SESSION EIGHT

FORMULATING OBJECTIVES
 Objectives are the results that a company
seeks to achieve over a specified period.
 Long term objectives
 Short term objectives
 Financial objectives
 Non-financial objectives
 Strategic objectives
 Operational objectives
 Setting strategic objectives needs to be
more of a top-down than a bottom-up
process in order to:
 Provide guidance to lower level managers
and units.
 Support Company wide interests.
 Be cascaded downwards
 A strategic objective is an objective of
medium and long term nature that aims
either at exploiting an opportunity or
strength, or deals with a threat or
weakness facing the organization.
 Strategic objectives therefore are based
on factors identified in environmental
analysis.
 They take advantage of favorable factors
and deal with unfavorable factors
identified in external and internal
analyses.
 For example, due to advancement in
communication technology (opportunity),
Kenya Airways may set for itself the following
objective:
 In three years, at least 90% of Kenya
Airways customers should be able to make
bookings and reservations on-line.
 This objective would be realistic if the airline is
strong financially to be able to install the
required information technology system
(strength).
 The objective would be necessary if
information technology was an area of
weakness in the company (weakness).
 To respond to the threat of competition
(threat), Kenya Airways could set the
following objectives:
 In three years, at least 70% of Kenya Airways
employees should be professionally qualified in
their jobs.
 In three years the airline should
achieve at least 95% customer
satisfaction.
 These two objectives would be realistic if
the airline is strong financially to be able
to train its employees, as well as, improve
on the airline’s services (strength).
 Training employees would be necessary if
lack of qualifications was one of the
weaknesses of the airline (weakness).
 As is evident from these examples,
strategic objectives like strategies help
align the firm’s strengths and weaknesses
to the environmental opportunities and
threats.
 STRATEGIC AND OPERATIONAL OBJECTIVES

 Strategic objectives are different from

operational objectives in a number of
significant ways.
 Strategic objectives are of medium and long
term nature, while operational objectives are
short term, covering a period of one year or
less.
 Strategic objectives are for the organization or
business unit as a whole, while operational
objectives provide guidance for specific
functional or operational units only e.g.
marketing function.
 Strategic objectives are concerned with
developing the organization’s future potential,
while operational objectives are concerned
with current performance i.e. converting
potential business into actual results.
 Building a stronger long term competitive
position benefits shareholders more lastingly
than improving short term profitability.
 Strategic objectives focus mainly on effectiveness of
the organization while operational objectives are for
implementation of strategies and hence focus mainly
on efficiency.
 Strategic objectives are derived from environmental
analysis, while operational objectives are usually
derived from strategic objectives
 CHARACTERISTICS OF GOOD
OBJECTIVES
Measurable
 This may require:

 Operationalization of abstract concepts.

 Quantification of the objective.

 Giving time frame to the objective

Acceptable to those responsible for

implementation
 If set in participatory manner

 If challenging i.e. difficult but attainable i.e.

neither too difficult nor too easy.

Flexible
 If can easily be modified to match

changed circumstances or conditions i.e.

not too rigid.
Motivating
 If challenging

 If linked to rewards i.e. contribution

towards attainment is rewarded.

Consistent with the other objectives
 If does not conflict with the other objectives.

In harmony with the vision and mission

 If does not contradict vision and mission but

leads to the realization of such vision and

mission.
Not abstract, but are capable of being
developed into strategies and actions.
 If capable of being operationalized i.e.

translated into operational plans and tactics for

implementation.
Relates directly to factors discovered in the
SWOT analysis.
 It aims at one or more of the following:

 Exploit an opportunity in the external

environment.
 Exploit strength of the firm.

 Deal with a threat in the external environment.

 Deal with a weakness of the firm.

 AREAS FOR STRATEGIC OBJECTIVES

 Balanced score card approach (Kaplan and

Stratton) is one framework that facilitates
the development of organizational
objectives.
 Focuses on four key areas:
 Financials
 Customers
 Internal Business Processes
 Learning and Growth
Strategic objectives usually are set on key
aspects of the organization, such as:
Profitability
 e.g. to increase net profits by 30% by the

end of three years from now.

Productivity
 e.g. to improve the firm’s rate of return on

total assets by 50% in the next 3 years.

Competitive position
 e.g. to improve the firm’s leadership in the

industry to at least position three in the next 3

years.
Employee development
 e.g. in the next three years, at least 70% of the

employees should be professionally qualified in

their jobs.
 Employee relations

 e.g. to reduce employee complaints by 60% in

the next 3 years.

 Technology
 e.g. in the next 3 years at least 70% of

the firm’s functions should be

computerized.
 To double the number of computers in

the next 2 years.

Public and social responsibility
 e.g. to increase the budget for public and

social responsibility by 200% in the next 3

years.
Quality e.g. product/service quality
 e.g. to reduce the percentage of

defective products by 50% in the next 3

years.
 To increase customer satisfaction by

100% in the next 2 years.

Customer care or service
 e.g. in the next three years the organization

should realize at least 95% customer

satisfaction.
Growth
 e.g. to increase total assets by 50% in the next

3 years.
 To increase market share by 30% in the next 3

years.