1. Objectives and Decision Making
Department of Business Administration
2. Chapter Outline
•Definition of objectives
•Types of business objectives
•Characteristics of business objectives
•Decision making process
•Influencing factor of decision making
•Decision support system.
3. Definition of objectives
•According to Louis Allen,“ Objectives are
goals established to guide the efforts of
the company and each of its components.“
•According to Dalton E. McFarland,
"Objectives are the goals, aims or
purposes that organization wish to achieve
over varying period of time."
4. Business objectives
•Business objectives are the goals, aims or
purpose of the business. The business
tries to achieve these goals. Profit is the
main objective of business. However, the
business cannot have only one objective.
This is because it has to satisfy different
groups such as shareholders, employees,
customers, creditors, etc. So, it has to fix
objectives for each group.
5. Types of Business Objectives
There are five types of business
1) Economic Objectives
2) Social Objectives
3) Organic Objectives
4) Human Objectives and
5) National Objectives
6. Characteristics of business objectives
1. Multiplicity of Objectives:
Business objectives are multiple in character.
That is, a business does not have only one
objective. It has many or multiple objectives.
This is because a business has to satisfy
different groups, i.e. shareholders, employees,
customers, creditors, vendors, society, etc. The
business has to fix different objectives for each
7. Characteristics of business objectives
2. Hierarchy of Objectives:
Hierarchy means to write down the
objectives according to their
importance. The most important
objective is written first, and the least
important objective is written last. All
objectives are important. However,
some objectives are more important
than others. Some objectives need
immediate action while others can be
kept aside for some time.
8. Characteristics of business
3. Periodicity of Objectives:
Based on period, business objectives can be
classified into two types: Short-term objectives,
and Long-term objectives. The short-term
objectives are made for a short-period, i.e.
maximum one year. Short-term objectives are
more specific. The long-term objectives are
made for a long-period, i.e. for five years or
more. Long-term objectives are more general.
They are like a Master Plan.
9. Characteristics of business objectives
4. Flexibility of Objectives:
The business is flexible. Therefore, the
business objectives must also be flexible. If
the objectives are rigid, the business will
not survive. This is because the business
environment keeps on changing. There are
continuous changes in the technical, social,
economic and political environment. The
business has to change its objectives
according to the changes in the business
environment. The hierarchy of objectives
must also be changed from time to time.
10. Characteristics of business objectives
5. Qualitative and Quantitative Objectives:
There are two types of objectives: Quantitative and
Qualitative objectives. Quantitative objectives are
easy to measure. It is expressed in numbers. For
e.g. in Dollars, Rupees, Percentage, etc.
Quantitative objectives are visible, tangible and
countable. Qualitative objectives are not easy to
measure. It is not expressed in numbers. For e.g.
Employee performance, employee satisfaction, etc.
These objectives cannot be measured. Qualitative
objectives are invisible, intangible and uncountable.
Today modern methods are used to measure
qualitative objectives. A business must have both
quantitative and qualitative objectives.
11. Characteristics of business objectives
6. Measurability of Objectives:
The objectives must be clear and specific. It must be
easy to measure. For e.g. Each salesman must sell 100
units of water purifier per month. This is a clear and
specific objective. It is easy to measure the
performance of the salesman. If a salesman sells 200
units of water purifier in a month then his performance
is good. He can be given bonus and promotion.
However, if a salesman sells only 10 units of water
purifier in a month then his performance is bad. He
needs more training. Measurable objectives motivate
the employees to work hard. This is because they know
their target clearly. Their performance can also be
12. Characteristics of business objectives
7. Network of Objectives:
Network means an interconnection between
different objectives. A business has many
different objectives, viz., corporate objectives,
departmental objectives, sectional objectives
and individual objectives. It also has objectives
for shareholders, customers, employees, etc.
All these objectives must be interconnected.
They must support each other. They must not
clash with each other. They must move in the
same direction. If not, the business will not
13. Management by Objectives
•Management by objectives is the process of defining
specific objectives within an organization that
management can convey to organization members, then
deciding on how to achieve each objective in sequence.
•This process allows managers to take work that needs to be
done one step at a time to allow for a calm, yet productive
• This process also helps organization members to see their
accomplishments as they achieve each objective, which
reinforces a positive work environment and a sense of
• An important part of MBO is the measurement and
comparison of an employee’s actual performance with the
15. Stages of MBO
The 6 steps of the MBO process are:
•Define organizational goals
•Define employees objectives
•Continuous monitoring performance and
16. Stages of MBO
1. Define Organizational Goals:
•Goals are critical issues to organizational
effectiveness, and they serve a number of purposes.
