Essentials of Planning and Managing by Objectives

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of the business, which might be to furnish convenient, low-cost transportation forthe average person. The stated mission might be to produce, market, andservice automobiles. As you will notice, the distinction between purpose andmission is a fine one, and therefore many writers and practitioners do notdifferentiate between the two terms. At any rate, these aims are in turn translatedinto general objectives and strategies, such as designing, producing, andmarketing reliable, low-cost, fuel-efficient automobiles.The next level of the hierarchy contains more specific objectives, such as thosein the key result areas. These are the areas in which performance is essential forthe success of the enterprise.Although there is no complete agreement on what the key result areas of abusiness should be—and they may differ between enterprises—Peter F. Druckersuggests the following: market standing, innovation, productivity, physicaland financial resources, profitability, manager performance and development,worker performance and attitude, and public responsibility. 8 More recently,however, two other key result areas have 'become of strategic importance: serviceand quality.
Examples of objectives for key result areas are the following: toobtain a 10 percent return on investment by the end of calendar year2005 (profitability); to increase the number of units of product Xproduced by 7 percent by June 30, 2005 without raising costs orreducing the current quality level (productivity).The objectives have to be further translated into those ofdivisions, departments, and units down to the lowest level of theorganization.Setting objectives and the organizational hierarchyAs Figure 4-3 shows, managers at different levels in theorganizational hierarchy are concerned with different kinds ofobjectives. The board of directors and top-level managers are verymuch involved in determining the purpose, the mission, and theoverall objectives of the firm, as well as the more specific overallobjectives in the key result areas. Middle-level managers, such asthe vice president or manager of marketing or the productionmanager, are involved in the setting of key-result area objectives,division objectives, and departmental objectives. The primaryconcern of lower-level managers is setting the objectives ofdepartments and units as well as of their subordinates. Althoughindividual objectives, consisting of performance and developmentgoals, are shown at the bottom of the hierarchy, managers at higherlevels also should set objectives for their own performance anddevelopment.' There are different views about whether an organization shoulduse the top-down or the bottom-up approach in setting objectives, asindicated by the arrows in Figure 4-3. In the top-down approachupper-level managers determine the objectives for subordinates,while in the bottom-up approach subordinates initiate the setting ofobjectives for their positions and present them to their superior.Proponents of the top-down approach suggest that the totalorganization needs direction through corporate objectives providedby the chief executive officer (in conjunction with the board of
Page 1 and 2: Essentials of Planning and Managing
Page 3 and 4: .Types of PlansPlans can be classif
Page 5 and 6: the same situation every time it co
Page 7 and 8: ProgramsPrograms are a complex of g
Page 9 and 10: 2. Establishing ObjectivesThe secon
Page 11 and 12: 8. Quantifying Plans by BudgetingAf
Page 13: Hierarchy of objectivesAs Figure 4-
Page 17 and 18: Multiplicity of objectivesObjective
Page 19 and 20: 113evolving Concepts in Management
Page 21 and 22: Failures of management by objective
Page 23 and 24: KEY IDEAS AND CONCEPTSFOR REVIEWPla

Essentials of Planning and Managing by Objectives

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