The Power and Purpose of Objectives:
Social Revolution as Business Pupose Mssion-The concentration Decision-The objectives: Marketing; Innovation; Key Resources; Productivity; Social Responsibilies-Profit as Result Rather Than as Goal-Converting Objectivies Into Work Assigments-The Lessons-Specifications for Objectives-Objectives Needed in All Survival Areas-The Eight Areas of Objectives-The Basic for Work and Assigments-Objectives and Measurements-The Use of Objectives.
One company in the Western world can (as has been said earlier) be compared with Sears, Roebuck: Marks & Spencer. It might even be slightly ahead in growth of sales and profits over a long period of years.
Like Sears, Marks & Spencer is a chain retailer. It opened its first penny bazaar in 1884, or just about the time Richard Sears make his first mail order offer of cheap but reliable watches to the Midwestern farmer. By 1915 the company was building variety stores. It has been growing fast ever since. Its most spectacular growth period, however, was then ten years between 1963 and 1972-a period in Britain’s economic history which was characterized by “stagflation,” i.e., inflationary stagnation, rather than growth. During this difficult period Marks & Spencer more than doubled its sales volume (from £184 million to £463 million, or in U.S. dollars, £460 million or fast, to $1,100 million). Profits went up just as fast, from £22 million to £54 million ($55 million to $135 million). Equaly remarkable was the profit margin-almost 12 percent on sales before taxes-which is double what any other retail merchant (except Sears) would consider fully satisfactory.
Social Revolution as Business Mision
By the mid twenties the four brothers in law (Simon Marks, Israel Sieff, Harry Sacher, and Norman Laski) who had built the penny bazaar of 1915 into a major chain of variety stores owned a succesfull business. They might have been satified to rest on their laurels and to enjoy their considerable wealth. Instead they decided-following a trip to America by Simon Marks in 1924 in the course of which he carefully studied Sears, Roebuck-to rethink the purpose and mission of their business. The bussiness of Marks & Spencer, they decided, was not retailing. It was social revolution.
Marks & Spencer redefined its business as the subversion of the class structure of nineteenth-century England by making available to the working and lower middle classes upper-class customer could well afford.
Marks & Spencer was by no means alone in the England of the twenties in seeing a major apportunity in the rapid social changes of the post-World War I period (another contemporary example was Montaque Burton, the “Fifty Shilling Tailor”). What made Marks & Spencer unique and successful, however, was its conversion of the defenition of “what our business is, and should be” into clear, specific, operationally effective and multiple objectives.
This required first a decision as to what to concentrate on, that is, a basic strategy objective.
Marks & Spencer had been a variety store chain like many others, offering a large assortment of products which had nothing in common axcept low price. Now the company decided to concentrate on wearing apparel (to which it soon added household textile such as towels and draperies).
This was a rational decision. In the England of that time dress was still highly class-determinated and the the most visible of all class distinctions. Yet all of Europe, after World War I, had become fashion conscious. At the same time mass-production facilites for good-quality but inexpensive fabrics and clothes had come into being, in large part as a result of the huge demand for uniforms during World War I. New textile fibers, such as rayon and acetate, were coming on the market. There was still, however, no mass-distribution system in England for well-designed, up-to-date, and inexpensive clothing for the masses.
Within a few years the new Marks & Spencer had become the leading clothing and textile distributor in England, a position held ever since. By 1972 clothing sales accounted for a full theree-quarters of total Marks & Spencer volume, i.e., for £327 millon (rougilly $800 million).
After World War II the same thinking was applied to a new major product category:food. During World War II the English people, formerly konown for their dogged resistance to any innovation in eating, learned to accept new foods. Marks & Spencer’s food bussiness accounted, in 1972, for the remaining one-fourth of its sales.
From having been a succesful variety chain in the early twnties, and even in the early thirties, Marks & Spencer purposefully changed itself into a highly distinct “specialty” marketer-maybe the largest in the world.
The concentration decision then enable the compnay to set specific marketing objective. The decision enable it to deside who its customer was and should be; what kind of store it needed and when; what pricing policy to follow; and what market penetration to aim at.
