Strategic objectives need to be developed from the vision, mission and values of the organization. these need to be a few significant items which are clearly stated, relatable to all levels and challenging, but not impossible.
Deploying Strategic Objectives: MBO, the Traditional Approach
Peter Drucker recognised that each member of an organization, although necessarily contributing something different, must aim towards a common goal. That is, every job in the company must be directed towards the objectives of the whole organization, if the overall goals are to be achieved. Drucker defined the concept of Management by Objectives (MbO), in order to ensure that individual objectives of the entire management group within an organization could be purposefully organised within a structure towards a common policy.
In order to gain compatibility within the management group, each manager within the organization requires clearly spelled out objectives to avoid confusion. The objectives should identify the performance each management group is tasked to achieve, the contribution a manager and his/her unit are required to help other units achieve their objectives, and what assistance a manager can expect from other units in the pursuit of his/her objectives. This would tend to emphasise teamwork and achievement of team results, rather than individual performance alone. these objectives need to be derived from the top-level goals of the organization, and should clearly spell out individual contribution to attainment of company goals in all areas of the business. Obviously not all managers will have a contribution to make in all areas, but this in itself should be clearly identified within the objectives set. To ensure that the objectives are balanced they should be set over both short and long term timescales, and contain both tangible and intangible elements.
Every manager should have some part to play in the development of the objectives of the next level up. This serves two purposes: it provides a sense of participation, and assists in the understanding of the overall goals of the unit. This can only be achieved if managers are provided with the opportunity to think through what the unit objectives are, and are encouraged to participate in the work of defining them. Yet in reality, the objectives are often set and approved by top management and cascaded vertically down the organization, leading to specific problems such as:
Strategic Planning and Execution
The vision, mission and values of the organization need to be enacted through an effective planning and execution cycle. This is the only way in which the slightly intangible concepts and promises can be made manifest.There are, however, a number of problems that frequently occur with planning:
Additional barriers to effective planning can be related to particular behaviors of managers within organizations. these include the failure of management teams to face up to poor business results and identify the cause and effect relationships, a failure to agree by consensus on the critical measures of success, and a lack of analysis of the organizations strengths and weaknesses and core competencies. Also, it is common to find organizations that continue to apply existing ad-hoc planning methods, which rapidly become inappropriate as the business grows in size and stature. Ultimately, the single biggest mistake is for businesses to rely on the planning and management of financial outcomes, without the recognition that the outcomes can only be as effective as the business processes that deliver them.
The primary role of strategic planning is to set the right objectives for the business, determine the best means of achieving the objectives and to facilitate the effective implementation and review of the means as the plan is executed. This requires that planners should work in the context of higher-order purposes of the organization, which are usually very specific to its own situation including the needs and desires of the owners and stakeholders.
An example of a higher order purpose may be to provide the best products and services to society, with specific objectives of introducing for new products next year. Strategy management is needed in addition to strategic planning in order to translate the strategic intent through a reliable execution methodology into planned results. The planned results can be in the form of incremental or breakthrough improvements (figure).
A plan to achieve the strategic vision must take account of both sets of activities. Incremental non-breakthrough activities improve current business processes through use of facts and analysis to solve recurring problems. these activities are often associated with the concepts and tools of total quality management. But some performance gaps are large and cannot be addressed by merely using an incremental approach to improvement because of the greater degree of change involved, as shown in figure .
Breakthrough and incremental improvement
Incremental improvement (sometimes referred to as Kaizen) relates to isolated process improvements to solve fundamental problems.Breakthrough improvement often requires a company-wide process redesign to solve chronic problems.
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