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Operational Objectives

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Operational Objectives

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.

Types of operational objectives

Operational objectives are achievable, action-oriented, and short-run objectives that an organisation 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 be contributing to a successful and all-encompassing goal.

These objectives facilitate in determining the choice of strategy and investments. Operational objectives vary from strategic objectives and concentrate more on ‘how’ instead of ‘what’.

Some of the main objectives are listed below:

Costs

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:

  1. Lowering fixed costs: This permits a precise focus and is usually controllable
  2. 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

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:

  • Satisfaction rating of customers: A survey can disclose the opinions of the customers on a statistical scale. Since the main purpose of any product is the satisfaction of needs of customers, this is a good way to measure if the quality was achieved/not.
  • Customer complaints: This will estimate the number of customers who have complaints. It is an excellent way to measure if the organisation has issues that need rectification. It is recognized that a single unhappy customer can affect the reputation of the organisation a lot more than a huge number of satisfied customers can increase it, therefore, it is essential to prevent customer complaints.
  • Level of product returns: If the number of returned products is getting high, it means that the customers are not satisfied with the product. This goal can set a target based on the prior data of returns.

Swiftness of response

Speed of response is generally estimated by the time between a customer making the request for the product and the time they actually receive it. But it can be utilized to measure certain activities such as the time taken to respond to an email. The rapid response will result in customer satisfaction and can assist in building customer loyalty.

Flexibility

Flexibility can be of various forms such as:
  • The flexibility of the product: capability of switching production from one product to the otherFlexibility in Volume: capability of changing the level of output of any product according to fluctuation in the demand of customers.

  • Mixed flexibility: the capability to offer a variety of alternate versions.

  • The flexibility of delivery: capability to adjust rapidly to fluctuations in timings and size of delivers to customersEach form of flexibility allows the organisation to adjust to changes in customer needs. This will result in increased sales and reduced costs.

Dependability

Similar to quality and flexibility, dependability can take various forms such as:

  • Dependability for any service can be related to consistent quality or the timeliness of delivery.

  • Dependability for any product can be related to product durability, longevity, and reliability.

  • If an organisation is not able to offer its services on time, then it is highly likely to lose its customers.

Environmental objectives

Nowadays environmental goals are increasingly becoming significant for operations management for various reasons:

  • Organisations have recognised their responsibility towards the environment.

  • An organisation can entice more customers if they present a more positive approach towards the improvement of the environment.

  • Several environmental goals, for instance, recycling will help in saving costs.

Added value

Adding value is the process of increasing the worth of resources.

The production process is the main factor to create added value. For instance, the conversion of different components into a T.V. adds value, as people place a greater value on the TV than its components. Likewise, distribution and retailing add value, by making the product more accessible to the customers. In addition, marketing adds value as well with the creation of USPs.

Examples of operational objectives

In any business comprehending the operational objectives is essential to enhance the overall facility. Here are some of the examples of operational objectives:

One of the very general operational objectives for any organisation is to survive. This is especially the foremost priority of new businesses, since they may be facing numerous issues like negative cash flows and extreme competition.

An operational objective to lower labour costs is to enhance scheduling and planning in the operation. This will help in decreasing labour costs by preventing overtime, lowering the use of very costly contract labour, lowering turnover, and evading the need for an additional shift.

Another typical operational objective is to boost sales revenue. This is highly significant for all organisations since it is in direct relation to its survival. Nonetheless, organisations with a high sales revenue might find it hard to survive considering that it is not profitable.

Value of setting operational objectives

Operational performance objectives are operational goals that businesses attempt to achieve in order to accomplish their corporate strategy.­

Once the corporate strategy is defined, a company will classify the applicable performance goals for measuring and configuring the environment so that strategic objectives can be achieved. It is essential to understand and plan the operational objectives to come closer to the visioned strategic goal.

By setting the company’s operational objectives especially, they will deliver guidance and direction to the workforce. They seem to be specific as well as measurable, with the aim of facilitating the company to reach its long-term goals. It will also help in lowering costs and improving budgets. The purpose of setting objectives is:

  • To act as a centre for decision making

  • To provide a gauge with which success or failure can be measured

  • To enhance synchronization by working towards the same objective

  • To enhance efficiency as the reasons for success and failure can be assessed.

Benefits of setting operational objectives

  • Enhancing quality as they aid to increase sales, boost a brand, and lower returns.

