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CREATING A CORPORATE VISION Vision is a mental perception of the kind of the
environment an individual or an organization aspires to create with in a broad time horizon and the underlying conditions for the actualization of this perception
It is a concept for a new and desirable future reality that can be communicated throughout the organization
It is central to the process of direction setting and represents a big picture of the desired future state of business that business manager has in his mind
WHY A VISION? Having a vision or creating one is of
critical significance to the competitive environment of today. The urge to conceive a vision could also arise from one or more of the following arguments:
Need to control an organization's destiny Need for creative strategies Demands of turnaround and recovery Need for change in corporate culture
What makes a good vision Be realistic and feasible, simple and clear Provide a challenge for the whole organization Mirror the goals and aspirations of the
constituents. Be far but close in terms of time span and
organizational commitment Able to focus the attention with respect to scope
and time Translatable into goals and strategies Endorsed and frequently articulated by the top
management Derived from a sense of direction
What kills a vision Visions may be killed at 2 different stages
of their conception and implementation. Concept-related mortality could relate to
individual behavior and the way individuals approach their environment and react to external stimuli.
The second category belong to an equally wide and diverse set of factors most of them relating to the way organizations respond to visions and deal with them
Concept-related vision killers Fear of mistakes Inability to tolerate ambiguity Preference for judging ideas instead of creating
them Inability to incubate or ‘sleep on it’ Lack of challenge or identification of problems
that engage interest Excessive zeal to succeed quickly Lack of access to areas of imagination Lack of imaginative control, inability to focus on
one idea Inability to distinguish reality from fiction
Implementation-related vision killers
Unconducive beliefs -corporate traditions and cultural norms could blur a vision and retard effective strategy implementation
Lack of strategic commitment -visions could evaporate if they are not well communicated and endorsed by key managers involved in strategy implementation
Missing reality test -the very ambiguity of visions and failure to substantiate them with tested data could undermine their translation into specific viable strategies
Deficient reward mechanism -reward systems that compensate for operational accomplishments based on short term achievements instead of long term contributions could stifle vision implementation
Unsteady implementation – noncommitment to an effective and efficient time schedule could retard the implementation process
Implementation-related vision killers
Over participation –knowing more than one needs to know could sound virtuous but is not always essential and could impede constructive process
Misaligned information system -an information system driven by technical specialism or that is not geared to the emergent vision changes could be disastrous
Task force fade out –task forces assigned the responsibility of stimulating creativity and providing motivation and commitment may not live up to their promise
Managerial discontinuity –visions and strategies implemented by individuals other than those who conceived them may fall short of their expected reach. Individuals who struggle to formulate and implement a vision or strategy maintain a unique personal relationship with the vision or strategy
Mission An organization’s mission is the purpose or reason for the
organization’s existence. It tells what the company is providing to society, either a service like housecleaning or a product like bread.
A well conceived mission statement defines the fundamental unique purpose that sets a company apart from other firms of its type and identifies the scope of the company’s operations in terms of products offered and markets served.
It echoes not only what the company is now, but also what it wants to become; management’s strategic vision of the firm’s future. It promotes a sense of shared expectations in employees and communicates a public image to important stakeholders groups in the company’s task environment.
It may also include the firm’s philosophy about how it does business and treats its employees. It puts into words what the company is. (It tells ‘who we are, what we do’).
The Difference between Vision & Mission is that the Vision statement describes what the organization would like to become while the Mission statement describes what the organization is now. A vision is still a dream most likely held by top management.
The basic elements of a mission statement
Purpose; why the business exists -customers to be served, needs to satisfied & means of satisfying these needs.
Values; What the firm believes in Standards & behavior;
rules/policies that guide the business operations.
Strategy &scope; what business and how.
Examples of mission statement To improve the quality of home life by
designing, building, marketing and servicing the best appliances in the world. (Maytag corporation)
To provide a competent reliable, efficient and effective postal service.
To develop a civil service, which delivers, high quality and appropriate services at the least cost to the nation, supports national development, and facilitates the growth of a wealth creating private sector.
Purpose in establishing a mission statement
To help the managers clarify in their own mind what the business of the organization is.
To provide focus for managers and their staff in meeting organization and their staff in meeting organizational goals.
To stimulate among the staff a sense of membership of the organization rather than being merely employees.
To provide a framework within which to determine targets and more precise objectives.
Characteristics of a good mission statement
Clear Concise (brief but covering
essential points) Output or service focused. Not a description of activities or
processes. Memorable Activities /processes- what do you
do to achieve an objective.
Business goals Business goals specify what the organization hopes to
fulfill in the medium to long term Most profit seeking organizations operate with a hierarchy
of goals, in which maximizing stockholder wealth is placed at or near the top and the rest are secondary.
Secondary goals are objectives judged necessary by the company if it is to maximize stockholder wealth
Secondary goals may include; market share, innovation, productivity, physical and financial resources, manager performance and development, worker performance and attitude and social responsibility.
