why does a business need to set aims and objectives

Aims and objectives are the 'ends' that an organisation seeks to achieve. It then has to decide the means it will use to achieve those ends, draw up a plan and devise a strategy. Most organisations have general or overall aims which they can break down into specific objectives, or targets. By setting aims and objectives, companies give themselves a sense of purpose and direction. This provides a framework around which to create their plans. With an overall plan in place, a company can set particular targets and monitor its progress towards reaching them. Targets can vary from a sales target and/or a profits target to a zero-accident target. Having a sense of direction and a coherent, overall plan is particularly important to a global organisation like Michelin, which produces many different product lines worldwide. One major challenge is to communicate the plan clearly to everyone in a form that they can understand and put into practice. In 2002, the Michelin Group, at the initiative of its Managing Partners, Edouard Michelin and Ren Zingraff, launched the 'Michelin Performance and Responsibility' approach. Based on the Group's traditional five values, it established a formal framework for the Group's day-to-day activities and responsibilities in all areas: economic, social, environmental and ethical.


Many large organisations set out their overall purpose in the form of a mission statement. Michelin's mission is '
to make a sustainable contribution to progress in the mobility of people and goods by constantly enhancing freedom of movement, safety, efficiency and pleasure when on the move. alongside its core activities, development of new technologies or products to support sustainable mobility delivering appropriate messages to its customers, enabling them to adopt sound purchasing behaviours and positive attitudes towards road safety and environmental issues. Any organisation must be based on a sound economic footing in order to achieve its mission. As such, Michelin intends to remain the world No. 1 in tyres and mobility assistance, and to perform well over the long-term. Having overall aims brings a sense of direction to everything Michelin does. These are then translated into particular objectives and targets for various areas: markets and customers: sales growth, market shares, product reliability, delivery employees: safety at work, training, diversity economic performance: operating margin, free cash flow, return on assets, level of investments environmental policy: end-of-life tyre recovery, number of sites with a certified environmental management system production: manufacturing cost per tyre, production capacities, flexibility.


Wherever possible, Michelin expresses its particular objectives or targets in a form that can be easily measured and monitored - that usually means using numbers. For example some of its economic objectives are to achieve: an economic performance well above the cost of capital employed. Michelin intends to achieve these mainly by growing faster than the market in the attractive segments that it has chosen, developing its positions in high-potential regions, reducing overheads and increasing flexibility and productivity. If you don't know where you're going, how will you get there? The first question a small business owner should ask himself is: "What is my vision for the company? " How many employees will it have? How much profit should the business make?


How much does it need to sell to make those profits? The answers to all of these questions become the goals of a business. These goals are the pillars of what a business owner wants his company to look like. They are his long-terms visions. The challenge is how to convert these dream-like visions into realities. That's where the objectives come in. Quite often, long-term goals become useless blather in the minds of employees about the direction of the company. They are discussed maybe once each year at the annual company dinner. But these goals don't have teeth, and they don't say anything about how they would be accomplished. An owner says he wants to increase profits and share more of the company's wealth with the employees. Great idea! But what, specifically, must employees do to make that happen? Answer: The owner must construct objectives and share them with the employees. Objectives are guideposts with specific action-steps on the roadmap to achieving the long-term goals of the owner. They lay out the specifics and tell each employee what his/her responsibility is in achieving the company's ultimate goals.


Effective objectives that help everyone achieve a company's goals follow the SMART Specific : Objectives assign direct responsibility and are clear. Measurable: The progress while working on the objectives must be measurable. There must be regular reporting to management and employees about where they stand in their progress toward achieving the objectives Attainable: Employees must believe they can accomplish the objectives; otherwise, they will not even try. Relevant: Objectives must align with the goals of the company. Each objective should be a piece of the puzzle that makes up the steps of the company's direction. Timely: Objectives must have a time limit. Without a time constraint, employees will relax their efforts and not work on their responsibilities with any sense of urgency. Goals describe where the owner wants the company to go; objectives define how to get there. Businesses that do not identify their long-term goals and do not create working objectives, will grow and develop more slowly than other companies, if they grow at all. Objectives are important to communicate and assign responsibilities of performance to employees.

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