In this lesson you learned that the purpose of setting objectives are to convert a company’s vision and mission into specific performance targets. You also learned the importance of a balanced approach to setting objectives which include Financial and Strategic objectives.

1. Crafting and
Executing
Strategy: The
managerial process
Global Business Consultants &
Partners Training Courses
Copyright 2020 Global Business Consultants

2. Chapter 2. Setting objectives
Lesson 1: The kinds of objectives to set

3. “Objectives are a company’s
performance targets. It is the specific
results a business owner or
management wants to achieve.”
Thompson et al.

4. The kinds of objectives to set.
The main purpose of setting objectives is to
covert the company’s vision and mission into
specific performance targets.
The company’s objectives reflect a business
owners’ aspirations for company performance.
The objectives are in light of economic and competitive
conditions and the company’s internal capabilities.
Setting
objectives

5. The kinds of objectives to set.
Well stated objectives are quantifiable
or measurable, and must contain a
deadline for achievement.
“You cannot manage what you cannot
measure…and what gets measured, gets
done”.
Bill Hewlett, Co-founder Hewlett-Packard
Setting
objectives

6. The kinds of objectives to set.
There are three reasons why specific, measurable and
time-bound objectives are managerially valuable:
Efforts can be focused and actions are aligned throughout
the company.
They serve as yardsticks for tracking and monitoring a
company’s progress.
They motivate employees to expend greater effort and
perform at a high level.
Setting
objectives

7. The kinds of objectives to set.
Every company should have two distinct types of
performance targets:
Financial. To communicate goals for financial
performance.
Strategic. To communicate goals concerning a
company’s market standing and competitive position.
A company’s set of financial and strategic objectives
must include both, near-term and long-term
performance targets.
Setting
objectives

8. The kinds of objectives to set.
Near-term targets focus on delivering performance
improvements in the current period and satisfy
shareholder expectations for near-term progress.
Long-term objectives are critical for achieving
optimal long-term performance and stand as a
barrier to nearsighted management philosophy.
Setting
objectives

9. The need for a balanced approach to
setting objectives.
The importance of financial objectives in every
business is obvious.
Without adequate profitability and financial strength,
the company’s long-term health and ultimate survival is
seriously jeopardized.
A weak balance sheet sends alarm-bells to shareholders
and creditors and puts the business at risk.
Setting
objectives

10. The need for a balanced approach to setting
objectives.
Good financial performance, by itself, is not enough.
Of equal or greater importance is a company’s strategic
performance.
Strategic outcomes indicate whether a company’s market
position and competitiveness are deteriorating, holding
steady or improving.
A strong market standing and greater competitive vitality is
what enables a company to improve its financial
performance.
Setting
objectives

11. The need for a balanced approach to setting
objectives.
Financial performance measures are actually lagging
indicators.
By this we mean that the results are indicative of past
decisions and organizational activities.
A company’s past or current financial performance is a not
reliable indicator of its future prospects.
Poor financial performers can turn things around, while
good financial performers can run into hard times.
Setting
objectives

12. The need for a balanced approach to setting
objectives.
The most reliable lead indicators of a company’s future
financial performance and business prospects are
strategic outcomes. For instance:
If a company is achieving ambitious strategic objectives such
that its competitive strength and market position are on the
rise, then there’s reason to expect future financial
performance will be better than current or past.
If a company begins to lose competitive strength and fails to
achieve important strategic objectives, then its ability to
maintain it present profitability is doubtful.
Setting
objectives

13. The need for a balanced approach to
setting objectives.
The most widely used framework for balancing
financial and strategic objectives is known as the
Balanced Scorecard.
It is a method for linking financial performance
objectives to specific strategic objectives that derive
from a company’s business model.
Setting
objectives

14. Congratulations! You’ve completed lesson 1.
Recap: In this lesson you learned that the purpose of setting
objectives are to convert a company’s vision and mission into
specific performance targets. You also learned the importance of
a balanced approach to setting objectives which include Financial
and Strategic objectives.
Awesome work!
Now click Complete and then Next for Lesson 2.