What gives managers the right to direct and to control their subordinates in order to attempt to accomplish organizational goals?

Organizational goals are strategic objectives that a company's management establishes to outline expected outcomes and guide employees' efforts.

There are many advantages to establishing organizational goals: They guide employee efforts, justify a company's activities and existence, define performance standards, provide constraints for pursuing unnecessary goals and function as behavioral incentives.

For the goals to have business merit, organizations must craft a strategic plan for choosing and meeting them.

Importance of organizational goals

Goals help define a company's purpose, assist its business growth and achieve its financial objectives. Setting specific organizational goals can also help a company measure their organization's progress and determine the tasks that must be improved to meet those business goals.

Goals need to be specific, measurable, achievable and timely. By setting clear, realistic goals, organizations have a clearer path to achieve success and realize its vision. Goal setting, and attaining them, can also help an organization achieve increased efficiency, productivity and profitability.

Organizations should clearly communicate organizational goals to engage employees in their work and achieve the organization's desired ends. Having a clear idea of organizational goals helps employees determine their course of action to help the business achieve those goals. Employees should also be equipped with the proper tools and resources needed as they do their work to help meet the overall organizational goals.

Setting goals can also help companies evaluate employee performance -- for example, creating individual employee goals that support overall organizational goals and measuring individual performance against those individual goals. While an organization can communicate its organizational goals through formal channels, the most effective and direct way to do so is through employees' direct supervisors. This enables managers to work with their staff to develop SMART (specific, measurable, achievable, realistic and time-bound) goals that align with the organization's goals. Setting organizational goals also helps build workplace harmony because it makes employees work toward attaining similar goals.

While developing sound goals helps organizations with planning, over time, goals might turn out to be unrealistic and need to be modified accordingly.

Types of organizational goals

There are two main types of organizational goals:

1. Official: Goals that an organization aims to achieve.
2. Operative: Goals that are required to achieve a desired outcome

Official goals detail a company's aims as described in its mission statement or in public statements, such as the corporate charter and annual reports. They help to build the organization's public image and reputation. Such goals are often qualitative and harder to measure.

Operative goals are the actual, concrete steps a business intends to take to achieve its purpose. A company's operative goals often don't parallel its official goals; for example, while a nonprofit volunteer organization's main official goal may be community service, limited funding might mean that its operative goal of fundraising will take precedence.

These are often short-term goals that organizations seek to achieve through its operating policies and undertakings and are measured quantitatively. Their success is based on metrics. Companies are able to outline specific steps they need to take to achieve operative goals.

Businesses also set operational goals to determine what business processes can help realize operative goals. They include specific, day-to-day operational tasks needed to run a business and that help drive scalability and business growth.

Key organizational goals can also include employee and management performance, productivity, profitability, innovation, market share and social responsibility goals.

Examples of organizational goals

Examples of effective organizational goals may include steps taken to cut down on the time taken to improve and process online orders for customers, keeping software up to date by applying security patches when needed or improving customer service interactions by streamlining call center productivity.

For example, if a company's official goal is to increase customer satisfaction by offering multichannel customer support, such as social media, mobile, live chat and email, its operative goal will be to craft a strategy for establishing, supporting and integrating customer support channels. The organizational goal -- supported by completing successful operative goals -- will be met when the company effectively captures all business process requests in a unified, central tool to provide effective multichannel support.

Management by objectives (MBO) is a strategic management model that aims to improve the performance of an organization by clearly defining objectives that are agreed to by both management and employees. According to the theory, having a say in goal setting and action plans encourages participation and commitment among employees, as well as aligning objectives across the organization.

• Management by objectives (MBO) is a process in which a manager and an employee agree on specific performance goals and then develop a plan to reach them.
• It is designed to align objectives throughout an organization and boost employee participation and commitment.
• There are five steps: Define objectives, share them with employees, encourage employees to participate, monitor progress, and finally, evaluate performance and reward achievements.
• Critics of MBO argue that it leads to employees trying to achieve the set goals by any means necessary, often at the cost of the company.

