Chapter 8 Formulating Strategic Objectives. Strategic Management 4e., Viljoen & Dann © 2002 Pearson Education Australia 2 Objectives explain why explicit.

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Presentation transcript:

Chapter 8 Formulating Strategic Objectives

Strategic Management 4e., Viljoen & Dann © 2002 Pearson Education Australia 2 Objectives explain why explicit strategic objectives and key result areas (KRAs) are critical prerequisites to organisational success establish objectives for all aspects of organisational performance – internal, social and environmental appreciate the importance of a rigorous process of formulating objectives in motivating employees at all levels, and describe the range of factors affecting the nature of strategic objectives, and be able to use them in creating objectives for an organisation.

Strategic Management 4e., Viljoen & Dann © 2002 Pearson Education Australia 3 Common mistakes in formulating objectives establishing objectives by edict delegation of the process to middle management basing strategic objectives on financial hurdle rates allowing divisional heads to drive the process

Strategic Management 4e., Viljoen & Dann © 2002 Pearson Education Australia 4 The source of strategic objectives opportunities and threats strengths and weaknesses expectations of stakeholders

Strategic Management 4e., Viljoen & Dann © 2002 Pearson Education Australia 5 The Triple Bottom Line (TBL) The triple bottom line means establishing strategic objective in three areas: financial/operational social environmental

Strategic Management 4e., Viljoen & Dann © 2002 Pearson Education Australia 6 Attributes of strategic objectives an attribute a yardstick a goal a time scale acceptance flexibility motivation consistency

Strategic Management 4e., Viljoen & Dann © 2002 Pearson Education Australia 7 Linking strategic objective to strategies and action plans strategy analysis strategic objectives performance targets strategy selection implement action plans

Strategic Management 4e., Viljoen & Dann © 2002 Pearson Education Australia 8 Key performance indicators (KPIs) what are KPIs? selecting core processes in an organisation why bother with KPIs? basic ingredients of KPIs misuse of KPIs

Strategic Management 4e., Viljoen & Dann © 2002 Pearson Education Australia 9 Outcomes and Drivers Outcomes based KPIs 1. Customer satisfaction levels 2. Percentage of clients serviced 3. Cost per customer Drivers-based KPIs 1. Knowledge of product / service 2. Staff skill level 3. Fixed/variable cost level

Strategic Management 4e., Viljoen & Dann © 2002 Pearson Education Australia 10 Evolution of Performance Measurement Efficiency Functional focus Inputs Financials Customer focus Customer satisfaction Inputs Financials Process focus Horizontal KPIs Customer satisfaction Financials Strategic focus Balanced scorecards Outcome KPIs Performance drivers Products/ services Synergy Effectiveness

Strategic Management 4e., Viljoen & Dann © 2002 Pearson Education Australia 11 Establishing and validating strategic objectives theories of goal formulation attainable strategic objective goals down plans up creating ownership of strategic objectives

Strategic Management 4e., Viljoen & Dann © 2002 Pearson Education Australia 12 Key = Goals = Plans CEO Division n Head: Division 2 Head: Division 1 Head: Function AHead: Function B Work Unit YWork Unit X Head: Function A Head: Function B “Goals down, plans up” process of setting strategic objectives