Chapter 4- Business Objectives
Learning Objective: Communicating, changing, and translating corporate objectives.
We discussed the various different objectives companies can have:
Profit maximization;
Profit satisficing;
Growth...
It's important to understand, however, that business objectives change overtime.
What are some of the reasons for that?
Market recessions and crisis may lead businesses in to having survival as their main objective instead of profit or growth - this can also happen due to competition;
A business might go from survival to growth or profit as it succeeds to grow;
A change in business control can also drive changes in business objectives.
Translating Business Objectives into Targets:
Managing by Objectives (MBO) is the process of breaking down the Corporate Objective targets so that it will become more individually personalized:
MBO helps delegating authority (give responsibility) by setting goals and expectations under the objective umbrella. It is also a helpful tool for motivating managers and employees.
Targets are short-term goals that must be reached before the overall objective can be achieved.
As important as setting objectives and breaking them down into more relatable objectives (MBO) is communicating objectives:
Appropriate communication and objective setting is important for:
Greater understanding by workers and managers of individual vs. corporate objectives;
Enables employees to interlink their objectives with others' making it more efficient;
Allows for monitoring, assessing, and actions to be taken.
Businesses have also been increasingly concerned with corporate social responsibility (CSR) which has driven the creation of various ethical codes across organizations:
Ethical code (a.k.a. code of ethics or code of conduct) is a document detailing the company's rules and guidelines on staff behavior that must be followed by all employees.
Most business decisions have an ethical or moral dimension to them:
Should toy companies advertise their toys to young children so that they drive parents to buying them?
Is it acceptable to pay bribes to close a deal?
Should a bank lend money to a business that manufactures weapons or do animal testing?
Is it acceptable to feed genetically modified food to cattle?
Should a business accept lower short-term profits for investing in low pollution equipment?
Should high executives be receiving high pay and bonusses when other workers are being made redundant?
Is it acceptable to close a factory to save costs and increase profits even if that would mean making thousands of people unemployed?
If the law allows you to, is it OK to pay very low wages for long-hours of work?
If a business can get away with it, would it be acceptable for a business to employ child-labor to reduce costs?
How employees and managers make decisions on these situations should be explicit on the code of conduct - to what extent should business consider ethics in their decisions?
Many ethical decisions can add high costs businesses:
Using fair-trade suppliers;
Not paying bribe could mean losing profitable contracts;
Not advertising to children may mean lost sales;
Paying fair wages in low-wage countries would limit business competitiveness as it increases costs.
In the long-term, however, ethical decisions may pay-off:
Helps avoiding expensive court cases;
Good publicity and an increase in sales;
Attracts ethical customers (which is increasing);
Higher likelihood of winning government contracts;
Well-qualified workers may prefer to work for ethical businesses.
To-Do List:
Term 1, Chapter 4 - Essay Question #1
Chapter 4- Business Objectives
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