• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

The Nature of Conflict over Business Objectives Between Owners and Managers of an Organization

Extracts from this document...

Introduction

The Nature of Conflict over Business Objectives Between Owners and Managers of an Organization This report aims to examine the sources, nature and effects of conflicting business objectives of the owners and managers of an organization. Relevant theories will be illustrated on the examples of Selfridges and New Look. These organizations have been chosen, as their recent buy-outs have been followed by the resignation of their chief executives, which points to the existence of conflict between the managers and the organizations' new owners. A business objective is a precise statement of the long-term direction of an organization. It sets out both, the desired result and the strategic measures to be used to achieve that result. To be effective, an objective should be specific, measurable, achievable, relevant and time-bound. Business objectives are set at both operational and functional level. In order to survive in the long term, any organization needs to make a profit. Usually substantial investment is needed at first, yet this will only be made, where a worthwhile return can be expected. It can therefore be argued that an organizations prime objective should be to maximize profits. This simplistic approach, however, ignores the fact that in order to sustain those profits in the long-run, a company needs to further invest. ...read more.

Middle

A conflict can already be identified at this level, whilst assuming that the manager will in fact identify with the organization he represents and acting to achieve the best possible outcome for the organization in the long-term and the shareholder in the short-term. According to Simon, however, the reality often sees managers pursuing their individual goals instead. They seek to "maximize their own utility". This means that they are concerned about their remuneration, work situation, power and status, before considering organizational welfare. Simon suggests that a manager will seek to satisfice the owner of the organization, but do no more than that. He will aim to achieve a level of profits that the shareholder will be satisfied with and invest enough to create optimism about the company's future, but then pursue his own interests. Where trading results are promising and satisfactory levels are met, the management is unlikely to disturb investors by such behavior, as these are concerned with achieving a worthwhile financial return on their investment. It may prove problematic though, when sales or profits fall, be it due to strategic weaknesses of the company, a downturn in the market as a whole or even economic slowdown in general. Within a public limited company, another issue linked into this is that the directors of a company issue their own pay rises, which means that this is not necessarily linked to their actual performance. ...read more.

Conclusion

In the case of Selfridges, the loss of managers' power to act in their own interest was made obvious by the appointment of a management team overseeing all of the new owners', Galen Weston's, businesses and the abandoning of large parts of the company's expansion plans. Both examples show that it is essential for a company to reach expected levels of profits for its owners. Investment, though necessary to sustain consistent profits in the long term are a risk in the short term and must be communicated well to the company's shareholders. A drop in sales will make investment less attractive, whereby it is not always relevant, how that fall is caused. It must be carefully assessed, which stakeholders interests to focus on. A failure to achieve a balance between investment and short-term profits may lead to a take over, which may mean the loss of power or even position for the managers. While the pursuit of individual goals is often the reality for managers, this can cause problems for the company, when trading becomes more difficult. The means of influence over management decisions for an owner of a public limited company are limited, however, where objectives are too wide apart, the effect of his disapproval will be wide reaching. 1 www.newlook.co.uk 2 the appointment, 14th Feb. 2004 ?? ?? ?? ?? 1 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Structures, Objectives & External Influences section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Structures, Objectives & External Influences essays

  1. Marked by a teacher

    ASDA's Ownership

    4 star(s)

    Shareholders are also an influence in the public. They have to show they enjoy working for them as; the shareholders of ASDA are the staff. They have to show a positive side to the business and that; ASDA is a business that offers many opportunities. (ii). Both my businesses have the same stakeholders. The stakeholders have different influences.

  2. The Business Environment Coursework. Describe the type of business, purpose and ownership of ...

    Tesco may lose employees or have to increase wages. The government provides incentives such as grants to help new businesses and they also need to ensure businesses act fairly to allow other businesses to compete. The Competition Commission or the Restrictive Practices Court can investigate and take action against companies that appear to be abusing their position.

  1. For my portfolio, I was asked to do an assignment on two businesses. I ...

    is secure and make profit Shareholders: The shareholders want to know the company is doing well and making profit and paying them good dividends on time Local community: The local community want to know that no business is affecting the environment and it's surrounding Government: government want to know that all the business is paying taxes and obeying laws.

  2. Outline key features of legislation and regulation on health and safety as applied to ...

    are introduced to protect the health and safety of all employees, Company assets, General Public and the Environment. The Directors have the responsibility to establish policy and to adopt procedures to ensure the health and safety of all employees. All Managers and Team leaders have the responsibility to implement these

  1. Spreadsheet Report for Tuck Shop

    The completed graph is shown below. The last thing I had to do was to rename the two chart tabs (as shown before) from 'Chart 1' to 'Total of Products Sold (Week 1)' and 'Chart 2' to 'Total of Products Sold (Week 2)'

  2. Barclays Investigating a Business

    Activities that they provide include: * The crystal challenge - Similar to the Crystal Maze Game Show teams set out to complete a number of challenges using both physical and mental skills. * Team Wok - Teams set out to complete a complex Chinese meal during a half day course.

  1. Investigating Business. Tesco PLC. I will be describing the aims and objectives of ...

    Providing customers with healthy choices 5. Creating good jobs and careers Out of the five promises, there are three that affect the social and ethical values of Tesco. The first one is ?buying and selling of our products responsibly? ? this basically means that they promise to sell their products without misleading customers, sell them at

  2. Comparison of stakeholders interest and influence. Apple vs. Mercedes Benz

    The business environment raises awareness of needs and the facilities required in order to meet the goals that can be set through strategic planning. The ownership of Apple effects the strategic plan because as it?s a large cooperation they need to set plans according to what the owners can manage and be responsible for.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work