Corporate objectives are fundamental to performance enhancing strategic planning. You find them by asking the most important question: what is your organization really for? The answer to this question will guide everything else in the strategic planning process.
A corporate strategic plan is the one right at the top of any organization's set of plans. It precedes and guides the business plans, the operational and project plans, the budgets and cash flow plans, human resources plans, and so on.
It is essential to clarify, agree, and write down the organization's long-range corporate objectives early in the formal systematic strategic planning process.
Do this by asking 'What is Your Organization Really For?'
Another way to set people in your planning team more clearly about this is to ask the question: 'What is the organization trying to do for whom?'
If you don't know where you are going, any road will get you there." Lewis Carroll.
Clear agreement about the purpose of the organisation can guide everything else in the strategic planning process. Each stage of the strategic planning process is governed by reference to the corporate objectives that express the statement of purpose.
Specification of these corporate aims or corporate objectives should be done before the generation of strategic options which, in turn, should be completed before the evaluation of possible strategic choices. The last stage of the strategic planning process is monitoring achievement of the results related to these objectives.
The various kinds of statements of intent produced through a strategic planning process can be confusing. They may be called aims, goals, mission, strategic intent, strategic objectives and many other things, as well as corporate objectives.
Often strategic planning processes begin by attempting to prepare mission statements. These statements are often used in at least two different senses.
Firstly they sometimes may embody the fundamental purpose of the organisation. Even when these are regarded as stating the most fundamental corporate objectives, goals, aims, they rarely address the most fundamental issue of what the organisation is trying to do for whom. So we recommend that you use a statement of purpose, rather than a mission statement, as the starting point for your strategic planning.
Secondly they more often are used as an inspirational summary of the current strategic intentions of the organisation. In this way mission statements may have a role in communicating strategic intent to various audiences. For this purpose mission statements should be prepared near the end of the strategic planning process, not at the beginning as is common practice. That is putting the strategic cart before the horse of a motivating purpose. For more on this download this article, right-click to download Putting the Horse Back in Front!.
Mission statements are often accompanied by so called vision statements. This practice of using these two statements may or may not be helpful in some organizations. In my experience it seems to result in some confusion for members of the organization.
After preparing for planning and arranging to involve the correct people, the formal strategic planning process should start with the identification of the ultimate strategic intent of the organization. Too often, companies confuse their corporate aims or objectives, which is what they want and by when, with their strategies, which is how they will achieve the objectives.
As I see it, the corporate purpose, as embodied in a statement of purpose, is the raison d'être of the whole organization. It is the ultimate aim, or the statement of strategic intent that trumps all others. It is determined by or for the people for whose benefit the organization exists. Who these Intended Beneficiaries are will vary according to the type of organization.
For example in the case of a commercial business the Intended Beneficiaries are the owners or shareholders. Knowing this it is possible to define a business mission in terms of shareholders benefits, often in terms of economic value added. This will involve measuring the overall performance of the business in terms that enable shareholders, or their representatives, to judge whether or not the benefit per shareholder is satisfactory, or alternatively is pointing to possible loss of shareholder confidence. Not for profit organizations are different.
Non-profit organizations pose some special issues regarding purpose.
In the case of non-profit organizations, the purpose could be to benefit students in a school, patients of a hospital, children for a child protection agency, or whoever is the clearly defined group for whose benefit the organization was founded.
Deciding the overall "performance metrics" is a vital component in having a strategic planning system that works. We must be able to measure performance in terms that make sense to the intended beneficiaries. The field of value based management addresses this area and the effective deployment of strategies to deliver the desired results.
When appropriate performance metrics have been defined in terms of measuring the benefit to the intended beneficiaries of the organisation's endeavours, then it is possible to set a corporate target for this performance. When we have a clear corporate target, and we have reviewed past performance, we can forecast possible future performance.
Before looking at possible ways to achieve the targets, we need an estimate of the size of the task. This assessment is called gap analysis. The strategic task is to close the gap between forecast performance using current strategies, and the agreed range of targets for desired future performance.
When finally strategies are selected they need to be turned into specific accountabilities for individuals. This is when a SMART goal setting process will be useful.
For most companies there should be little difficulty in agreeing that their real purpose, or governing corporate objective, is to generate a return on shareholders' capital. This is of course subject to a vital constraint.
Organizations are constrained in the manner they discharge the obligations imposed upon them by society. It should also be constrained by its own sense of responsibility towards those likely to be affected by its activities.
In terms of business ethics, it would be quite wrong for any benefit to accrue to any shareholders, who are or should be in the position of residual legatees, unless and until all these obligations had been discharged. Many companies today take special care to define their obligations and attitudes to their employees, and other important interest groups.
However, it is important not become confused between this ethical responsibility and most versions of the stakeholder theory which put the organization in the almost impossible position of being an arbitrator in a political power struggle among all the various 'stakeholder' groups. We will cover this more fully in corporate social responsibility.
Of course, although most nonprofit organizations may be engaged in worthwhile activities that contribute to the welfare of the communities they operate in; it cannot be assumed they will always behave as well as they should toward interest groups other than their intended beneficiaries. So just like companies they must make explicit provision for not harming any such interest groups.
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Andrew Keay, Professor of Corporate and Commercial Law, Centre for Business Law and Practice, University of Leeds, UK., has addressed the issue of the shortcomings of current shareholder value maximization versus stakeholder theory in his book, The Corporate Objective.
His work is based on the idea that properly clarifying the objective of the business enterprise is a matter of great importance, not only to the individual company, but is also of great political, economic and social significance.
Professor Keay tries to resolve the unhelpful extremes involved in much of the current discussion of the purpose of the business firm. This we may shorthand by the description shareholder/stakeholder debate.
Rather than relying on either of the dominant theories, Keay advocates what he calls the entity maximization and sustainability theory. This focuses on the company as a separate legal entity and maintains that the objective of the company is to maximize the wealth of the entity as an entity and, at the same time, to ensure that the company is sustained financially. This view sees directors having a responsibility to enhance the long term market valuation for the business as a corporate whole, with due allowance for returns to investors. But it argues that this value maximizing must be within a framework of long term enterprise survival and development. The theory aims to value the groups who contribute to the business, and maintains that they should enjoy benefits in relation to their investment or contribution.