The next area which Markas & Spencer tackled was that of innovation objectives. The clothing and textiles Marks & Spencer needed did not exist at the time. Marks & Spencer started out with quality control labotatories into research, design, and development centers. It developed new fabrics, new diestuffs, new processes, new blends, and so on. It develop design and fashions. Finally, it went out in looked for the right manufacturer, whom it often had to help get started-for the existing old-line manufacturers were for abvious reasons none too eager to throw in their lot with the brash upstart who tried to tell them how to run their business. And whwn, after World War II, the company moved ionto prepared and processed foods, bakery goods, and dairy products, it applied the same innovation approach to a new industry.
Marks & Spencer set innovation goals in marketing. It pioneered, for instance, in consumer research in the early thirties, when such work was still so new that Markas & Spencer had to develop the needed techniques.
Markas & Spencer set obkectives for the supply and development of key resources. It early copied and adapted the Sears program for recruiting, training, and developing managers. It set objectives for the systematic development of financial rsources, and measurments to control the utilixation of these resources. And it set objectives for the development of its physical facilities, that is, for retail stores.
Hand in hand with these objectives for resources went objectives for their productivity. Marks & Spencer had orginally taken its measurements and controls from America. In the twenties and early thirties it began to set its own objectives for continuously improving the productivity of key resources.
As a result, Marks & Spencer has a singularly high productivity of capital-surely one the keys to it succes. Unnoticed, by and large-but fully as important-is the productivity of the Marks & Spencer retail store, which exceeds, to my knowledge store-management virtuosi of the Anerican retail scene.
Up till the late twenties the expansion of Marks & Spencer had been achived primary by opening new stores. Since the thirties Marks & Spencer’s expansion has been achivied primarily by making each store more productive and by raising sales pe square foot of selling space. Marks & Spencer,measured by the number of its stores, ir stil a small chain-there are only 250 stores. The stores themselves are not large, even by English standards; the average selling area is only 20,000 square feet per store. (The large American supermarket, by comparison, goes up to 100,000 square feet). Yet these small stores sell something like $4 million apiece a year, which is many times what even highly succesful retail stores of other companies do. The only explanation is continual upgrading of volume per store, that is, upgrading of merchandise, display, and sales per customer. Store selling space is the controling resource of a retail merchant; Marks & Spencer’s success in raising its utilization was central to its performance.
Marks & Sepencer set objectives for its social responsibilities, and especially for areas of major impact: its own work force and its suppliers. It intrduced “staff manageresses” into its stores ti look after the employees are treated with intelegence and compassion. Personel management remains the job of the store manager. The staff manageress was set up to be the “people concience” of the company.
Similarly Marks & Spencer develop objectives for its relations with its suppliers. The more successfully a supplier works with Marks & Spencer, the more dependent upon the company he will be. To safequard the supplier against exploitation by the company become a concern of the company’s management. It set out develop a “putting out” system which, unlike its pre-industrial predecessor of early eighteenth-century England, would not impoverish the supplier and make him less secure but would, on the contrary, enrich the supplier and give him security.
But what about a profit objective? The aswer is that there has never been one. Profit goals have been anathema at Marks & Spencer. Obviously the company. Is highly profitable and highly profit conscious. But it sees profit not as a need. Profit, in the Marks & Spencer view, is the result of doing things right rather than the purpose of business activity. It is, above all, determined by what is necessary to attain company discharges its functions in serving market and customer. Above all, it is a restraint; unless profit is adequate to cover the risks, a company will not be able to attain its objectives.
I do not know how conscious Marks & Spencer’s top management was in the early years, the late twenties and early thirties, of the full import of the decisions they than made. There was proably no master plan. But the young key executives who were brought into the firm in those years to take on new jobs such as innovation or the development of productivity objectives and standars were fully aware that their company had commited itself to a definition of what its business was-and they knew what the definition entailed.. They were highly conscious of the company’s social and business objectives. They knew what these objectives meant to each of them individuallly in terms of performance standart, and demands for their own contribution.
Marks & Spencer from the start converted objectives into work assignments. It though what results and contributions were needed in each objectives area. It assigned responsibility for these results to someaone and held him accountable. And it measured performance and cotribution against the objectives.
