Setting Objectives

Read the overview below and complete the activities that follow.

The managerial purpose of setting objectives is to convert the vision and mission into specific performance targets. Objectives reflect managements aspirations for company performance in light of the industrys prevailing economic and competitive conditions and the companys internal capabilities. Well-stated objectives must be specific, as well as quantifiable or measurable. Concrete, measurable objectives are managerially valuable for three reasons: (1) they focus organizational attention and align actions throughout the organization; (2) they serve as yardsticks for tracking a companys performance and progress; and (3) they motivate employees to expend greater effort and perform at a high level. For company objectives to serve their purpose well, they must also meet three other criteria: they must contain a deadline for achievement, and they must be challenging, yet they must be achievable.

The goal of this exercise is for you to understand the importance of setting both strategic and financial objectives.

Before completing this exercise, be sure to review Ch. 2, Charting a Companys Direction, specifically, the section entitled Stage 2: Setting Objectives.

Sources: Pich under Fire, The Economist, December 8, 2005; Chris Bryant and Richard Milne, Boardroom Politics at Heart of VW Scandal, Financial Times, October 4, 2015; Andreas Cremer and Jan Schwartz, Volkswagen Mired in Crisis as Board Members Criticize Piech, Reuters, April 24, 2015; Richard Milne, Volkswagen: System Failure, Financial Times, November 4, 2015.

A company sets financial and strategic objectives

Multiple Choice A) to determine a company's short-term and long-term financial strength. B) to establish the direction toward which an organization needs to be headed. C) to help direct managers in deciding what the company's strategic intent should be. D) to support, but not conflict with, the performance targets of lower-level organizational units. E) to adapt the vision and mission to specific performance targets.