THE HIERARCHY OF OBJECTIVES

(PAPER BY CHARLES H. GRANGER)

HARVARD BUSINESS REVIEW, MAY 1964 ISSUE

Presented By,
Mayur Mitra
18125024
NEED FOR OBJECTIVES

• Need for having objectives within objectives, which further lie

within objectives.
• Some important questions that are addressed;
1. Why a conceptual framework of objectives is important in decision
making?
2. What are the important characteristics of good objectives?
3. How objectives are chosen and established?
4. How objectives can be utilized for profitability?
WHAT IS AN OBJECTIVE?

• Generic definition; “An aim or end of an action”.

• On broader sense, “a objective is an aim or guide to
intermediate decisions or action”.
• Organizations dilemma, is its failure to follow its own objectives.
• Famous quote, “Having lost sight of our objective, we
redoubled our effort”.
• True for most modern organizations.
ANALYSIS OF OBJECTIVES

• Objectives are important (organizational & personal)

• Question arises, is it really important to analyse objectives?
• Examples were objectives were clearly analysed.
1. U.S Secretary of Defence Robert S. McNamara and military personnel
were in dispute because of military objectives in handling $50 billion
military industrial complex.
2. The Roman Catholic Church recalling some 2500 high ranking officials
to help rethink their organizational objectives.
3. Economist Theodore Levitt proposed that certain leading industries
were trying to compete in railroads industry because of their
inappropriate objectives.
ANALYSIS OF OBJECTIVES

• Precious time and efforts are not wasted if, desired objectives
are clear in the minds of the decision makers.
• When organizational objectives are well defined, other
activities such as organizational planning, marketing, R&D,
finance, corporate strategy, etc, are carried out smoothly.
• Professor Douglas McGregor incorporated “Theory Y” into
organizational objectives.
• Theory Y states that, people working in an organization are
participative, motivated and enjoy their work.
• Integrating organization’s objectives with individuals objectives
is the aim of incorporating Theory Y in organizations objectives.
IS THEORY NECESSARY?

• Management’s focus is; Quote by Lyndall Urwick;

1. How to setup organizational “We cannot do without theory. It will
objectives? always defeat practice in the end for a
2. Comparison between objectives, to quite simple reason. Practice is static. It
check what suitable for them. does and does well what it knows. It
has, however, no principle for dealing
• Less attention is paid to; with what it doesn’t know. Practice is
1. Structure of objectives not well adapted for rapid adjustment
to a changing environment. Theory is
2. Pseudo objectives
light-footed. It can adapt itself to
3. Organizational constraints changed circumstances, think out
fresh combinations and possibilities,
• Aim of management should be to peer into future”.
link organizational objectives i.e,
“grand design” with objectives
lower down in the organization
VALIDITY TESTING OF OBJECTIVES

• The validity of objectives are tested by answering the following

questions
1. Is the objective a guide to action?
Does the objective help/facilitate management to take up the most desirable or alternative
course of action?

2. Is the objective explicit enough to suggest certain type of action?

The objective should define the purpose of carrying out the task. Example; simply making
profits does represent a meaningful guide to actions, but carrying it out profitably in certain
type of business does.

3. Does the objective suggest tools to measure and control

effectiveness?
Example; AIG is the world’s leading insurance provider. It cannot move into steel
manufacturing and claim to be best steel manufacturer. It is merely a lofty dream.
VALIDITY TESTING OF OBJECTIVES

4. Is the objective ambitious enough to be challenged?

It is appropriate for some companies to abandon their respective industry and move on to a
new industry once its organizational objective have been achieved. Example:- Sony moving
from electronic equipments to Sony Pictures.

5. Does the objective suggest cognizance of organization’s external

and internal constraint?
Organizations operate within their external and internal constraints. They do so keeping their
objectives to be a guide to action.
Example:- Japanese motor vehicles have differences over their American and German
counterparts due to their organizational objectives. Thus, they and distinct from other and
act as source of their competitive advantage.

6. Can the objective be related to both broader and specific objective

at higher and lower level of the organization?
Division’s objectives should be relatable to organization’s objective.
COMPLETE FRAMEWORK

Fig1(a). Hierarchy of Objectives in terms of need or level of activity

COMPLETE FRAMEWORK

Fig1(b). Detailed Hierarchy of Objectives in terms of level of activity

COMPLETE FRAMEWORK

• Confusion relating to objectives can be avoided.

• Viewing organizational objectives as a whole framework of
complex “aims or end of actions”
• Example:- Simply going for Profit is not the only objective.
Operating within the given guidelines/rules is also mandatory
constraint.
CHARACTERISTICS OF HIERARCHY
• To address the important characteristics of hierarchy of objectives and
understand their implications.
1. Full range of objectives and their guiding considerations is extremely
broad in an organizational context
2. The rate of change of hierarchy decreases as we move up structure
3. Most organizations change their objectives, and vision ever 20 years
4. Debates on specificity of an objective over others is not helpful
One must fall back on organization’s broader objective in case of conflict.

