How do Companies set Goals?

How companies develop goals and objectives will vary based upon the organizations structure and the orientation of leaders. The traditional method of setting goals proceeds as follows below.

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Guided by the mission and vision statements, managers are tasked with developing goals and objectives for their immediate divisions or sub-units or the organization. Even if these goals are handed down to the manager from higher levels, the immediate manager must fully understand the goals to effectively develop objectives and coordinate resources in pursuit of their accomplishment. 

Within most organizations, goals at each level are interrelated. Developing goals that are connected to the completion of goals at other levels is known as the Means-End Chain. This framework models the understanding of the traditional organization. Higher-level goals are handed down by higher levels of management. Subordinate groups are tasked with carrying out these goals and objectives and creating sub-goals. 

Obtaining goals at each level is dependent upon the completion of objectives at other levels. In this way, the goal completion process is interwoven through the organization. An alternative method of setting goals is consistent with the Management by Objectives theory. 

Under this theory, company goals and objectives must be mutually agreed upon by managers and those executing the goals or objectives. This generally requires employee input and buy-in during the formation of goals - with managers deferring largely to employees in the development of objectives. Lastly, all goals and objectives must be clearly communicated to all parties to make certain there is uniformity of understanding.