Fundamentals of Management, 8th ed

Chapter 3: Planning and Strategic Management

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Organizational Goals

Goals are critical to organizational effectiveness, and they serve a number of purposes. Orga-

nizations can also have several different kinds of goals, all of which must be appropriately

managed. And a number of different kinds of managers must be involved in setting goals.

Purposes of Goals

Goals serve four important purposes.

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First, they provide guid-

ance and a unified direction for people in the organization. Goals can help everyone

understand where the organization is going and why getting there is important.

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Mark

Pincus, founder and CEO of the social-gaming company Zynga, recently noted that

“it’s important to know what your goal is, because if you don’t know what your goal is,

you will … never achieve it.”

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IBM announced a goal to achieve earnings per share of

$20 (up from $11 52 in 2010) by 2015. The company also plans to reach $100 billion

in cash flow and return 70 percent to shareholders by that same year.

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Top managers

at General Electric (GE) have a long-standing goal that every business owned by the

firm will be either number one or number two in its industry. This goal helps set the

tone for decisions made by GE managers as it competes with other firms such as

Whirlpool and Electrolux.

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Second, goal-setting practices strongly affect other aspects of planning. Effective goal

setting promotes good planning, and good planning facilitates future goal setting. For

example, IBM’s financial goals demonstrate how setting goals and developing plans to

reach them should be seen as complementary activities. Specifically, the firm will need

to work aggressively to boost both profits and cash flow to meet its goals.

Third, goals can serve as a source of motivation for an organization’s employees.

Goals that are specific and moderately difficult can motivate people to work harder,

Strategic goals

Strategic plans

Tactical goals

Operational goals

Operational plans

The Organization‘s Mission