Management by objectives (also known as management by planning) is the establishment of a management information system (MIS) to compare actual performance and achievements with the defined objectives. Practitioners claim that the major benefits of MBO are that it improves employee motivation and commitment and allows for better communication between management and employees.

However, a cited weakness of MBO is that it unduly emphasizes the setting of goals to attain objectives, rather than working on a systematic plan to do so. Critics of MBO, such as W. Edwards Deming, argue that setting particular goals like production targets leads workers to meet those targets by any means necessary, including shortcuts that result in poor quality.

In his book that coined the term, Peter Drucker set forth several principles for MBO. Objectives are laid out with the help of employees and are meant to be challenging but achievable. Employees receive daily feedback, and the focus is on rewards rather than punishment. Personal growth and development are emphasized, rather than negativity for failing to reach objectives.

MBO is not a cure-all but a tool to be utilized. It gives organizations a process, with many practitioners claiming that the success of MBO is dependent on the support from top management, clearly outlined objectives, and trained managers who can implement it.

MBO outlines five steps that organizations should use to put the management technique into practice.

1. Either determine or revise organizational objectives for the entire company. This broad overview should be derived from the firm’s mission and vision.
2. Translate the organizational objectives to employees. In 1981, George T. Doran used the acronym SMART (specific, measurable, acceptable, realistic, time-bound) to express the concept.
3. Stimulate the participation of employees in setting individual objectives. After the organization’s objectives are shared with employees from the top to the bottom, employees should be encouraged to help set their own objectives to achieve these larger organizational objectives. This gives employees greater motivation since they have greater empowerment.
4. Monitor the progress of employees. In step two, a key component of the objectives was that they are measurable for employees and managers to determine how well they are met.
5. Evaluate and reward employee progress. This step includes honest feedback on what was achieved and not achieved for each employee.

The term “management by objectives (MBO)” was first used by Peter F. Drucker in his 1954 book titled The Practice of Management.

MBO comes with many advantages and disadvantages.

• Employees take pride in their work and are assigned goals they know they can achieve that match their strengths, skills, and educational experiences.
• Assigning tailored goals brings a sense of importance to employees, boosting their output and loyalty to the company.
• Communication between management and employees is increased.
• Management can create goals that lead to the success of the company.

• As MBO is focused on goals and targets, it often ignores other parts of a company, such as the culture of conduct, a healthy work ethos, and areas for involvement and contribution.
• Strain is increased on employees to meet the goals in a specified time frame.
• Employees are encouraged to meet targets by any means necessary, meaning that shortcuts could be taken and the quality of work compromised.
• If management solely relies on MBO for all management responsibilities, it can be problematic for areas that don’t fit under MBO.

Management by objectives (MBO) uses a set of quantifiable or objective standards against which to measure the performance of a company and its employees. By comparing actual productivity to a given set of standards, managers can identify problem areas and improve efficiency. Both management and workers know and agree to these standards and their objectives.

A company can set various goals with its employees. In the case of a call center, an MBO could be to increase customer satisfaction, say, by 10%, while reducing call times by one minute. The onus is now on finding ways to achieve this goal. Once that’s decided on, it’s important to get employees on board and then monitor their progress, provide feedback, and reward those who do a good job.

As MBO is entirely focused on goals and targets, it often ignores other parts of a company, such as the corporate culture, worker conduct, a healthy work ethos, environmental issues, and areas for involvement and contribution to the community and social good.

In management by exception (MBE), management only addresses instances where objectives or standards are transgressed. Thus, workers are left alone until and unless proficiency is not met.

As a theory, MBO makes a lot of sense: Help employees to get involved in setting company goals and they are more likely to share management’s objectives, work harder, and deliver.

However, there’s also a good reason why MBO is widely criticized. Like most things that look good on paper, it doesn’t always work in practice. The key is to be aware of its drawbacks, customize the plan according to your organization, and make sure that everyone is fully on board and that the objectives are clear and reasonable before commencing.