Ch – 09 Decision Objectives

1. Introduction
a. General Background
b. 3 Types of Objectives

2. Who Determines Objectives in Organization?

3. Characteristics of Decision Objectives

a. Strategic and Operational Objectives
b. Multiple Objectives
c. Implicit and Explicit Objectives
d. Efficiency and Effectiveness
e. Changing Objectives
f. Intrinsic and Extrinsic Objectives

4. Setting Decision Objectives

a. Objectives should be Clear
b. Objectives should be Consistent
c. Objectives should be Agreed
d. Formulization of Objectives 1
 1. Introduction
 Introduction
 General Background
 Lack of Clarity and Unambiguous Objectives take value away from DM
process.
 To have better decisions, Objectives must be Well Defined and Well
Understood.
 Question is how do we understand decisions?
 One possible answer is where the decision is heading us?
 Prior to learning the reasons and objectives it is imperative to
understand about type of objectives:

 3 Types of Objectives
 Primary: These Reflect the Fundamental Reason for the Organization’s
Existence and may include Survival of the Company, Independence from
Outside Control, Profit etc.
 Strategic: These Guide the Organizations Long Term Direction towards
the achievement of Primary Objectives and may include Developing
Innovative Products, Keep Presence in a Particular Market, and Fund
Projects from internal sources only etc.
 Operational: Interpretation of an Organization’s Strategic Objectives into
Manageable Terms for Short Term Decision Making and may include 2
Controlling Budgets, Giving In time Delivery, Managing Unit Costs etc.
 2. Who Determines Objectives
 Answer is a Manager or Managing Body i.e. BOD or Stock Holders.
 Objectives of Company Founder are Broader and in Wide Range, may include profit,
growth, producing a good product etc.
 Managers have Narrow mind objectives and may include focus only on profit.

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 3. Characteristics of Decision Objectives
 Characteristics of Decision Objectives
 Strategic and Operational Objectives
 Both have Different Purposes and are expressed in Different Ways.
 Operational Level Objectives are shaped by whatever Strategic
Objectives are adopted.
 There are different Layers of Objectives – Broad at the Beginning
(Strategic Objectives) and becoming More Specific as they approach
Operational Level.
 The Means – End Chain.
 If Objectives are present at Different Levels in an Organization then,
 An Objective to one Decision Maker will be Means of
Achieving a Higher Objective for a Higher Decision Maker
 In Practice, Means – Ends Chains are Interconnected in a
Complex Manner (See Fig 9.3 at Page 247).
 Mean- Ends Chains then explain
 How? When moving Downwards from Strategic Objectives that
How the Objective will be achieved at Operational Level
 Why? When moving Upward from Lower Level the Chain
answers why an Objective should be achieved
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3. Characteristics of Decision Objectives

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 3. Characteristics of Decision Objectives
 Characteristics of Decision Objectives
 Multiple Objectives
 Organizations pursue More than one Objective at the same time:
 A company wants to Increase Rate of Return, Grow in the Market, Make
Innovative Products etc.
 Multiple Objectives can be Conflicting or they can be Compatible with each
other
 Multiple Objectives can compete with each other for resources even if they are not
Conflicting
 When an Organization is pursuing Multiple Objectives, then Priorities may be set
for each Objective
 The prioritization may Set Constraints for other Objectives
 The prioritization should not be Strict and Managers should be willing to make
Trade Offs to achieve the Main Objective
 Implicit and Explicit Objectives
 Implicit: Not Expressed Indirectly
 Explicit: Clear, Fully Expressed, Unambiguously Stated (Preferably written down)
and Fully understood by all decision makers within the Organization
 How to Make Objectives Explicit?
 Do Objectives State what organization does not want to do?
 Are the objectives are useful guide to Action?
 Are the Objectives reasonably Comprehensive and State the
implications for all Stakeholders? 6
 3. Characteristics of Decision Objectives
 Characteristics of Decision Objectives
 Efficiency and Effectiveness
 Efficiency: Efficiency is measured is as some function of Output per of unit
Input Resource
 Efficiency Objectives are used to increase the Per Unit Output against
per Unit of Input

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 3. Characteristics of Decision Objectives
 Characteristics of Decision Objectives
 Efficiency and Effectiveness
 Effectiveness: Effectiveness Objectives consider the Characteristics of the
Output as well as the Efficiency of its Generation

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 3. Characteristics of Decision Objectives
 Characteristics of Decision Objectives
 Efficiency and Effectiveness
 Output
 Specification of Product and service
 Quality of Product and Service
 Reliability of org Operation
 Availability of Good and Service
 Flexibility of Organization to change its activities

 Changing Objectives
 Any company’s objective are unlikely to remain constant in the long run.
 Main reason of changing these objectives are;
 Changes occurring in the organizations environment
 Changes occurring in the organization itself
 The rate of change of organizations objectives depends partly on their level in
the objective hierarchy.
 Although, the prime objective may be the same but sub-objectives are
continuously changing by adapting to these above changes

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 3. Characteristics of Decision Objectives
 Characteristics of Decision Objectives
 Intrinsic and Extrinsic Objectives
 Extrinsic Objectives: Something from Outside
 The Objectives which managers talk about as Applying to their
decisions are Extrinsic Objectives
 They exist as they are considered as being Efficient in achieving the
 Hierarchical Objectives
 Intrinsic Objectives: Personal Worth
 The Objectives which are set by the Intrinsic Value of Extrinsic
Objectives

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 4. Setting Decision Objectives

 Objectives should be Clear

 Clear and Explicit Statement
 Clear Time Period

 Objectives should be Consistent

 Developing and Communicating Explicit Objective Statements
 Sharing and Agreeing Objectives with those responsible for their achievements
 Reviewing how far Objectives have been achieved at Regular Intervals
 Modifying Objectives and Action Plans as a result
 Management by Objectives (Howell – Social Scientist)
 Sub-ordinate Managers participate with their Superiors in agreeing
Performance Goals which are to be achieved or bettered by them over a
Period of Time
 Participation in Target Setting and Evaluation of Performance
 Increase Risk taken by the performers
 Increases Level of Motivation
 Increases Level of Commitment

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 4. Setting Decision Objectives

 Objectives should be Agreed

 Agreement is sought from those who has to achieve the Objectives i.e.
Subordinates and Peers
 Making participants to Commit themselves to the Accomplishment of the
Objectives
 Can be achieved through Involvement as in increases:
 Understanding and Commitment
 Improves the views on feasibility, Constraints, Resources Available

 Formulization of Objectives
 Making an Objective Explicit requires:
 Clear and Unambiguous Statement
 Fully understood by all Participants
 Criteria for a Sensible Objective include:
 Necessity: Do we need to establish objective this time?
 Practicability: Given resources can objective be achieved
 Relevance: Does objective fit with high level org objectives?
 Measurability: Can we measure /quality objective assessment?
 Success Criteria
 Standards through which we measure the Achievement of any Objective12