5. Debates on merit of one objective over another is circumstantial

6. The obviousness of stated objectives decreases as one reaches
upper end of the hierarchy/organizational structure
7. Need for broad objectives of the grand design and mission is not
restricted to a very large company
DERIVATION OF GOALS
• To proceed from grand design to budget, organizations must focus on
setting goals
1. Start by setting up measurable yardsticks making the process
tangible
2. Analysing internal resources (Example: goods present for export),
and external market condition (Example: Which world markets can
be targeted?)
3. Defining the range of possible activities which can be utilized to
accomplish larger objectives (decided by management). Mostly
relation between range of resource consumption and
accomplishment of objective
4. Reiterations to overcome inconsistencies before finalizing
subobjectives
DERIVATION OF GOALS

Fig2(a). Process of Deriving Specific Objectives from Broader Objectives

DERIVATION OF GOALS

Fig2(b). Example of Process of Deriving Specific Objectives from Broader Objectives

ROLE OF CREATIVITY
Establishment of subobjectives with the framework of broader objectives
is a creative act
The created subobjectives need to be tested against realities of;
1. Consistency with internal resources
2. Consistency with environmental conditions
3. Effectiveness/cost relations in obtaining broader relationship
Need of creative individuals who have had exposure to company
situations must be consulted before setting up organizational goals
Creator of “grand design”, mostly the organization’s head, uses only his
needs, values, motives, and organization’s internal and external
condition as tools to face challenges
MOTIVES & APPEALS
• Only people with high motivational drive and egos couple with
Theory Y are the only ones’ who can fulfil company objectives and
are suitable for accomplishing company missions
• True in higher echelons of large organizations. Example: Trading
companies
• Hire and fire policy for blue collar workers, but financial gains and
positions to secure managers
• Example:- Frederick R. Kappel’s visionary goals for AT&T;
1. An instinctive feeling for quality throughout the organization
2. Freedom to make some mistakes
3. A recognition of the pressure of external factors

• In the end, it depends upon segregating goal setters and visionaries

from the people whom have qualities to carry out them out
LOCATING RESPONSIBILITY
• Leader of an organization may have more exposure to internal and
external environment than his sub-ordinates
• Aim is to identify sub-ordinates who are good at a specific task
• To find how staff workers can complement line workers
• Example; staff workers can perform both internal and external
analysis, and propose and analyse possible alternative subobjectives
• People with power hold ultimate responsibility. Such people are to
be brought into the decision making process at the earliest
• Example; line workers will not accept ready-made objectives
proposed by staff worker, unless the line worker himself has been in a
similar situation
UPWARD WORKING APPROACH
• It is reverse of Hierarchy of Objectives approach
• May businesses have found that profit objectives are best
understood at starting point of the business
• It leads starting from environmental factors of comparable
companies which result in profits, and the move on to their internal
resources. Example:- Aviation Industry setting up low cost carriers
(LCC)
• People feel it easy to understand the need and value to understand
profit goals. Once this is done, it is easier for businessmen to work up
and down the hierarchy of objectives and fill it accordingly
• Process of continual reiteration of the objective statement to fit the
subobjectives, and new developments in internal resources and
environmental conditions
PRACTICAL USES OF OBJECTIVES
The practical uses of objectives can be divided into four part;
1. Better Planning
2. Choice of Alternatives
3. Management Development
4. Organizational Efficiency
CONCLUSIONS
After going through the case, we find that the real nature of objectives
remain unclear
• Objectives cannot be setup randomly for any enterprise with
assumption that they will work out. They lead to meaningless guides to
action
• There are minimum number of tests that an objective, or set of
objectives have to pass
• Objectives do not have to begin with broad grand design of enterprise
• Objectives must create drive within the organization for people to work
• Objectives can be measured in realistic terms of;
a) Internal resources of the enterprise
b) External opportunities, threats and constraints
CONCLUSIONS
• Objectives should take into account the following;
a) Creative conception of range of alternatives
b) Relative effectiveness
c) Costs incurred

• Objectives must be known to each working person in the organization

such that he/she understands the goals of their own work, and how it
relates to the broader objectives of the total enterprise
• Objectives should be periodically reconsidered and redefined due to;
a) Changing environmental conditions for the organization
b) Salutary effect of rethinking the aims of organizational activities

Objectives when properly developed and applied can guide the daily
activities of individuals in an organization, but also aid in their personal
development
THANK YOU