Setting Functional Objectives: Marketing, Operations, Finance, HR
Functional objectives are the specific, measurable targets set for each of a business's main departments, marketing, operations, finance and human resources, that together support the achievement of the business's overall corporate objectives. A marketing objective might target market share or brand awareness; an operations objective might target unit cost, capacity utilisation or quality; a finance objective might target profit margin, cash flow or return on investment; and an HR objective might target labour productivity, turnover or employee engagement. Because departments share a limited pool of resources, cash, staff time and management attention, functional objectives can conflict, for example a marketing objective to cut price to grow market share can directly conflict with a finance objective to protect profit margin, so setting them well requires each department's target to be consistent with, and to actively support, the corporate objective and the other functions' targets.
Before you start
Make sure you're comfortable with these topics first:
Method
- Start from the corporate objective given in the case (e.g. survival, growth, profit maximisation, market leadership) and check that each functional objective genuinely supports it, rather than pulling in an unrelated or contradictory direction.
- Learn a typical objective type for each function: marketing (market share, brand awareness, sales growth), operations (unit cost, capacity utilisation, quality/defect rate), finance (profit margin, cash flow, return on investment), HR (labour productivity, labour turnover, staff engagement).
- Identify potential conflict between two functional objectives by checking whether achieving one makes the other harder, for example a marketing objective to launch a wider product range can conflict with an operations objective to cut unit cost, since more variety usually reduces the scale efficiency of production.
- When a case gives numerical objectives for two functions, check them against each other directly (e.g. does the finance objective's implied budget actually cover the cost of the operations objective) rather than assessing each function's target in isolation.
- For an analyse or evaluate question on setting or resolving conflicting objectives, identify which function's objective should usually take priority given the stated corporate objective, and suggest a specific compromise or resourcing change that could allow both functions to move closer to their target simultaneously.
- Recognise that well-set functional objectives should still follow SMART principles, Specific, Measurable, Achievable, Relevant, Time-bound, since a vague functional target (e.g. 'improve quality') is far harder to monitor or hold a department accountable for than a specific, numerical one.
Worked example
Voss Appliances has a stated corporate objective of raising overall profit by 20% over the next two years. The marketing department sets an objective to grow market share from 8% to 12% by cutting average selling price by 10%. The finance department sets an objective to raise gross profit margin from 32% to 36% over the same period. Explain why these two functional objectives are likely to conflict, and suggest one way the conflict could be resolved.
- State the marketing objective's likely effect on price and revenue: a 10% price cut is intended to win market share, but, all else equal, a lower selling price directly reduces the profit margin earned on every unit sold.
- State the finance objective's requirement: raising gross profit margin from 32% to 36% needs revenue to grow faster than cost of sales, or cost of sales to fall relative to revenue, which a price cut works directly against.
- Identify the conflict: cutting price to grow market share, as marketing proposes, pulls gross profit margin down, while finance's objective needs margin to rise, so the two functional objectives cannot both be met through the current marketing plan unaltered.
- Suggest a resolution: marketing could pursue market share growth without cutting price as much, for example through increased advertising or product differentiation, while operations targets a lower unit cost (e.g. through more efficient production) so that even a smaller price cut still allows margin to rise towards the finance objective.
- Conclude: reconciling the two objectives requires cross-functional coordination, in this case likely combining a smaller price cut with a genuine cost reduction elsewhere in the business, rather than marketing and finance pursuing their targets independently.
Practice questions
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Q1Define a functional objective.Show answer
Answer: A specific, measurable target set for one department of a business (marketing, operations, finance or HR) that supports the achievement of the business's overall corporate objective.
Q2Give one typical objective for the operations function.Show answer
Answer: For example, reducing unit cost, raising capacity utilisation, or reducing the defect/reject rate.
Q3Give one typical objective for the human resources function.Show answer
Answer: For example, raising labour productivity, reducing labour turnover, or improving employee engagement/satisfaction.
Q4State what each letter stands for in the SMART framework for setting objectives.Show answer
Answer: Specific, Measurable, Achievable, Relevant, Time-bound.
Q5Explain why a marketing objective to widen the product range can conflict with an operations objective to reduce unit cost.Show answer
Answer: A wider product range usually means smaller production runs of each individual product, reducing the scale efficiency (and any economies of scale) that help keep unit cost low, so pursuing variety can work against a target to cut unit cost.
Q6State one reason functional objectives across a business can conflict.Show answer
Answer: Departments share a limited pool of resources, such as cash, staff time and management attention, so a target that requires more resource for one function can leave less available for another to meet its own target.
Q7Explain why a functional objective should be consistent with the business's corporate objective.Show answer
Answer: If a department pursues a target that does not support, or actively works against, the overall corporate objective, resources are used inefficiently and the business as a whole is less likely to achieve its main strategic goal.
Exam-style questions
Written in the style of a A Level Business exam paper, with a full mark scheme.
A furniture retailer has a corporate objective of survival following a difficult trading year. Analyse how this corporate objective might shape the functional objectives set for its finance and human resources departments.
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Ballantine Sportswear has a corporate objective to become the number one brand in its regional market within three years. Marketing has set an objective to increase advertising spend from 400,000 pounds to 900,000 pounds a year to build brand awareness. Operations has set an objective to cut unit cost by 8% by investing 600,000 pounds in new, more efficient machinery. Finance has set an objective to maintain a gearing ratio below 50%, and the company's current gearing ratio is 46%, with capital employed of 5 million pounds. HR has set an objective to cut labour turnover from 22% to 15% by improving pay and training. Evaluate whether Ballantine Sportswear's functional objectives are consistent with each other and with its corporate objective.
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See real A Level Business past-paper questions, with official mark schemes →
Free printable worksheet
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