These goals shape the choice of strategies e.g. a company pursuing the goal of maximizing productivity will favor strategies that enhance productivity
Goals specify how a company intends to go about attaining its strategic intent
Strategic Objectives These indicate both, a specific kind of performance and
results an organization seeks to produce through its activities and the competitive position the enterprise wishes to occupy in the markets for its products or services. These objectives can be short or long term. Objectives should not be abstract but clear, specific, concrete and if possible measurable. They state what is to be accomplished & by when. The achievement of corporate objectives should result in the fulfillment of the corporation’s mission.
The term goal is often used interchangeably with the term objective.
A goal is an open-ended statement of what one wants to accomplish with no quantification of what is to be achieved and no time criteria for completion. E.g. ‘ increased profitability ‘ is a goal not objective. An objective would say something like ‘’increase profits 10% by the year 2010.
Objectives contd Objectives take the generalities of the mission
statement and turn them into more specific commitments
The most important objective for commercial businesses is likely to be creating profit for its owners, or maximizing shareholder wealth – Return On Investment (ROI)
The danger in emphasizing too strongly on ROI is that this may create pressure to focus too much on the short term benefits, often at the expense of long-term benefits
To guard against the above, the organization should develop secondary objectives in a number of areas: customer orientation, productivity, internal structuring, employee development, technology and innovation, employee relations, public responsibility etc
Areas in which a corporation might establish its objectives.
Profitability (net profits) Efficiency (low costs) Growth (increase in total assets, sales etc) Shareholder wealth (dividends plus capital
appreciation) Reputation (being considered a top firm) Contributions to employees e.g. employment
security, wages diversity. Contributions to society (taxes paid, participation
in charities, providing a need product or service) Market leadership (market share) Technological leadership (innovations, creativity) Survival (avoiding bankruptcy)
Formulation of objectivesInformation on objectives can be obtained by asking these
questions. What do you think are the most important things you
do? What do believe you are expected to achieve in each of
these areas? How will you or anyone else know whether or not you
have achieved them? Objectives describe something that has to be
accomplished. They are like road maps. They help us to define where we want to go. Plan the most appropriate route, check to see how close we are to our destination. Help us confirm that we have reached.
Characteristics of good objectives
Objectives should be SMART: Specific; clear, unambiguous, straight forward Measurable; in terms of quality, quantity, time,
money Achievable/Attainable/Agreeable Realistic Time-bound Challenging enough but within reach of competent
and committed person. Consistent with mission and the vision of the
organization
Corporate, Functional and Business Objectives
The development of corporate strategy is not just a task for the chief executive officer (CEO) and the main board. It usually involves many others in the organization
The overall corporate objective needs to be translated into objectives for different functions or business units
Executives from different functional areas of the business might be asked for their opinions as the strategy is explored
After agreement, functional executives (marketing, finance, human resource, operations, etc) might take the overall strategy or take aspects of it back to their own areas
Functional objectives are subordinate to the overall corporate objective
Translating corporate objectives into SBU objectives
Corporate Objective (s)
SBU 1 Objectives
SBU 2Objectives
FinancialObjectives
SBU 3Objectives
MarketingObjectives
Human ResourceObjectives
OperationsObjectives
FinancialStrategies
MarketingStrategies
Human ResourceStrategies
OperationsStrategies
Translating corporate objectives into functional
objectives
Corporate Objective (s)
Financial Objectives
MarketingObjectives
OperationsObjectives
OperationsStrategies
MarketingStrategies
FinancialStrategies
Human ResourceObjectives
Human ResourceStrategies
Short-term &Long-term strategic objectives
Short-term strategic objectives These specify the near future/ near term
organizational performance targets and market standing an organization desires to attain in progressing towards its long-term objectives. (They should be in a one year physical calendar)
Long-term strategic objectives These specify the desired performance
and market position on an on going basis (goes on for a long time in future).
Linkage among mission, goal and objectives- example
Mission Goal Long-term objectives
Functionalobjectives
The company is dedicated to providing its customers with a wide selection of quality merchandise that is competitively priced with a high level of after sales service. For our shareholders, we strive for optimum long-term return on capital invested through steady profit growth and prudent asset management
Profitability1.To achieve sufficient Profit to finance company growthCustomer
orientation2.The business
meets highest customer demands in fruit products through
high quality, natural and fresh products
1.Increase profit margin by 2% each year2. Increase sales by 20% each year
3.To increase re-buy of customers to 90%4.Delivery to distribution channels to be done within 2 days of request
1.Increase profit margins from current 7% to 9% end of next year2.Maintain at least 95% of current customers over the next 12 months3.Achieve a sales growth of 25% in the next 12 months3.Reduce defective units to 2 per 100 this year4.To have an efficient and effective structure by end of next year
Management By Objectives (MBO)
This is a planning or decision making technique where goals are laid down by those who they affect and means of achieving them are collectively determined
MBO is a formal procedure that begins with goal setting and continues through performance review and appraisal
It is a participative process that actively involves managers and subordinates acting together to establish common goals
Each person’s major areas of responsibility are clearly defined in terms of measurable results
Peter Drucker the proponent of MBO emphasizes that goal setting should involve every one otherwise goals set or decisions taken will be seen as someone else’s objectives or decisions and thus will be ignored
MBO is a task centered approach that recognizes the motivational effect on employees of knowing what is expected of them and how well they can do to achieve it
