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The Importance of Goals

Both official goals and operating goals are important for the organization, but they serve very different purposes.

  • Official goals and mission statements describe a value system for the organization and set an overall purpose and vision.
  • Operating goals represent the primary tasks of the organization.
  • Official goals legitimize the organization.
  • Operating goals are more explicit and well defined.

Operating goals serve several specific purposes. For one thing, goals provide employees with a sense of direction so that they know what they are working toward.

This can help to motivate employees toward specific targets and important outcomes. Numerous studies have shown that specific high goals can significantly increase employee performance.

A recent study verified that departments perform significantly better when employees are committed to the goals. People like having a focus for their activities and efforts. Jennifer Dulski, currently head of Groups and community at Facebook, talks about how she motivated people at a previous organization.

“One quarter we had three big goals. I said, ‘If we hit all three, it’s the trifecta and we’re going to all go the horse races.’ And I gave everybody $50 to bet with at the races. I learned as a teacher that everybody has a little kid inside them, but they do.” This provides example of just how powerful goals can be as a motivational tool.

As shown by this example, another important purpose of goals is to act as guidelines for employee behavior and decision making.

Managers can establish appropriate goals that act as a set of constraint on individual behavior and actions so that employees behave within boundaries that are acceptable to the organization and the larger society. Goals also help to define the appropriate decisions concerning organization structure, innovation, employee welfare, or growth.

Finally, goals provide a standard for assessment. The level of organizational performance, whether in terms of profits, units produced, degree of employee satisfaction, level of innovation, or number of customer complaints, needs a basis for evaluation. Operating goals provide this standard for measurement.

1.4    Goal Conflict

Organizations perform many activities and pursue many goals simultaneously to accomplish an overall mission. But who decides what mission and goals to strive?

Pursuing some goals means that others have to be delayed or set aside, which means managers often disagree about priorities. Employee development goals might conflict with productivity goals; goals for innovation might hurt profitability.

As one real-life example of goal conflict, recent analyses of company operations at Facebook reveal that goals of protecting user privacy and personal data have long been in conflict with goals of growth and increased advertising revenue.

Many companies mix value systems and behaviors that represent different sectors of society, which leads to tensions and conflict within the organization over goals and priorities. For example, a social mission, such as helping the community, often conflicts with business goals of making money. Differences in goal orientation can trigger manipulation, avoidance, or defiance on the part of one side versus the other unless managers can balance the conflicting demands. When the goals and values of the two sides are mutually exclusive, managers must negotiate and come to some agreement on which direction the company will take.

Remember This
  • Organizations exist for a purpose, and top leaders are responsible for deciding the organization’s strategic intent, including a specific mission to be accomplished. The mission statement, or official goals, makes explicit the purpose and direction of an organization.
  • Two other factors related to strategic intent are competitive advantage and core competence.
  • Competitive advantage refers to what sets the organization apart from others and provides it with a distinctive edge.
  • A core competence is something the organization does extremely well compared to competitors.
  • Operating goals designate specific ends sought through the actual operating procedures of the organization. Operating goals include performance goals, resource goals, market goals, employee development goals, productivity goals, and innovation and change goals.
  • Goal conflict is inevitable in organizations and managers sometimes have to negotiate to reach agreement about the important goals to pursue.
  • Official and operating goals are a key element in organizations because they meet these needs—establishing legitimacy with external groups, providing employees with a sense of direction and motivation, providing decision guidelines, and setting standards of performance.
The Series:
    Research data for this work have been adapted from the manual:
  1. Managerial Accounting: Tools for Business Decision Making By Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso

An organization’s mission is sometimes called the official goals, which refers to the formally stated definition of business scope and outcomes the organization is trying to achieve.

Official goal statements typically define business operations and may focus on values, markets, and customers that distinguish the organization.

Whether called a mission statement or official goals, the organization’s general statement of its purpose and philosophy is often written down in a policy manual or the annual report. Figure X-1 shows the mission statement for CVS HealthOpens in new window.

CVS Health's Mission Statement Figure X-1. Credit — CVS Health Opens in new window

CVSOpens in new window defines its mission (or purpose, as shown in the Figure) as “Helping people on their path to better health.” The statement also defines the company’s core values.

One of the primary purposes of a mission statement is to serve as a communication tool.

  • The mission statement communicates to current and prospective employees, customers, investors, suppliers, and competitors what the organization stands for and what it is trying to achieve.
  • A mission statement communicates legitimacy to internal and external stakeholders, who may join and be committed to the organization because they identify with its stated purpose and values.

Most top leaders want employees, customers, competitors, suppliers, investors, and the local community to look on the organization in a favorable light, and the concept of legitimacy plays a critical role.

CVS Caremark changed its name to CVS Health and redefined its purpose to reflect a broader healthcare commitment and the company’s vision to “drive innovations needed to shape the future of health.”

CVSOpens in new window, which provides health clinics as well as pharmacy and retail sales, stopped selling cigarettes and other tobacco productions in all its stores by October of 2014.

