Define organizational goals. Explain the steps involved in goal formulation process. Also explain the approaches to goal formulation.

 Organizational goals are the commitments of the organization to achieve the desired result within a specific time frame. The goal of the organization tells employees about where the organization is heading and how the organization plans to attain the desired state. 

Process of Goal Formation

Goal formulation is one of the major functions of management. It is done through the following five interrelated steps.

1. Environmental scanning: Environmental scanning is the first step of goal formulation. It is the process by which organizations monitor their relevant internal and external environment to identify strengths, weaknesses, opportunities, and threats. Environmental scanning helps identify the early signals of potential changes in the environment. It also detects the changes that are already underway. It normally reveals ambiguous, incomplete, or unconnected data and information. Hence, it involves a detailed and micro-study of the environment. Environmental scanning provides a big picture of the environment and helps to formulate realistic, ambitious and feasible organizational goals.

2. Formulation of strategic goals: In the second step of the goal formulation process, strategic goals are formulated. They are the target outcomes of an organization in the long range normally above five years. Formulation of strategic goals involves development of vision, mission, long-term goal, and strategy for the organization. They provide long-term direction to the organization and depict the desired future.

3. Formulation of tactical goals: After formulating strategic goals, tactical goals are formulated. They are short-term actionable goals. They support strategic goals and set by the middle-level management for a relatively short period of time. They are more specific and focused and expressed quantitatively.

4. Formulation of operational goals: After tactical goals are formulated, the final step of the goal formulation process involves formulating operational goals. They are set for lower-level managers. They support tactical goals. The operational goals are related to certain employees or a unit of the organization.

5. Evaluation and review of the goals: After formulating different types of goals, plans and programs are formulated and implemented to achieve them. The implementation should be evaluated to ensure they are heading towards goal achievement. Now, the managers should evaluate the goals. Finally, the goals may be modified, adjusted or changed as required.

Approaches to Goal Formulation

The approach is the way of doing things. Organizational goals may be formulated with different approaches. The approaches to goal formulation are based on the degree of employee involvement in goal formulation process. There are three basic approaches to goal formulation.

Top-down Approach

This is the most traditional approach to goal formulation. Under this, the top level management sets organizational goals. While doing this, it does not seek the involvement of the middle and lower level employees. The top level believes that it has all the information required for goal setting. However, it may take the suggestions and advices from professional and experts.  Irrespective of this, the final decision is taken by itself. Hence, this approach is not a participative way of goal formulation. Nepalese organizations tend to follow this approach widely.

The top-down approach has several advantages. 

• The top-down approach ensures that the goals of the organization are directly tied to the mission statement.

•  The goals formulated under this approach are more ambitious and challenging.

The top-down approach of goal formulation has disadvantages too. 

• The top-level management may not be so familiar with the day-to-day activities of the organization and the goals may be overly ambitious and unrealistic.

• Goals may not be flexible enough to cope with the environment. The top-down approach does not involve employee participation in the goal-setting process. Hence, this approach does not enhance employee commitment towards goal achievement.

2. Bottom-up Approach

The bottom-up approach of goal formulation begins at the lower levels of the organization. The middle and lower level managers are authorized to set their departmental and unit goals. Hence, it is a participatory approach of goal formulation.

The bottom-up approach has several advantages. 

• The goals formulated under the bottom-up approach are likely to be more realistic than those set under top-down approach. 

• The goals are more flexible and reflect the current reality of the organization. The goals created with wider participation are more likely to enhance employee commitment.

There are disadvantages of bottom up approach to goal formulation. 

• The goals may not be in line with the organization's mission.

• They may lack clear direction and focus. 

• Likewise, the goals created by lower level may not always be challenging and ambitious enough to enhance organizational competitiveness.

3. Interactive/Mixed (MBO) Approach  

The interactive/mixed or management by objective (MBO) approach of goal formulation is a process by which employees at all levels of the organization participate in formulating organizational goals. First, the top level develops a mission statement. Second, the managers at different levels and departments come together and determine the strategic goals. Third, discussions regarding the tactical goals take place by including middle and lower level managers and supervisors. Finally, employees contribute to the process by defining their own operational goals. Hence, interactive approach to goal setting involves the participation and consensus of different levels of management and employees. It promotes cooperation between management and employees.

The interactive approach of goal setting has several advantages.

•  The goals are likely to be more realistic than in the top-down approach.

•  Due to wider participation, employee commitment towards the organization increases. 

• Input from top management helps to ensure that the goals are challenging and ambitious.

The interactive approach has some disadvantages too.

• It is a time consuming approach because of the discussion and consensus of all levels. 

• It also demands active involvement of the managers in the goal setting process. If not, it can turn into a top-down or bottom-up approach with the disadvantages of both.