  • Better scheduling, new machinery, and employee training are operational goals that boost productivity and lower costs

  • There is nothing better than a greatly satisfied customer, operational objectives exactly ensure this combined with a quality product.

  • With increased productivity, quality products, and satisfied customers, the cost that the company incurs on servicing the product is greatly decreased. This will eventually increase revenues.

  • With decreasing operational cost, there is also a cut of waste as a precise number of products are produced through appropriate operations management.

Internal and external influences on operational objectives and decisions

It is important for businesses to evaluate both internal and external influences.

Evaluating internal influences

Internal factors are those that are inside the organisation, for instance, workforce, finances, and resources.

  • Corporate objectives: The operations department should make sure that its goals and decisions are coherent with the corporate objectives of the organisation.

  • Finance: Operations management goals and decisions depend on substantial spending on capital equipment, Research and development, and enough finance for the implementation of decisions.

  • Human resource: The skills, training, and determination of an organisation will have a key influence on operational goals and decisions. If there are weaknesses in HR, then fewer aspiring goals should be set.

  • Availability of resources: If the organisation has sufficient resources with equipment and popular brands, then it becomes easy to produce cost-effective high-quality products.

Evaluating external influence

External factors are from outside the organisation, for instance, economic situation or the actions of rivals.

  • Market factors: If there is a change in demand, the organisation will have to adapt its production levels. If there is a decline in sales, it will have to introduce new products.

  • Rival’s actions: If a rival has introduced a successful new product, then the organisation will have to launch its own new product.

  • Technological change: Technology can influence the cost of an organisation, the quality of its products, and productivity. These factors are essential performance goals for operations management; hence, technology becomes a significant factor for several organisations when setting their operational objectives.

  • Legal factors: Due to the possible health and safety risks, the operations management is strictly regulated by legislation.

Setting Operational Objectives - Key takeaways

  • Operational objectives are short-term goals and with their accomplishment, a business becomes closer to its long-term goals.

  • Operational objectives define the task that needs to be accomplished in order to achieve goals.

  • Operational goals vary from strategic goals and concentrate more on ‘how’ instead of ‘what

  • Some of the main operational objectives include cost and quantity targets, enhancing the HR process, effective management of debt, development of IT competencies.

  • Operational goals are short-run and are specific as well as measurable, strategic objectives are long-run goals.

  • Operations management is the heart of the company as it controls the operations of the system.

  • Operations management has a significant role to make sure that the business achieves its strategic objectives.

  • The setting of the company’s operational goals especially will deliver guidance and direction to the workforce.

  • The benefits of operational goals are that they boost productivity, increase sales, lower returns, increase product quality and customer satisfaction, lower costs and waste, and increase revenues eventually.

  • The internal influence on operational objectives is corporate objectives, finance, HR, and availability of resources.

  • The external influence on operational objectives is market factors, rival's actions, technological change, and legal factors.

Frequently Asked Questions about Operational Objectives

An example of an operational objective is:
To enhance productivity and efficiency. 

Businesses set operational objectives to:
For decision making, to measure success or failure, and to improve efficiency. 

The different operational objectives are:

Decreasing costs, improving quality, increasing swiftness of response and enhancing flexibility and dependability. 

The operational objectives in business could be:
Improving quality, better scheduling, and waste reduction. 

Operational objectives include achievable, action-oriented, and short-run objectives to meet long-run objectives.

Final Operational Objectives Quiz

Question

What do operational objectives define?

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Answer

 They define the task that needs to be accomplished in order to achieve goals.  


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Question

How do operational objectives differ from strategic objectives?

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Answer

Operational goals vary from strategic goals and concentrate more on ‘how’ instead of ‘what’.


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Question

What is the distinction between operational and strategic objectives?


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Answer

A major distinction between operational and strategic goals is the time duration, operational objectives are short-run and strategic objectives are long-run goals.


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Question

What are operational and strategic objectives aligned with?


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Answer

Strategic goals are associated with mission and vision and operational goals are associated with strategic goals.

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Who is responsible for strategic and operational objectives?


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Answer

Strategic objectives are the responsibility of top managers and line managers for operational goals.

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Question

What is the role of the operational objective if the strategic goal is to have cost-efficient production?

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Answer

Operational goals can be to ask the suppliers if they can reduce prices of raw materials, modify employee training in order to escalate efficiency, thorough assessment of the machinery to see if it is outdated or needs an upgrade.

