- Have a distinct purpose (goal)
- Composed of people
- Have a deliberate structure
- Linked to external environment
2.3 Meaning of Goals
Goal refers to the purpose that an organization strives to achieve. Different writers have tried to shed light on the meaning of goal. Some of them are as follows:
- Amitai Etzioni: “Goal may be defined as a desired state of affairs that organizations attempt to realize.”
- Koontz and Weihrich: “Goals are the ends toward which activity is aimed-they are the result to be achieved”.
- V.H. Vroom: “Goal is desired future state of affairs”.
- Ivancevich, Donnelly and Gibson: “Organizational goals are the broad aims which serve as guide for action”.
2.4 Purpose/Function of Goals
Organizational goals perform the following functions
1. Reasons for organizing: Goals serve as the reason for organizing. They guide member behavior towards their achievement. They serve as the basis for assigning authority, responsibility and work schedule.
2. Direction: Goals provide direction to achieve desired results. They serve as guidelines for managers.
3. Control: Goals serve as standards to judge efficiency and effectiveness of organization. They help to correct performance deviation.
4. Motivation: Goals are important to motivate employees. They energize employees for higher performance.
5. Human Resource Management: Goals assist the organization to acquired right type of people. They also help to retain them.
6. Job Direction: Goals provide job direction to employees. They provide self-identity and sense of security.
2.5 Types of Goals
Organization goals can be broadly classified on the following basis:
1. Types of goals on the basis of Nature of Organization:
On the basis of nature of organization, the goals can be of following types:
a) Survival: Organization pursue goal to survive when the organization wants to stay alive in the tough competition. For example carpet industry of Nepal is pursuing survival goal due to loss of market in Europe.
b) Growth: Growth goals refer to growth in terms of activities, profit, sales etc. For example, if Toyota Company opens its plant in India to increase the sales volume, it is pursuing growth.
c) Profit: Most of the business have profit goal. Without profit it would be impossible for organization to survive in the market.
d) Service: Non-profit organization pursues the goal of service. For example, Red Cross Organization pursues the goal of service towards humanity.
2.Types of goals on the basis of Nature of Organization:
a) Corporate goals: Corporate goals are set up by top level managers. Top level goals are represented by mission and strategy.
b) Tactical goals: Tactical goals are developed by middle level managers. They represent department goals. For instance, marketing department’s goal of increasing sales by 20% annually is a tactical goal. Tactical goals are formed to achieve corporate goals.
c) Operational goal: These are the goals set up for lower level managers. These are the goals that drive the activities of units.
d) Individual goals: These goals guide the activities of individual employees. Individual goals are set to achieve operational goals.
3. Types of goals according to Timing
According to time the goals can be of following types:
a) Long term goals: Long term goals represent corporate goals. These goals relate to time period of five years or more. Mission and strategy are long term goals of an organization.
b) Medium term goal: Medium term goals represent tactful goals for departments, such as marketing, production, finance etc. These goals are related to period of one to three years.
c) Short term goals: Short term goals relate to period of one year or less. Short term goals are also known as operational goals. These goals guide the day to day operations of an organization. For instance, annual plan and budget are based on short term goals.
2.6 Characteristic of effective goals
Effective goals should cover key result areas. They should be SMART.
1. S= Specific: Goals should not be vague or ambiguous. They should be stated clearly.
Example
‘Our organization will maximize profit’ is a vague goal. It does not clearly state how much profit will be maximized. However, if the organization states ‘we will earn 10% profit on our total sales’ then it is a specific goal.
2. M= Measurable: The goals should be measureable so that it is possible to verify whether the goals have been achieved or not. The goal can be measured in terms of cost, time, quantity and quality.
Example
“We will sell many cars” is not a measurable goal.
“We will sell 1000 cars in Kathmandu valley in the fiscal year 2067/68” is a measurable goal. If the company sells 900 cars in Kathmandu in that year, we can say the organization did not achieve its goal.
3. A= Achievable: Goals must be within organization’s reach in its present situation. High goals that stretch organization are okay, but high AND realistic goals are better. Unattainable goals can not motivate organization. Easy goals on the other hand are not challenging enough. Thus, they do not contribute to organization’s growth.
.Example
Vague goal – The organization wants to be number 1 company in 2 months. (A company recently in 10th position cannot be number 1 company in 2 months)
SMART goal – The organization want to be number 1 company in 8 years by improving quality and customer satisfaction..
SMART goal – The organization want to be number 1 company in 8 years by improving quality and customer satisfaction..
4. R= Realistic/Relevant: Goals should be realistic. Organization/Individual should believe that those goals can be achieved. Besides this, the goals should fit with the other goals of organization.
Example:
Vague: The organization will earn $ 400,000 by selling opium.
Example: The organization will earn $ 400,000 by introducing new cosmetic product.
5. T=Time-bound: Goals must have a clearly defined time frame including a starting date and a target date. If you don’t have a time limit then there is no urgency to start taking action towards achieving your goals.
