Objectives can be compared to a compass bearing by which a ship navigates. A compass bearing is firm, but in actual navigation, a ship may veer off its course for many miles. Without a compass bearing, a ship would neither find its port nor be able to estimate the time required to get there."
-Peter Drucker
Operational objectives are highly significant for a company as it provides them with a strategic direction. What are the different types of operational objectives? How do companies benefit from them? What are the factors that influence the operational objectives and decisions? Let's find out.
Operational objectives definition
Operational objectives are specific, measurable targets that a business sets for its day-to-day operations. These objectives are typically focused on improving efficiency, productivity, and quality in order to achieve the company's overall goals.
Imagine a small bakery that sells cakes and pastries to customers in its local community. In order to stay competitive and profitable, the bakery needs to ensure that its operations are running smoothly and efficiently on a day-to-day basis. This might involve setting operational objectives such as reducing waste, improving quality control, and streamlining the production process. By focusing on these objectives, the bakery can produce high-quality baked goods at a lower cost, which in turn can help attract and retain customers, increase profits, and expand the business over time.
Operational objectives are defined as achievable, action-oriented, and short-run goals that a business sets for itself and achieves in order to accomplish its long-run objectives. They generally include explicit daily, weekly, or even monthly duties, which, if performed together, will contribute to a successful and all-encompassing goal.
Types of operational objectives
There are several different types of operational objectives that businesses may set, including:
- Cost objectives: focused on reducing the costs of production, distribution, and other operational expenses. This can be achieved through measures such as improving efficiency, reducing waste, and negotiating better deals with suppliers.
- Quality objectives: focused on improving the quality of a company's products or services. This can be achieved through measures such as implementing quality control processes, conducting regular inspections, and gathering customer feedback.
- Speed objectives (or swiftness of response): focused on improving the speed and responsiveness of a company's operations. This can be achieved through measures such as reducing lead times, improving communication and coordination between departments, and investing in faster technology.
- Dependability objectives: aiming at improving the reliability and consistency of a company's operations. This can be achieved through measures such as implementing backup systems, maintaining equipment and facilities, and ensuring adequate staffing levels.
- Flexibility objectives: seeking to improve the ability of a company to adapt to changing circumstances. This can be achieved through measures such as cross-training employees, diversifying product lines, and implementing flexible work arrangements.
- Environmental objectives focus on reducing the impact of the business on the environment through reducing carbon footprint or using recycled resources.
Let's study these objectives in more detail!
Cost objectives
It is essential that the business makes sure that the operations are cost-effective. The usual measure of cost efficiency is the unit cost (i.e., the average cost incurred to produce a unit of a product). Companies operating in a similar industry will have the same cost structures, however, they will differ depending on the productivity, competence, and level of production. The company which has the lowest cost of producing a product will have a stronger position in comparison to its rivals by offering lower prices, or by making greater profit margins at average market price. Generally used cost targets for organisations involve:
Diminishing unit costs: This is the main cost target. Reducing unit costs allows the organisation to reduce prices or increase profit margins by maintaining the prices at the same level. Decreasing unit costs can be obtained in two ways:
- Lowering fixed costs: This permits a precise focus and is usually controllable
- Lowering variable costs per unit: Organisations try to find inexpensive suppliers or inexpensive methods for manufacturing. By slashing labour and raw material costs, organisations can lower their variable costs per unit. One way to target this is to improve labour productivity as this would reduce wages per unit.
Quality objectives
Operational goals concerning cost and quantity targets emphasize productivity and effectiveness, the unit cost of each product, number of products to be produced per time period or for each machine, greater sales and satisfied customers, etc. some of the quality objectives are as follows:
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