What are organizational goals? What steps are followed in the goal formulation process? Explain in brief./ Explain the goal formulation process

According to 

"Etzioni: "Organizational goal is a desired state of affairs that organizations attempt to realize. Ivancevich, 

Donnelly, and Gibson: "Organizational goals are the broad aims which serve as guides for action and as the starting point for more specific and detailed operating objectives at the lower levels of the organization."

Parrow: "Organizational goal is a useful frame of reference for an organization to conduct its affairs."

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. 

Concept of Goal Formulation

The goal is the desired future outcome of an organization. Goal formulation is one of the important functions of management. It involves analysis of the internal and external environment. There are different approaches to goal formulation. Goals are formulated for different levels of an organization and for different time periods. Goal formulation is an important, purposive and complex task of an organization.

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.

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GOALS FORMATION PROCESS

Organizational goals should be formulated carefully. Goals should be specific, measurable, acceptable and attainable, realistic, and time based. Goal formulation is a complex and unique process in an organization. Only the effective goals can be attained within a time frame as specified. Goals provide direction for efforts of organization and encourage employees and managers to pay efforts. Goals are the basis of organizational existence. Therefore, organizations should give proper emphasis while formulating them to make effective. The process of goal formulation differs organization to organization. It depends on size and nature of organization, attitude of top management, efficiency of managers and participative culture. The most common goal formulation process of business organizations consists of following steps:

1. Environmental Scanning: Environmental scanning is the first step in goal setting process. In this step, organizations analyze internal and external environmental factors which directly or indirectly influence organizational activities. External environment of the business provides threats and opportunities to the organization. Likewise, internal environment provides strengths and weaknesses. By using organizational strengths, organizations grab the opportunity which is the basic foundation for attainment of goals. Thus, before formulating goals, managers should gather basic information to study the impact of external environmental factors. Organizations must estimate strength and weakness of organization to overcome organizational challenges to attain opportunities. In the environmental scanning process, external factors like political-legal, economic, socio-cultural, technological and global environmental forces are analyzed. In this process, current status of these factors, rate of change in such factors and chances of changes are analyzed sincerely. For this, different computer based programs and techniques can be used. Expert opinion and suggestions are required to make analysis. Similarly, managers should analyze internal factors like technology, human resources, capital, organizational culture, etc. to identify strengths and weaknesses.

2.Formation of overall goals: After analyzing the environmental factors, top level management determines the overall goals like mission goals and strategic goals. Such goals determine the key areas of business. Overall goals provide the reason of organizational existence i.e. main cause of organizational establishment. Such goals should be measurable and clear. Overall goals are long term goals of organization. Overall goals are formulated by top level management on the basis of information obtained from environmental scanning. Middle level managers are participated in formulating the overall goals. Departmental and operational goals are formulated on the basis of overall goals. Following goals are common overall goals formulated by organizations:

• A business organization can formulate goal of making fifty percent profit on capital investment in five years.
• A telecommunication organization can set goal of being number one service provider in nation within three years.
• A manufacturing company can formulate goal of being market leader within ten years of time. 

3. Formation of specific goals: After setting overall goals, organizations formulate specific goals for departments, divisions, sections and individual. Organizations prepare a hierarchy of goals according to levels of organization. Tactical goals are prepared for middle level managers and departments. Similarly, operational goals are formulated for divisions and sections. Specific performance goals are formulated to handle daily activities for operating level managers.

a) Departmental goals: As you know, different departments perform separate functions. Thus, according to their functional area, departments formulate departmental goals. Departmental goals are set on the basis of overall goal and in coordination with other departments. Departmental goals are intermediate term goals.

b)  Individual goals: Each department assists to formulate goals for each division, sections and individual involved in those sections. Such goals are prepared to facilitate the departmental goals. Normally, individual goals are short term goals. It is important to formulate individual goal in association and coordination of each individual involved within and in different production units.

Followings are some examples of specific goals:

• Account department formulates goal of reducing account receivable and payable within two years as departmental goal.
• Production department formulates goal of increasing production capacity by five hundred each day within two years.
• Human resource department formulates goal of providing training to all employees within two years.