Chapter 10 Objectives Objective: Setting objectives to guide the operation

Objectives provides a sense of direction and purpose provides a sense of direction and purpose guide and challenge the managers and employees guide and challenge the managers and employees can be defined quantitatively and qualitatively can be defined quantitatively and qualitatively are the basis for operational controls are the basis for operational controls are subject to adjustments, depending on what is realistic and achievable are subject to adjustments, depending on what is realistic and achievable should be set for both long- and short-term should be set for both long- and short-term after objectives are determined, strategies are created after objectives are determined, strategies are created

Characteristics measurable; should be quantified as in: money terms, percentage, date, time period, or a certain number of something (150 customers in one hour) “what you cannot measure, you cannot manage” measurable; should be quantified as in: money terms, percentage, date, time period, or a certain number of something (150 customers in one hour) “what you cannot measure, you cannot manage” motivating; all employees must accept the objectives as achievable and worth the personal effort motivating; all employees must accept the objectives as achievable and worth the personal effort flexible; should not be set in stone - adjustments may be required as the environment changes flexible; should not be set in stone - adjustments may be required as the environment changes

compatible; should be compatible with the company’s mission, environment, abilities and culture compatible; should be compatible with the company’s mission, environment, abilities and culture understandable; whoever reads the objectives, should clearly understand what is meant understandable; whoever reads the objectives, should clearly understand what is meant

Long-term Objectives can be defined for three to five years. The general business meaning for long-term is anything over one year. can be defined for three to five years. The general business meaning for long-term is anything over one year. are based on appraisal of factors from the SWOT analysis, grand strategies, and the firm’s desired position and mission. are based on appraisal of factors from the SWOT analysis, grand strategies, and the firm’s desired position and mission. the theoretical process for setting long-term objectives: identifying opportunities, determining strategies, setting long-term objectives the theoretical process for setting long-term objectives: identifying opportunities, determining strategies, setting long-term objectives

help reduce strategic myopia – the inability to see the future. Without long-term objectives, the result is usually short-term thinking (shortsightedness), which lessens the chances of stable growth. help reduce strategic myopia – the inability to see the future. Without long-term objectives, the result is usually short-term thinking (shortsightedness), which lessens the chances of stable growth. may be utilized as a strategy; e.g. using promotions to increase sales would normally be a strategy, not an objective “we will spend 3% of sales on promotions” or “add four new entrees each year, delete the four least productive entrees”-objective, product development- strategy. may be utilized as a strategy; e.g. using promotions to increase sales would normally be a strategy, not an objective “we will spend 3% of sales on promotions” or “add four new entrees each year, delete the four least productive entrees”-objective, product development- strategy. both long-term and annual objectives are set in the following seven categories: social responsibility, profitability, productivity, employee development, employee relations, competitive position and technology. both long-term and annual objectives are set in the following seven categories: social responsibility, profitability, productivity, employee development, employee relations, competitive position and technology.

Social Responsibility is managing the company’s image and being viewed as a contributing part of the community is managing the company’s image and being viewed as a contributing part of the community benefits are: increased morale of employees and management, a more stable community, being recognized by the community as a company which care about something besides making money benefits are: increased morale of employees and management, a more stable community, being recognized by the community as a company which care about something besides making money E.g. contacting a charity to support it as an ongoing project or during a special occasion, beginning a recycling program. E.g. contacting a charity to support it as an ongoing project or during a special occasion, beginning a recycling program.

Profitability is primarily the return on sales (ROS – operating income before interest and taxes divided by sales) or return on investment (ROI – net income divided by capital investment), return on equity (ROE – net income divided by owner’s or stockholder’s equity) and return on assets managed (ROAM – net income divided by equity). is primarily the return on sales (ROS – operating income before interest and taxes divided by sales) or return on investment (ROI – net income divided by capital investment), return on equity (ROE – net income divided by owner’s or stockholder’s equity) and return on assets managed (ROAM – net income divided by equity). could also include liquidity ratios; current ratio (current assets divided by current liabilities), leverage ratios (debt-to-equity ratio), debt ratio (total debt divided by total assets) could also include liquidity ratios; current ratio (current assets divided by current liabilities), leverage ratios (debt-to-equity ratio), debt ratio (total debt divided by total assets)

Productivity is the ratio of input to output. is the ratio of input to output. for food cost, this is the food cost percentage – food cost divided by food sales. For labor cost, labor expenses divided by total sales. for food cost, this is the food cost percentage – food cost divided by food sales. For labor cost, labor expenses divided by total sales. can be calculated for specific areas separately can be calculated for specific areas separately management should be careful when attempting to lower any productivity percentage; customer satisfaction figures must be considered. management should be careful when attempting to lower any productivity percentage; customer satisfaction figures must be considered. the nature of hospitality industry is labor intensive, therefore it is more difficult to increase productivity than manufacturing industries the nature of hospitality industry is labor intensive, therefore it is more difficult to increase productivity than manufacturing industries

improvements on productivity in the service sector are generally handled through; improvements on productivity in the service sector are generally handled through; increased manual dexterity (through training and selective hiring) increased manual dexterity (through training and selective hiring) reduction of distances between tasks reduction of distances between tasks work simplification work simplification reduction of inefficiencies of production reduction of inefficiencies of production cost controls (most efficient; departments establish the lowest reasonable level for expenses) cost controls (most efficient; departments establish the lowest reasonable level for expenses) E.g. reach a 30% food cost by 20xx, decrease overall operating costs by 7% by 20xx, reduce utility costs to 4% by 20xx. E.g. reach a 30% food cost by 20xx, decrease overall operating costs by 7% by 20xx, reduce utility costs to 4% by 20xx.