Example
Vague goal- I will do my research paper.
Smart goal- I will start doing my research paper by 7 tonight and finish it by 7 pm on the next day.
2.7 Process of Goal Formulation
The goal formulation process in organization consists of three steps:
1. Environmental scanning: It is the process of acquiring information to monitor changes and development in the environment. Through the environmental scanning the following information is gathered:
a) Trends in external environment forces: Trends in external environment can be analyzed through PEST analysis.
· Political/legal: government policies, laws, regulations etc.
· Economic: Competition, inflation, fiscal policy, monetary policy etc.
· Socio-Cultural: Norms, values, beliefs, social structure etc
· Technological: Level of technology and pace of technological change
PEST Analysis helps to analyze the variables in external environment. The outcome of this analysis should be used as a base for developing goal for the organization.
b) SWOT (Strength, Weakness, Opportunities, and Threats) Analysis: While scanning the environment it is necessary for the organization to analyze both internal and external environment. SWOT analysis is a useful tool for analyzing both internal and external environment. Based on the organization’s strength and weakness goals should be formed.
2. Formation of Overall goals: Based on the environmental analysis and SWOT analysis, overall goals of the organization are set. Top level managers determine mission, strategy and overall goals in key result areas. For example, 10% return on investment, 15% increase in market share etc.
3. Formulation of Specific goals: Specific goals are short term goals that are set to achieve overall goals of an organization. Specific key result area goals are set for department. Similarly, specific performance goals are set for sections and individuals.
2.8 Approaches to goal formulation
There are three major approaches to goal formulation and they are as follows:
1. Top-down approach: Top down approach of goal formulation is management driven. The goals are developed by the top level management and are disseminated to the lower level. The guiding principle in top down approach is that the corporate goals should direct the goals formation process at middle and lower levels.
Example
For instance, the corporate level of a bank may set a goal of earning Rs 200 million as a profit. The goal is disseminated to lower and middle level managers. Then middle and lower level managers set their own goals. For example, marketing department may set its goal to increase advertisement so that more clients can be attracted to the bank.
Top-down approach of goal formulation is the most commonly used approach of goal formulation.
2. Bottom-up approach: Bottom up approach of goal formulation is more of a participatory approach of formulating goals. In this approach the process of goal formulation is driven by subordinates. Middle and lower level managers set goals and present them to top-level managers. The assumption is that top level managers need information from subordinates for overall goal formulation. Since there is participation of subordinates in goal formulation, there is commitment and motivation from subordinates towards the achievement of the goals.
3. Management by Objective (MBO) Approach: MBO is used as an approach to goal formation. Superior and subordinates jointly set time-bound measureable goals. The following steps are used in MBO:
a) Collaborative goal setting: Managers and subordinates sit together to form effective goals. The participation of subordinates are ensured.
b) Action plan Development: Activities are identified to achieve the goals. A broad action plan directs the action of employees towards goal.
c) Performance Review: The performance of each employee is reviewed periodically.
d) Performance appraisal: Managers carryout the appraisal of performance in terms of goal achievement and feedback is provided to the employees.
2.9 Goal Succession:
2.9 Goal Succession:
Meaning
Goal succession refers to conscious attempt by management to adopt new goals. Such change in goals is done consciously and intentionally to adapt the organization to changing environment.
Reasons for goal succession
Goals succession is needed because of following reasons:
- Original goal achieved: When original goal is achieved, the organization must set new goal. E
- Environment adaptation: Environment changes require modified or new goal.
- Unachievable goals: Some goals may prove unachievable in the course of time. In this case, this unachievable goal should be replaced with new achievable goal.
2.10 Goal displacement
Goal displacement is unintended change in goals. The original goals are disregarded. Organization pursues goals for which it was not established.
According to D.E. McFarland:“Goal displacement in organization occurs when decision makers substitute tangible goals for broader, riskier, more uncertain, long range goals.”
Reasons for goal displacement:
- Goal Conflict: When organizational goals conflict with individual goals, there is displacement of goals. Multiple goals can also create confusion.
- Means-End Inversion: End is what is to be achieved. Means is how it is to be achieved. When means become ends, goal displacement takes place.
- Abstract Goals: If original goals are abstract, uncertain and unclear, goal displacement takes place. Abstract goals cannot be translated into operational goals.
- Goal Substitution: Substitution of long term goals by short term goals leads to displacement.
- Employee attitude: Uncooperative attitude of employee to original goals leads to goal displacement.
2.11 Importance of Organization
The importance of Organization can be summarized as follows:
- Bring together resources to achieve desired goals and outcomes
- Produce goods and service efficiently
- Facilitate innovation
- Use modern manufacturing and computer based technology
- Create value for owners, customers and employees
- Adapt to and influence changing environment
- Accommodate ongoing challenges of diversity, ethics, and the motivation and coordination of employees.