The Lessons
The Marks & Spencer story reaffirm the central importance of thinking through “What our business is and what should be.” But italso shows that this, by itself, is not enough. The basic defenition of the business and of its purpose and mission have to be translated into objectives. Otherwise, they remain insight, good intentions, and brilliant epigrams which never become achievement.
The Marks & Spencer story brings out the specifications for objectives. Each of them will be discussed in some detail in the next chapter. But here is the list:
1. Objectives must be derived from “what oor business is, what it will be, and what it should be.” They are not abstractions. They are the action commitments through which the mision of abusiness is to be carried out, and the standarts against which performance is to be measured. Objectives, in other words, are the fundamental strategy of a business.
2. Objectives must be oprational. They must be capable of becoming the basic, as well as the motivation, for work and achievement.
3. Objectives must make possible concentration of resources and efforts. They must winnow out the fumdamentals among the golas of a business so that the key resources of men, money, and physical facilities can be concentrated. They must, therefore, be selective rather than encompass everything.
4. There must be multiple objectives rather than a single objective. Much of today’s lively discussion of management by objectives is concerned with the search for the “one right objective.” This search is not only likely to be as unproductive as the quest for the philosopher’s stone; it does harm and misdirects.
To manage a business is to balance a variety of needs and goals. Andd this requires multiple objectives.
5. Objectives are needed in all areas on which the survival of the business depends. The specific targets, the goals in any objective area, depend on the strategy of individual business, for all business depend on the same factors for their survival..
A business must first be able to create a customer. There is, therefore, need for a marketing objective. Business must be able to innovate or else their competitors will oblosesce them. Yher is need for an inovation objective. All business depend on the there factors of production of the economist, that is, on the human resource, the capital resource, and physical resources. There must be objectives for their supply, their employment, and their development. The resources must be employed productively and their productivity has to grow if the busuness is ti survive. There is need, therefore, for productivity objectives. Business exists in society and community and, therefore, has to discharge social resposibilities, at least to the point where it takes responsibility for its impact upon the enviroment. Therefore objectives in respect to the social dimensions of business are needed.
Finally, there is need for profit-otherwise none of the objectives can be attained. They all require effort, that is, cost. And they can be financed only out of the profit of a business. They all entail risks; they all, therefore, require a profit to cover the risk of potential losses. Profit is not an objectives but it is requirement that has to be objectively determined in respect to the individual business, its startegy, its needs, and its risks.
Objectives, therefore, have to be set in these eigtht key areas:
- Marketing
- Innovation
- Human Organization
- Finacial Resources
- Physical Resources
- Productivity
- Social Responsibility
- Profit Requirements
Objectives in these key areas enable us to do five things: to organize and explain the whole range of business phenomena in a small number of general statements, to test these statements in actual axperience; to presdict behavior; to appraise the soundness of decisions while they are still being made; and to let managers on all levels analyze their own experience and, as a results, improve performance.
The Basic of Work and Assignments.
Objectives are the basic for work and assignments.
They determine the stucture of the business, the key activities which must be dishcarged, and, above all, the allocation of people to tasks. Objectives are the fundation for designing both the structure of the business and the work of individual units and indivudual managers.
Objectives are always needed in all eight key areas. The area without specific objectives will be neglected. Unles we detemine what shall be measured and what the yardstick of measurement in an area will be, the area itself will not be seen. (On this Cahpter 39).
The measurements available for the key areas of a business enterprise are still haphazard by and large. We do not even have adequate concepts, let alone measurements, except for market standing. For something as central as profitanility in necessary. In respect to innovation and, even more, to productivity, we hardly know more than that something ought to be done. In the other areas-including physical and financila resources-we are reduced to statements of intentions; we do not possess goals and measurements for their attaiment.
How to Use Objectives
We know one more thing about objectives: how to use them.
If objectives are only good intentions they are worthless. They must degenerate into work. And work is always specific, always has-or should have-clear, unambiguous,measurable results, a deadline and a specific assignment of acountability.
But objectives that become a straitjacket do harm. Objectives are always based on expectations. And expectations are, at best, informed guesses. Objectives express an appraisal of factors that are largely outside the business and not under its control. The world does not stand still.
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