Cyert and March suggested that most groups remain relatively passive so long as they receive satisfactory compensation (see also the concept of slack payments below) such as workers receiving adequate payment or shareholders receiving satisfactory dividends. However, although parts of the coalition might be bought off in this fashion, management is assumed to seek specific policy commitments and rewards.
Interestingly this approach does not see management as a single homogeneous group with common goals. Instead, it is seen as fulfilling different functional roles within the organisation. For example, we may have marketing managers and personnel managers; each of these managers, and the area of the firm in which they operate, may then have different goals and demands. The firm is commonly divided into the following functional departments:
● production and production development
● sales and marketing
● personnel
● finance.
Within the management group we can distinguish top management.It is the role of top management ultimately to set the goals of the firm. The firm is seen to have five main goals:
1 The product goal.This goal is of direct concern to the production department. It will wish for smooth and continuous production and the avoidance of either excess capacity (necessitating the lay-off of workers) or working above capacity and the inherent problems of overworking fixed capital, machinery breakdowns, etc. It may also be reluctant to implement too many design modifications to the product.
2 The inventory goal.Whilst holding inventories (stocks) of raw materials and finished products may satisfy the production and the sales/marketing departments respectively by avoiding the risk of running short of stock, it will displease the financial department who regard the holding of excessive stock as wasteful in tying up working capital.
3 The sales goal.This originates from the sales/marketing department and may be defined in terms of either sales revenue or sales volume. In either case there might be a conflict with profitability as these goals might, for example, be achieved through excessive advertising and/or price reductions. The need for more output to satisfy increased demand, and for increasingly innovative products to create demand, might cause conflict with the production and design departments.
4 The market share goal. The firm is clearly concerned with its market share and outperforming its rivals. Although this goal may be contained within the sales goal, it is likely to be a pivotal goal within the firm’s strategic planning.