Employee Development generally any plan of for improvement requires improvement in training efforts. generally any plan of for improvement requires improvement in training efforts. ongoing training programs for both employees and managers are not only for current needs but also for the future ongoing training programs for both employees and managers are not only for current needs but also for the future empowerment is the buzzword for new trend of pushing decisions to the lowest reasonable organizational level of the company. This strategy requires greater skills and need for training. empowerment is the buzzword for new trend of pushing decisions to the lowest reasonable organizational level of the company. This strategy requires greater skills and need for training. E.g. have all employees take certified sanitation, CPR courses, have crisis management plans for emergencies like fire, fighting etc. E.g. have all employees take certified sanitation, CPR courses, have crisis management plans for emergencies like fire, fighting etc.

Employee Relations basically concerns the morale of employees – generally expressed as in the turnover percentage. basically concerns the morale of employees – generally expressed as in the turnover percentage. the biggest cost of high employee turnover is low customer satisfaction. the biggest cost of high employee turnover is low customer satisfaction. here, the questions to consider may be; do employees feel good about working for the company?, can the company offer employees the opportunity for a better future, decent wages and benefits, good working conditions etc? here, the questions to consider may be; do employees feel good about working for the company?, can the company offer employees the opportunity for a better future, decent wages and benefits, good working conditions etc? E.g. finding a group health insurance program, reducing employee turnover to 205 by 20xx, instituting employee vacation policy etc. E.g. finding a group health insurance program, reducing employee turnover to 205 by 20xx, instituting employee vacation policy etc.

Competitive Position Most are marketing related and serve to support market share or sales objectives. Most are marketing related and serve to support market share or sales objectives. Include objectives related to innovation and image that lead to an improved strategic advantage compared to competitors. Include objectives related to innovation and image that lead to an improved strategic advantage compared to competitors. The second most important objective here is customer satisfaction. The second most important objective here is customer satisfaction. E.g. open six new units during the next three years, achieve $xxxxx in sales by 20xx, increase average daily customer count to 100, achieve a 4,2 overall CSI (customer satisfaction index), increase corporate business segment by 15% by 20xx, have at least four major promotional events each year directed to increase customer loyalty etc. E.g. open six new units during the next three years, achieve $xxxxx in sales by 20xx, increase average daily customer count to 100, achieve a 4,2 overall CSI (customer satisfaction index), increase corporate business segment by 15% by 20xx, have at least four major promotional events each year directed to increase customer loyalty etc.

Technology is basically anything mechanical or electronic that improves the effectiveness or efficiency of the business – primarily in the areas of speed, productivity, quality, convenience and accuracy. is basically anything mechanical or electronic that improves the effectiveness or efficiency of the business – primarily in the areas of speed, productivity, quality, convenience and accuracy. increased competition and customer demand recently forcing hospitality firms to consider the latest technology increased competition and customer demand recently forcing hospitality firms to consider the latest technology when choosing equipment, decisions should include; performance, reputation, serviceability, ease of use, cleaning and maintenance, price, effective utilization when choosing equipment, decisions should include; performance, reputation, serviceability, ease of use, cleaning and maintenance, price, effective utilization E.g. reduce service time from 14 minutes to 10 minutes, continually reevaluate present kitchen equipment etc. E.g. reduce service time from 14 minutes to 10 minutes, continually reevaluate present kitchen equipment etc.

Annual Objectives are the specific statements of what an organization is expected to achieve within the next year. are the specific statements of what an organization is expected to achieve within the next year. should directly flow from the long-term objectives, convert long-term thinking into day-to-day operations. should directly flow from the long-term objectives, convert long-term thinking into day-to-day operations. as soon as they are set, functional strategies, policies and action plans are supposed to be set to accomplish them as soon as they are set, functional strategies, policies and action plans are supposed to be set to accomplish them E.g. if the grand strategy is for market development, and the long-term objective is to open six new units, then the annual objective would be to open two units. E.g. if the grand strategy is for market development, and the long-term objective is to open six new units, then the annual objective would be to open two units.

Supporting Objectives the annual objectives may need to have supporting objectives to improve implementation; some may take priority. the annual objectives may need to have supporting objectives to improve implementation; some may take priority. E.g. objectives supportive of lowering the food cost might be: training all kitchen staff about receiving, immediately beginning to make price comparisons among suppliers, implementing a new computerized purchasing system by 30/4/20xx E.g. objectives supportive of lowering the food cost might be: training all kitchen staff about receiving, immediately beginning to make price comparisons among suppliers, implementing a new computerized purchasing system by 30/4/20xx