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216 PART 3 • STRATEGY IMPLEMENTATION

They serve as an important source of employee motivation and identification. They
give incentives for managers and employees to perform. They provide a basis for
organizational design. 2

Clearly stated and communicated objectives are critical to success in all types and
sizes of firms. Annual objectives, stated in terms of profitability, growth, and market share
by business segment, geographic area, customer groups, and product, are common in
organizations. Figure 7-2 illustrates how the Stamus Company could establish annual
objectives based on long-term objectives. Table 7-2 reveals associated revenue figures that
correspond to the objectives outlined in Figure 7-2. Note that, according to plan, the

FIGURE 7-2
The Stamus Company’s Hierarchy of Aims

LONG-TERM COMPANY OBJECTIVE
Double company revenues in two years through
market development and market penetration.
(Current revenues are $2 million.)

DIVISION I DIVISION II DIVISION III
ANNUAL OBJECTIVE ANNUAL OBJECTIVE ANNUAL OBJECTIVE
Increase divisional Increase divisional Increase divisional
revenues by 40% this revenues by 40% this revenues by 50% this
year and 40% next year. year and 40% next year. year and 50% next year.
(Current revenues are (Current revenues are (Current revenues are
$1 million.) $0.5 million.) $0.5 million.)

R&D Production Marketing Finance Personnel
annual objective annual objective annual objective annual objective annual objective
Develop two Increase Increase Obtain Reduce
new products production the number long-term employee
this year efficiency of salespeople financing absenteeism
that are by 30% this by 40 this of $400,000 from 10% to
succesfully year. year. in the next 5% this year.
marketed. six months.

Purchasing Advertising Auditing
Shipping Promotion Accounting
Quality Control Research Investments
Public Relations Collections
Working Capital