THE CENTRAL OBJECTIVE 59
The central objective
At this point, it is advisable to take a break from writing so that you can question yourself
and perhaps those around you. You need to identify the central objective for the business.
This is the overriding force that drives you forwards.
Naïve commentators frequently suggest that maximising profit (a monetary surplus)
is the firm’s central objective. At the very least this should be restated as ‘maximising
profitability’ (the percentage return on capital employed), which is slightly different. City
commentators often seem obsessed with earnings per share (EPS, essentially net profit
per ordinary share – profit divided by the number of shares), but this can be a bit myopic.
Among other things it favours short-term (and sometimes high-risk) projects over longer-
term ventures. These ratios are discussed in Chapter 12. Stock prices are a good measure
of shareholder value in the longer term.
Frequently, though, profitability or shareholder value is not the central objective. A
number of common central objectives are listed in the box below. Note that the central
objectives of shareholders and managers frequently diverge.
Indeed, a major difficulty is that companies do not have objectives – people do. And
there can be many personal objectives all pulling in different directions. The chief exec-
utive, influential directors, individual general managers, a majority shareholder, or a
wealthy individual investor might all be pursuing differing aims.
2 Specify vision, mission, philosophy
3 Sketch corporate history
include summary financial data for the latest five years (full details
should be provided in an annex).
4 Describe the current business organisation
list directors, general management team, describe line and staff employees.
5 Outline the business infrastructure
list major premises, production facilities, business assets.
6 Describe your products and services
7 Identify your core competencies