For a company involved in promoting health and wellness, managers say, selling tobacco products didn’t make sense and hurt the company’s reputation.

Other pharmacies involved in providing healthcare have also stopped selling tobacco products because of the need to communicate legitimacy.

Companies where managers are sincerely guided by mission statements that focus on a larger social purpose, such as Medtronic’s “To restore people to full life and health” or Liberty Mutual’s “Helping people live safer, more secure lives,” typically attract better employees, have better relationships with external parties, and perform better in the marketplace over the long term.

  1. Core Competence

A company’s core competence is something the organization does especially well in comparison to its competitors.

A core competence may be in the area of superior research and development, expert technological know-how, process efficiency, or exceptional customer service.

MimeoOpens in new window, an online printing and copying company, for example, excels with core competencies of superb customer service and the application of technology to ensure internal process efficiency. MimeoOpens in new window can handle rush jobs that larger companies can’t.

At AppleOpens in new window, strategy focuses on core competencies of superior design and marketing skills. In each case, managers identified what their company does especially well and built the strategy around it.

  1. Competitive Advantage

The overall aim of strategic intent is to help the organization achieve a sustainable competitive advantage.

Competitive advantage refers to what sets the organization apart from others and provides it with a distinctive edge for meeting customer or client needs in the marketplace.

Strategy necessarily changes over time to fit environmental conditions, and good managers pay close attention to trends that might require changes in how the company operates.

Managers analyze competitors and the internal and external environments to find potential competitive openings and learn what new capabilities the organization needs to gain the upper hand against other companies in the industry.

Competitive opening might be thought of as spaces that a company can potentially fill. This section’s BookMark describes how organizations can move from competing in “red oceans,” crowded markets where companies chew each other up for smaller and smaller chunks of market share, toward “wide open blue oceans,” where there is more promise and less competition.

BOOKMARK 2.0 | HAVE YOU READ THIS BOOK?
Blue Ocean Shift: Beyond Competing; Proven Steps to Inspire Confidence and Seize New Growth
By W. Chan Kim and Renée Mauborgne

Almost every book or article you read about strategy focuses on how to outpace rivals, beat the competition, and win at the expense of other companies. That’s why there are so many managers and companies out there fighting in the “red ocean” of cutthroat and bloody competition. In their previous book Blue Ocean Strategy and their new volume, Blue Ocean Shift, W. Chan Kim and Renée Mauborgne’s more recent Blue Ocean Shift gives managers a roadmap for doing just that.

MAKING THE SHIFT

Kim and Mauborgne’s book is based on decades of research into successful and unsuccessful strategic moves spanning more than a hundred years and 30 industries. They describe three components for successfully executing blue ocean strategy.
  • Start with the Right Perspective. A shift in perspective means recognizing that managers can shape industry conditions and create or expand new markets. They cite powerful real-life examples such as Square, which opened up the credit card market for small businesses and sole proprietors, and French appliance maker Groupe SEB, which established a goal of producing a French fry maker that didn’t involve any actual frying.
  • Applying the Right Set of Tools. Kim and Mauborgne provide a set of market-creating tools, such as “The Three Tiers of Non-Customers,” which helps managers identify various levels of people who do not currently patronize the industry in which the company operates.
  • Use a Humanistic Process to Create an Involved Workforce. The thired key component is to ensure that the blue ocean shift recognizes and harnesses the humanity within people, “acknowledging their fears, their insecurities, their need to be treated with dignity, their desire to matter.”


MAKING THE PROCESS HUMANISTIC

Without employee contributions and buy-in, the new strategy will fail. A successful blue ocean transformation process recognizes that “each pair of hands comes with a brain and a heart” so it involves people by weaving three humanistic elements throughout the entire journey:
  • Engagement. Managers actively involve people in the change process. If people aren’t involved in the strategic decisions that affect them, the transformation from red to blue ocean strategy could founder from lack of involvement.
  • Explanation. Managers give people throughout the organization “a clear account of the thinking that underlies the process.”
  • Reassurance. Managers might not adopt all employee ideas and opinions, but they are careful to reassure people “that their opinions have been considered.” Providing reassurance also means letting people know what to expect and clarifying their roles and responsibilities in the new blue ocean world.
Blue Ocean Shift, by Chan Kim and Renée Mauborgne, is published by Hachette.
Remember This
  • Organizations exist for a purpose, and top leaders are responsible for deciding the organization’s strategic intent, including a specific mission to be accomplished. The mission statement, or official goals, makes explicit the purpose and direction of an organization.
  • Two other factors related to strategic intent are competitive advantage and core competence.
  • Competitive advantage refers to what sets the organization apart from others and provides it with a distinctive edge.
  • A core competence is something the organization does extremely well compared to competitors.
The Series:
    Research data for this work have been adapted from the manual:
  1. Managerial Accounting: Tools for Business Decision Making By Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
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