an overall importance for each of the established goals and objectives. This is accomplished by having each of the team members weigh the objectives established in the previous step for their view of overall importance in decisions. You can use the Normalized Direct Weighting scheme described next to weigh the objectives. You can also use a more complex weighing scheme such as SPAN or Borda, but they require automation to be practical. (Refer to Appendix B for a detailed description of methods.)
A weighting scheme for the example objectives of Maximize Customer Satisfaction, Minimize Logistics Costs, Maximize Growth, and Maximize Sales is shown in Table 1.1. This weighting scheme was generated by the Normalized Direct Weighting scheme. A set of weights should be generated by each of the team members. These can then be averaged to determine a group weighting of the objectives. In this example, each of the four individuals weighted the objectives on a scale of 1 to 10, where 10 was the most important. These then are totaled and normalized for the individuals and the group overall.
Table 1.1. Group Consensus Weighting of Objectives
|
Objective |
Expert #1 Input |
Expert #1 Weights |
Expert #2 Input |
Expert #2 Weights |
Expert #3 Input |
Expert #3 Weights |
Expert #4 Input |
Expert #4 Weights |
Total Input Values |
Overall Weight |
|
Maximize Customer Satisfaction |
9 |
28.10% |
10 |
30.30% |
10 |
33.30% |
9 |
30.00% |
38 |
30.40% |
|
Minimize Logistics Costs |
6 |
18.80% |
7 |
21.20% |
3 |
10.00% |
4 |
13.30% |
20 |
16.00% |
|
Maximize Growth |
9 |
28.10% |
7 |
21.20% |
7 |
23.30% |
9 |
30.00% |
32 |
25.60% |
|
Maximize Sales |
8 |
25.00% |
9 |
27.30% |
10 |
33.30% |
8 |
26.70% |
35 |
28.00% |
|
TOTAL |
32 |
33 |
30 |
30 |
125 |
Objective weighting can come from senior management's view of corporate strategic direction. Another approach to weighting objectives is to determine the percent of budget that falls within a given corporate functional area. Weighting objectives using the number of dollars quantifies the magnitude of financial importance associated with a functional area. This provides a view of the potential impacts of improvement opportunities for a given functional area.
Assigning an overall importance weighting to the objectives gives the decision makers an idea of what the group as a whole views as the importance of the objectives for the organization. These objectives and their importance also provide the necessary direction and focus in the decision modeling process. You now have a better idea of what you can accomplish as an organization.