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Objectives and decision making

Prime University
Prime University
Prime UniversityDhaka University at Prime University

Objectives and decision making

Objectives and decision making

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Objectives and Decision Making
Prepared By:
Jannatul Ferdous
Assistant Professor
Department of Business Administration
Prime University.
Chapter Outline
•Definition of objectives
•Types of business objectives
•Characteristics of business objectives
•MBO cycle
•Decision making process
•Influencing factor of decision making
•Decision support system.
Definition of objectives
•According to Louis Allen,“ Objectives are
goals established to guide the efforts of
the company and each of its components.“
•According to Dalton E. McFarland,
"Objectives are the goals, aims or
purposes that organization wish to achieve
over varying period of time."
Business objectives
•Business objectives are the goals, aims or
purpose of the business. The business
tries to achieve these goals. Profit is the
main objective of business. However, the
business cannot have only one objective.
This is because it has to satisfy different
groups such as shareholders, employees,
customers, creditors, etc. So, it has to fix
objectives for each group.
Types of Business Objectives
There are five types of business
objectives, viz.,
1) Economic Objectives
2) Social Objectives
3) Organic Objectives
4) Human Objectives and
5) National Objectives
Characteristics of business objectives
1. Multiplicity of Objectives:
Business objectives are multiple in character.
That is, a business does not have only one
objective. It has many or multiple objectives.
This is because a business has to satisfy
different groups, i.e. shareholders, employees,
customers, creditors, vendors, society, etc. The
business has to fix different objectives for each
group.

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Objectives and decision making