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Question

Why are operational objectives significant?


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Answer

They have a significant role to make sure that the business achieves its strategic goals.

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How is setting operational objectives beneficial for employees?

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Answer

Setting these goals especially will deliver guidance and direction to the workforce.

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Question

Are operational goals specific and measurable?


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Answer

Yes, they are specific and measurable.

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Question

Why is it essential to understand the operational objectives?


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Answer

It is essential to understand and plan the goals to come closer to the visioned strategic goal.

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Question

List two benefits of operational goals.


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Answer

Do operational goals help to reduce waste and costs?

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Question

Do operational goals help to reduce waste and costs?

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Answer

Yes, because only a precise number of products are produced through appropriate operations management.

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Question

What is the internal influence on operational objectives and decisions?

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Answer

The internal influence on operational objectives are corporate objectives, finance, HR, and availability of resources.

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Question

What is the external influence on operational objectives?

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Answer

The external influence on operational objectives are market factors, rival's actions, technological change, and legal factors.

Show question

Question

How is diminishing unit cost useful for the business?


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Answer

Reducing unit costs allows the organizations to reduce prices or have rising profit margins by maintaining the prices at the same level.

Show question

Question

 What are the two types of costs?


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Answer

Fixed cost and variable costs

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Question

How can quality objectives be measured?


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Answer

Customer’s satisfaction rating, Customer complaints, Level of product returns

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What is the Swiftness to respond?

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Answer

Speed of response is generally estimated by the time between a customer making the request for the product and the time they actually receive it.

Show question

Question

What are the different forms of flexibility?


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Answer

Product flexibility, volume flexibility, mixed flexibility, and delivery flexibility

Show question

Question

List two environmental objectives.


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Answer

  • Organizations have recognized their responsibility towards the environment.
  • An organization can entice more customers if they present a more positive approach towards the improvement of the environment.

Show question

Question

What is added value?


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Answer

It is the process to increase the worth of resources with modification.

Show question

Question

State two ways of diminishing unit costs.

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Answer

  1. Lowering fixed costs
  2. Lowering variable costs per unit

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Question

How can you lower variable cost per unit?

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Answer

  • Find inexpensive suppliers or inexpensive methods for manufacturing.
  • Cut labour and raw material costs.
  • Improve labour productivity as this would reduce wages per unit. 

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Question

Some quality objectives include satisfaction rating of customers, _______ ________, and level of product returns.

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Answer

customer complaints

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Why is the satisfaction rating of customers important?

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Answer

Since the main purpose of any product is the satisfaction of needs of customers, this is a good way to measure if the quality was achieved/not. 

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What is mixed flexibility?

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Answer

The capability to offer a variety of alternate versions. 

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Question

What are the missing forms of flexibility?

  • Flexibility of the product
  • Flexibility in ______ 
  • Mixed flexibility

  • The flexibility of ________

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Answer

  • Flexibility of the product
  • Flexibility in Volume
  • Mixed flexibility

  • The flexibility of Delivery

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Question

Dependability for any product can be related to product durability, longevity, and reliability.

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Answer

True

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Question

What are a few steps in business that add value?

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Answer

Distribution, retailing, marketing and addition of USPs.

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Question

Define operational performance objectives.

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Answer

Operational performance objectives are operational goals that businesses attempt to achieve in order to accomplish their corporate strategy.­ 

Show question

Question

State the purpose of setting objectives.

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Answer

  • To act as a centre for decision making.

  • To provide a gauge with which success or failure can be measured.

  • To enhance synchronization by working towards the same objective.

  • To enhance efficiency as the reasons for success and failure can be assessed.

Show question

Question

What is the meaning of internal influences?

Show answer

Answer

Internal factors are those that are inside the organisation, for instance, workforce, finances, and resources. 

Show question

Question

What is the meaning of external influences?

Show answer

Answer

External factors are from outside the organisation, for instance, economic situation or the actions of rivals. 

Show question

Question

How can technology influence operational objectives and decisions?

Show answer

Answer

Technology can influence the cost of an organisation, the quality of its products, and productivity. These factors are essential performance goals for operations management.

Show question

Question

Select the internal factors of operational objectives and decisions.

Show answer

Answer

Corporate objectives

Show question

Question

Select the external factors of operational objectives and decisions.

Show answer

Answer

Market factors

Show question

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