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Goal Formulation and Changing Goals

management, business, business goals, administration, leading, directing, staffing, planning, organizing

The formulation of goals and their change over time involve complex issues. Since, in the goal approach, effectiveness is a function of the degree to which goals are met, the matter of how goals get established in the first place is important. Goal formulation is determined by factors that are both inside and outside the organization.

Internal factors

Organizations are coalitions of groups and individuals who have diverse needs and desires. Within an organization, these coalitions bargain continuously, using side payments to induce others to join them in attaining their goals. These side payments can take many forms, such as money, status, power, or authority. In this view, conflicts among coalition members are settled through side payments as well; for a price, an individual or group adopts a goal. Thus, for money employees produce products, and for status they take on jobs that may not be entirely to their liking. The more power a coalition or an individual has, the larger the number of side payment available for use in cementing its position of dominance.

Goals are also influenced by prior commitments such as agreements that members of organizations make with one another or policies that are established and internalized. Such commitments include a wide range of past decisions or obligations and may embrace such issues as growth, minority hiring policies, research priorities, market selection, dividend policy, and other issues. These commitments directly affect future allocation decisions and may constrain future behavior, limiting major changes that an organization may make in its goals, because these commitments limit the organization’s resources. As an example, if a company commits resources to a new product line, fewer resources are available for expanding markets in older lines.

Goals are also shaped by previous experience. For example, an organization may have had bad experiences in a market and be unwilling in the future to enter that market.

External factors

Factors outside an organization also have the potential to influence the organization’s goals. One can view goal formulation primarily as a process in which managers attempt to maintain a favorable balance of power between the organization and its environment. The amount of power organizations have over their environments determines how they deal with those environments. Large multinationals typically have considerable power over their environment and can frequently dictate their own activities to those environments. Grassroots groups of any sort typically have little such power and must cooperate with their environments or use ingenious methods of exerting pressure on those environments.

Organizational power can be seen as situated in a continuum. Where an organization sits on that continuum suggests the appropriate strategy for dealing with the environment. The optimum strategy is competition with elements in the environment. An organization in a position to employ this strategy has considerable power to determine its own goals and pursue them with little concern for other factors. Hospitals, which compete with midwives, quacks, faith healers, and patent medicine manufacturers, are in a state of competition. As the health care industry has changed, with the addition of HMOs and emergency clinics, hospitals are meeting even more challenges in their environments.

As environmental forces come to have increasing power, one of three more cooperative strategies is called for. The first such cooperate mode is bargaining, in which organizations and environments engage in exchange relationships. Lobbying is an example of bargaining. Sometimes this approach can cross the line of ethical behavior, with disastrous results for both participants.

As the proportion of organizational to environment power decreases, cooptation is the appropriate strategy. In this approach, the organization absorbs environmental elements into itself in order to maintain stability. Firms in the military – industrial complex, for instance, often hire former officials of military agencies in an attempt to secure inroads into decision making.

The other strategy, employed when organizational power is at its weakest compared to the environment, is coalition. In this strategy, the organization is forced to join another organization for a common purpose. The auto industry is rife with joint ventures and combinations reflecting this strategy – combinations by General Motors and Toyota and by Chrysler and Mitsubishi are two obvious examples. The combination of federal Express and Flying Tigers, creating the first air freight company with truly international reach, is another example.

It is essential that organizations read their environments and select the appropriate strategy. History is filled with examples of organizations unable to do so or in other words, of failed organizations. The Johnson administration was forced out of power by President Johnson’s misreading of the country’s position on the Vietnam War. The air traffic controllers were fired when they misread President Reagan’s position and persisted in their strike. AT&T misread how the courts would interpret the pleas of its competitors and was ultimately broken up in the largest corporate breakup in modern times.
Published: 2007-04-14
Author: Martin Hahn

About the author or the publisher
Martin Hahn PhD has received his education and degrees in Europe in organizational/industrial sociology. He grew up in South-East Asia and moved to Europe to get his tertiary education and gain experience in the fields of scientific research, radio journalism, and management consulting.

After living in Europe for 12 years, he moved to South-East again and has worked for the last 12 years as a management consultant, university lecturer, corporate trainer, and international school administrator

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