Objective Setting refers to the activity of setting objectives for an organization.
A Goal denotes what an organization hopes to accomplish in a future period of time and therefore are qualitative in nature.
Objectives are the ends that state specifically how the goals shall be achieved therefore they are quantitative in nature.
Objectives refer to the end results which are to be accomplished by an organization through their plan or strategy over a specific period of time.
There are four factors identified by Glueck which must be considered while objective setting. They are:
- Forces of the environment
- Realities of an enterprise`s resources and internal power relations
- Values of the top executives
- Awareness of past objectives by the management
Need to establish Objectives/ Need for Objective Setting
- It provides a yardstick to measure performance
- It serves as a motivating force – People work to achieve Objectives
- It helps to pursue organization`s vision and mission
- It defines the relationship between the firm`s internal and external environment.
- It provides basis for decision making-All decisions are aimed towards accomplishment of objectives
- It provides standards for performance appraisal
Characteristics of Objectives
- It must be understandable
- It should be concrete and specific
- It should be related to a time frame
- It should be measurable and controllable
- Different objectives must correlate with each other
- It must be set within constraints
Issues in objective setting
Multiplicity – It deals with different number and different types of objectives w.r.t. organizational level (higher/lower), ends (survival/growth), functions (marketing/finance) and nature (organizational/personal).
Periodicity – Objectives can be long-term or short-term.
Verifiability – Each objective is tested on the basis of its verifiability.
Reality – Objectives can be official and operative. Official objectives are those which an organization professes to attain while operative objectives are those which an organization seeks to attain in reality.
Quality – Objectives can be good or bad on the basis of its capability to provide specific direction and tangible basis for measuring performance.
Specifically – Objectives may be stated at different levels of specificity. Example at macro level as goals and as target at the micro level.