Long Term Objectives

Long-term objectives are specific results that an organization seeks to achieve in pursuing its mission. These objectives typically cover a time frame of more than one year, usually between two to five years, and are essential for organizational success.

Key Characteristics:

Long-term objectives are commonly stated in terms such as:

• Growth in assets
• Growth in sales
• Profitability
• Market share
• Degree and nature of diversification
• Degree and nature of vertical integration
• Earnings per share
• Social responsibility

Each objective should also be associated with a clear timeline.

Benefits of Long-Term Objectives

Clearly established objectives offer numerous benefits:

• Provide direction: Help the organization stay focused on its mission.
• Allow synergy: Create alignment among departments and teams.
• Assist in evaluation: Facilitate performance tracking and assessment.
• Establish priorities: Help in determining which tasks are most critical.
• Reduce uncertainty: Offer clarity to stakeholders about future plans.
• Minimize conflicts: Clarify roles and expectations, reducing misunderstandings.
• Aid in allocation of resources: Help in distributing resources efficiently.
• Aid in job design: Assist in structuring roles and responsibilities.

Types of Objectives

Organizations generally focus on two types of objectives:

1. Financial objectives
2. Strategic objectives

Financial Objectives

Financial objectives are related to measurable financial outcomes such as:

• Growth in revenues
• Growth in earnings
• Higher dividends
• Larger profit margins
• Greater return on investment
• Higher earnings per share
• Rising stock price
• Improved cash flow

Strategic Objectives

Strategic objectives focus on the long-term competitive position of the organization, including:

• Larger market share
• Quicker on-time delivery compared to rivals
• Shorter design-to-market time than competitors
• Lower costs than rivals
• Higher product quality
• Wider geographic coverage
• Technological leadership
• Consistently introducing new or improved products ahead of competitors

Financial vs Strategic Objectives

Often, there is a trade-off between financial and strategic objectives. For example, increasing prices might boost short-term financial gains but harm long-term strategic goals like market share growth.

The best way to sustain competitive advantage over the long term is by pursuing strategic objectives that strengthen a firm’s market position. Financial objectives can best be met by focusing on achieving strategic goals that enhance competitiveness.

Balanced Scorecard

The Balanced Scorecard is a strategic evaluation and control technique developed in 1993 by Harvard professors Robert Kaplan and David Norton. It helps organizations balance financial measures with non-financial strategic measures like product quality and customer service.

An effective Balanced Scorecard includes a combination of strategic and financial objectives tailored to the company’s business needs.

Key Elements of a Balanced Scorecard:

• Establish objectives beyond financial measures. Financial measures are crucial, but non-financial factors like:
  • Customer service
  • Employee morale
  • Product quality
  • Social responsibility
  • Community involvement
  • Business ethics
  • Pollution abatement are equally important.

The overall aim of the Balanced Scorecard is to balance shareholder objectives with customer and operational objectives. For example, customers may demand low prices and high service, which might conflict with shareholders’ desire for high returns on investment.

The concept aligns with the principles of Continuous Improvement in Management (CIM) and Total Quality Management (TQM).