Organizations can also have several different kinds
of goals, all of which must be appropriately
•The goals set by the superiors are preliminary,
based on an analysis and judgment as to what can
and what should be accomplished by the
organization within a certain period.
17. Stages of MBO
2. Define Employees Objectives:
•After making sure that employees’ managers have
informed of pertinent general objectives, strategies and
planning premises, the manager can then proceed to
work with employees in setting their objectives.
•The manager asks what goals the employees believe
they can accomplish in what time period, and with
what resources. They will then discuss some
preliminary thoughts about what goals seem feasible
for the company or department.
18. Stages of MBO
3. Continuous Monitoring Performance and Progress:
For monitoring performance and progress the
followings are required;
•Identifying ineffective programs by comparing
performance with pre-established objectives,
•Using zero-based budgeting,
•Applying MBO concepts for measuring
individual and plans,
•Preparing long and short-range objectives and
•Installing effective controls, and
•Designing a sound organizational structure with
clear, responsibilities and decision-making
authority at the appropriate level.
19. Stages of MBO
4. Performance Evaluation:
• Under this MBO process performance review are made by the
participation of the concerned managers.
5. Providing Feedback:
• The filial ingredients in an MBO program are continuous feedback
on performance and goals that allow individuals to monitor and
correct their own actions.
• This continuous feedback is supplemented by periodic formal
appraisal meetings which superiors and subordinates can review
progress toward goals, which lead to further feedback.
20. Stages of MBO
6. Performance Appraisal:
Performance appraisals are a regular review
of employee performance within
organizations. It is done at the last stage of
the MBO process.
21. Steps of the decision making process
The following are the seven key steps of the decision
•Identify the decision: The first step in making the right
decision is recognizing the problem or opportunity and
deciding to address it. Determine why this decision will
make a difference to your customers or fellow employees.
•Gather information: This requires making a value
judgment, determining what information is relevant to the
decision at hand, along with how you can get it. Ask
yourself what you need to know in order to make the right
decision, then actively seek out anyone who needs to be
22. Steps of the Decision Making Process
•Identify alternatives: It’s likely that you have many
different options when it comes to making your
decision, so it is important to come up with a range of
options. This helps you determine which course of
action is the best way to achieve your objective.
•Weigh the evidence: In this step, you’ll need to
“evaluate for feasibility, acceptability and
desirability” to know which alternative is best,
according to management experts Phil Higson and
Anthony Sturgess. Managers need to be able to weigh
pros and cons, then select the option that has the highest
chances of success. It may be helpful to seek out a
trusted second opinion to gain a new perspective on the
issue at hand.
23. Steps of the Decision Making Process
• Choose among alternatives: When it’s time to make your decision, be sure that
you understand the risks involved with your chosen route. You may also choose a
combination of alternatives now that you fully grasp all relevant information and
• Take action: Next, you’ll need to create a plan for implementation. This involves
identifying what resources are required and gaining support from employees and
stakeholders. Getting others onboard with your decision is a key component of
executing your plan effectively, so be prepared to address any questions or
concerns that may arise.
• Review your decision: An often-overlooked but important step in the decision
making process is evaluating your decision for effectiveness. Ask yourself what
you did well and what can be improved next time.
24. Factors that Influence Decision Making
• Past experiences can impact future decision making. It stands to
reason that when something positive results from a decision, people
are more likely to decide in a similar way, given a similar situation.
On the other hand, people tend to avoid repeating past mistakes
.This is significant to the extent that future decisions made based
on past experiences are not necessarily the best decisions.
• In decision making, cognitive biases influence people by causing
them to over rely or lend more credence to expected observations
and previous knowledge, while dismissing information or
observations that are perceived as uncertain, without looking at the
bigger picture. While this influence may lead to poor decisions
sometimes, the cognitive biases enable individuals to make
efficient decisions with assistance of heuristics.
25. Factors that Influence Decision Making
•In addition to past experiences and cognitive biases,
decision making may be influenced by an escalation of
commitment and sunk outcomes, which are unrecoverable
•Some individual differences may also influence decision
making. Research has indicated that age, socioeconomic
status (SES), and cognitive abilities influences decision
making. In addition, older people may be more
overconfident regarding their ability to make decisions,
which inhibits their ability to apply strategies Finally,
with respect to age, there is evidence to support the notion
that older adults prefer fewer choices than younger adults
26. Decision Support System
•A Decision Support System (DSS) is an information
system that supports business or organizational decision-
• DSS’s serve the management, operations and planning
levels of an organization (usually mid and higher
management) and help people make decisions about
problems that may be rapidly changing and not easily
specified in advance—i.e. unstructured and semi-
structured decision problems. Decision support systems
can be either fully computerized or human-powered, or a
combination of both.