  • 1. Objectives and Decision Making Prepared By: Jannatul Ferdous Assistant Professor Department of Business Administration Prime University.
  • 2. Chapter Outline •Definition of objectives •Types of business objectives •Characteristics of business objectives •MBO cycle •Decision making process •Influencing factor of decision making •Decision support system.
  • 3. Definition of objectives •According to Louis Allen,“ Objectives are goals established to guide the efforts of the company and each of its components.“ •According to Dalton E. McFarland, "Objectives are the goals, aims or purposes that organization wish to achieve over varying period of time."
  • 4. Business objectives •Business objectives are the goals, aims or purpose of the business. The business tries to achieve these goals. Profit is the main objective of business. However, the business cannot have only one objective. This is because it has to satisfy different groups such as shareholders, employees, customers, creditors, etc. So, it has to fix objectives for each group.
  • 5. Types of Business Objectives There are five types of business objectives, viz., 1) Economic Objectives 2) Social Objectives 3) Organic Objectives 4) Human Objectives and 5) National Objectives
  • 6. Characteristics of business objectives 1. Multiplicity of Objectives: Business objectives are multiple in character. That is, a business does not have only one objective. It has many or multiple objectives. This is because a business has to satisfy different groups, i.e. shareholders, employees, customers, creditors, vendors, society, etc. The business has to fix different objectives for each group.
  • 7. Characteristics of business objectives 2. Hierarchy of Objectives: Hierarchy means to write down the objectives according to their importance. The most important objective is written first, and the least important objective is written last. All objectives are important. However, some objectives are more important than others. Some objectives need immediate action while others can be kept aside for some time.
  • 8. Characteristics of business objectives 3. Periodicity of Objectives: Based on period, business objectives can be classified into two types: Short-term objectives, and Long-term objectives. The short-term objectives are made for a short-period, i.e. maximum one year. Short-term objectives are more specific. The long-term objectives are made for a long-period, i.e. for five years or more. Long-term objectives are more general. They are like a Master Plan.
  • 9. Characteristics of business objectives 4. Flexibility of Objectives: The business is flexible. Therefore, the business objectives must also be flexible. If the objectives are rigid, the business will not survive. This is because the business environment keeps on changing. There are continuous changes in the technical, social, economic and political environment. The business has to change its objectives according to the changes in the business environment. The hierarchy of objectives must also be changed from time to time.
  • 10. Characteristics of business objectives 5. Qualitative and Quantitative Objectives: There are two types of objectives: Quantitative and Qualitative objectives. Quantitative objectives are easy to measure. It is expressed in numbers. For e.g. in Dollars, Rupees, Percentage, etc. Quantitative objectives are visible, tangible and countable. Qualitative objectives are not easy to measure. It is not expressed in numbers. For e.g. Employee performance, employee satisfaction, etc. These objectives cannot be measured. Qualitative objectives are invisible, intangible and uncountable. Today modern methods are used to measure qualitative objectives. A business must have both quantitative and qualitative objectives.
  • 11. Characteristics of business objectives 6. Measurability of Objectives: The objectives must be clear and specific. It must be easy to measure. For e.g. Each salesman must sell 100 units of water purifier per month. This is a clear and specific objective. It is easy to measure the performance of the salesman. If a salesman sells 200 units of water purifier in a month then his performance is good. He can be given bonus and promotion. However, if a salesman sells only 10 units of water purifier in a month then his performance is bad. He needs more training. Measurable objectives motivate the employees to work hard. This is because they know their target clearly. Their performance can also be measured easily.
  • 12. Characteristics of business objectives 7. Network of Objectives: Network means an interconnection between different objectives. A business has many different objectives, viz., corporate objectives, departmental objectives, sectional objectives and individual objectives. It also has objectives for shareholders, customers, employees, etc. All these objectives must be interconnected. They must support each other. They must not clash with each other. They must move in the same direction. If not, the business will not survive.
  • 13. Management by Objectives •Management by objectives is the process of defining specific objectives within an organization that management can convey to organization members, then deciding on how to achieve each objective in sequence. •This process allows managers to take work that needs to be done one step at a time to allow for a calm, yet productive work environment. • This process also helps organization members to see their accomplishments as they achieve each objective, which reinforces a positive work environment and a sense of achievement. • An important part of MBO is the measurement and comparison of an employee’s actual performance with the standards set.
  • 15. Stages of MBO The 6 steps of the MBO process are: •Define organizational goals •Define employees objectives •Continuous monitoring performance and progress •Performance evaluation •Providing feedback •Performance appraisal
  • 16. Stages of MBO 1. Define Organizational Goals: •Goals are critical issues to organizational effectiveness, and they serve a number of purposes. Organizations can also have several different kinds of goals, all of which must be appropriately managed. •The goals set by the superiors are preliminary, based on an analysis and judgment as to what can and what should be accomplished by the organization within a certain period.
  • 17. Stages of MBO 2. Define Employees Objectives: •After making sure that employees’ managers have informed of pertinent general objectives, strategies and planning premises, the manager can then proceed to work with employees in setting their objectives. •The manager asks what goals the employees believe they can accomplish in what time period, and with what resources. They will then discuss some preliminary thoughts about what goals seem feasible for the company or department.
  • 18. Stages of MBO 3. Continuous Monitoring Performance and Progress: For monitoring performance and progress the followings are required; •Identifying ineffective programs by comparing performance with pre-established objectives, •Using zero-based budgeting, •Applying MBO concepts for measuring individual and plans, •Preparing long and short-range objectives and plans, •Installing effective controls, and •Designing a sound organizational structure with clear, responsibilities and decision-making authority at the appropriate level.
  • 19. Stages of MBO 4. Performance Evaluation: • Under this MBO process performance review are made by the participation of the concerned managers. 5. Providing Feedback: • The filial ingredients in an MBO program are continuous feedback on performance and goals that allow individuals to monitor and correct their own actions. • This continuous feedback is supplemented by periodic formal appraisal meetings which superiors and subordinates can review progress toward goals, which lead to further feedback.
  • 20. Stages of MBO 6. Performance Appraisal: Performance appraisals are a regular review of employee performance within organizations. It is done at the last stage of the MBO process.
  • 21. Steps of the decision making process The following are the seven key steps of the decision making process. •Identify the decision: The first step in making the right decision is recognizing the problem or opportunity and deciding to address it. Determine why this decision will make a difference to your customers or fellow employees. •Gather information: This requires making a value judgment, determining what information is relevant to the decision at hand, along with how you can get it. Ask yourself what you need to know in order to make the right decision, then actively seek out anyone who needs to be involved.
  • 22. Steps of the Decision Making Process •Identify alternatives: It’s likely that you have many different options when it comes to making your decision, so it is important to come up with a range of options. This helps you determine which course of action is the best way to achieve your objective. •Weigh the evidence: In this step, you’ll need to “evaluate for feasibility, acceptability and desirability” to know which alternative is best, according to management experts Phil Higson and Anthony Sturgess. Managers need to be able to weigh pros and cons, then select the option that has the highest chances of success. It may be helpful to seek out a trusted second opinion to gain a new perspective on the issue at hand.
  • 23. Steps of the Decision Making Process • Choose among alternatives: When it’s time to make your decision, be sure that you understand the risks involved with your chosen route. You may also choose a combination of alternatives now that you fully grasp all relevant information and potential risks. • Take action: Next, you’ll need to create a plan for implementation. This involves identifying what resources are required and gaining support from employees and stakeholders. Getting others onboard with your decision is a key component of executing your plan effectively, so be prepared to address any questions or concerns that may arise. • Review your decision: An often-overlooked but important step in the decision making process is evaluating your decision for effectiveness. Ask yourself what you did well and what can be improved next time.
  • 24. Factors that Influence Decision Making • Past experiences can impact future decision making. It stands to reason that when something positive results from a decision, people are more likely to decide in a similar way, given a similar situation. On the other hand, people tend to avoid repeating past mistakes .This is significant to the extent that future decisions made based on past experiences are not necessarily the best decisions. • In decision making, cognitive biases influence people by causing them to over rely or lend more credence to expected observations and previous knowledge, while dismissing information or observations that are perceived as uncertain, without looking at the bigger picture. While this influence may lead to poor decisions sometimes, the cognitive biases enable individuals to make efficient decisions with assistance of heuristics.
  • 25. Factors that Influence Decision Making •In addition to past experiences and cognitive biases, decision making may be influenced by an escalation of commitment and sunk outcomes, which are unrecoverable costs. •Some individual differences may also influence decision making. Research has indicated that age, socioeconomic status (SES), and cognitive abilities influences decision making. In addition, older people may be more overconfident regarding their ability to make decisions, which inhibits their ability to apply strategies Finally, with respect to age, there is evidence to support the notion that older adults prefer fewer choices than younger adults .
  • 26. Decision Support System •A Decision Support System (DSS) is an information system that supports business or organizational decision- making activities. • DSS’s serve the management, operations and planning levels of an organization (usually mid and higher management) and help people make decisions about problems that may be rapidly changing and not easily specified in advance—i.e. unstructured and semi- structured decision problems. Decision support systems can be either fully computerized or human-powered, or a combination of both.