Mata Kuliah

Strategic Management
Tema II :
Vision and Company Mission, Longterm Objective, Corporate Culture, Corporate
Governance dan The Agency Theory

Mahasiswa : Adrianto - 55117120160

Dosen : Prof. Dr. Ir. Hapzi Ali, MM, CMA
 Vision and Company Mission, Longterm Objective, Corporate Culture, Corporate
Governance dan The Agency Theory

Mission and Vision Statements

Along with strategic planning, mission and vision statements are among the most widely used
tools, and consistently rank above average in satisfaction.

A Mission Statement defines the company’s business, its objectives and its approach to reach
those objectives. A Vision Statement describes the desired future position of the company.
Elements of Mission and Vision Statements are often combined to provide a statement of the
company’s purposes, goals and values. However, sometimes the two terms are used
interchangeably.

How Mission and Vision Statements work:

Typically, senior managers will write the company’s overall Mission and Vision Statements.
Other managers at different levels may write statements for their particular divisions or
business units. The development process requires managers to:

 Clearly identify the corporate culture, values, strategy and view of the future by
interviewing employees, suppliers and customers
 Address the commitment the firm has to its key stakeholders, including customers,
employees, shareholders and communities
 Ensure that the objectives are measurable, the approach is actionable and the vision is
achievable
 Communicate the message in clear, simple and precise language
 Develop buy-in and support throughout the organization

Companies use Mission and Vision Statements to:

Internally:
 Guide management’s thinking on strategic issues, especially during times of significant
change
 Help define performance standards
 Inspire employees to work more productively by providing focus and common goals
 Guide employee decision making
 Help establish a framework for ethical behavior
Externally:
 Enlist external support
 Create closer linkages and better communication with customers, suppliers and alliance
partners
 Serve as a public relations tool

Source:
Bain & Company, April 02, 2018, https://www.bain.com/insights/management-
tools-mission-and-vision-statements/ (12 September 2018)
 Longterm Objective
Business Long Term Objectives in Strategic Management

May 21, 2016 by zkjadoon

Long term objectives are prepared from the mission statement of the organization on the basis
of which all other activities depend. Long term objectives highlight the expected consequences
that emerged from application of certain strategies. All the strategies of the Business
Organization are formulated & implemented in the guidance of the long term objectives.
These objectives are for longer period of time ranging from two to five years & this time frame
should also be consistent for the resulting strategies.

Nature of Long Term Objectives

The nature of long term objectives is better explained from the following features.

1. Should be quantitative
2. Should be realistic
3. Should be measurable
4. Should be challenging
5. Should be obtainable
6. Should be hierarchical
7. Should be according to other functional units of organization

There must be a time line that is associated with each objective. Moreover following are some
of the forms of Long Term Objectives.

1. Growth in sales
2. Growth in assets
3. Market share
4. Profitability
5. The nature & degree of diversification
6. The nature & degree of vertical integration
7. Social responsibility
8. Earnings per share

The long term objectives should be clearly established and communicated. Following are some
of benefits that are associated with the clear & effective development of long term objectives.

1. Synergy is created between all the functional areas of organization

2. Clear direction is provided that assist all the functioning of the organization.
3. The exertion of activities are stimulated
4. The resources are better allocated that generates more productive results
5. The designing of jobs is made effective
There are separate long term objective for corporate, divisional & functional levels in an
organization. But all of them should indicate the same direction. Managerial Roles and
performances are measured through these objectives by comparing the actual performance of
the managers with the standard performance level set in the light of these long term objectives.

There are many reasons that associate the success of the organization with the clearly
established & communicated long term objectives. The first reason is that all the stakeholders
of the organization identify & understand their roles keeping in view the future of the
organization. Those mangers whose values & attitudes differ are motivated for consistent
decision making in the organization. Almost every manager is involved in the strategy
formulation process and gives his opinion in shaping the final strategy for the organization.
When finalized strategy is formulated by consensus then there remains no element of conflict
among different managers during the strategy implementation stage. The priorities in the
organization are set by the long term objectives which further stimulate the exertion efforts so
that the desired targets can be achieved. In fact the long term objectives serve as performance
evaluation standard through which the performance of individual, group, department, division &
overall organization is effectively evaluated. The designing of jobs function & organization of
required activities for the performance of those designed jobs are based on the long term
objectives of the organization. All the activities in the functional areas of the organization are
directed towards some desired position. There is complete synergy among all the activities &
employees of the organization when effective long term objective are developed & properly
communicated.

Source:
Business Study Notes, May 21, 2016 by zkjadoon,
http://www.businessstudynotes.com/finance/strategic-managment/discuss-
business-long-term-objectives/ (12 September 2018)

Corporate Culture

What Is Corporate Culture and How It Affects Performance

Mark Miller | VP of Marketing, Emergenetics International

Among the many factors that affect an organization’s ability to innovate, compete, and engage
employees and customers is corporate culture. Corporate culture is the amalgamation of
values, vision, mission, and the day-to-day aspects of communication, interaction,
and operational goals that create the organizational atmosphere that pervades the
way people work. It’s hard to define and even harder to get right. No amount of modern
furnishings, stocked kitchens, happy hours, or young, hip workers can create a corporate
culture.

But what difference does it really make? A pretty big, one according to the data—this
article from Science Daily on a study from the University of Southern California and the
University of Minnesota puts it in stark terms: ”Corporate culture is, above all else, the most
important factor in driving innovation.”

Doesn’t get much more cut-and-dry, so the question on the minds of business leaders should
be how to create an effective corporate culture. If corporate culture can make the difference in
performance, innovation, and employee development and retention, then what is the bottom
line for fostering that organizational environment? The fact of the matter is that, at the most
basic level, an organization is simply a group of individuals working towards a goal—the
generation of corporate culture, therefore, stems from the individuals who make up
the organization, from leadership to the front-line workers.

If culture is about people, let’s take it a step further–what is going on in an employee’s head
and how they affect (and are affected by) others can build a positive, effective corporate
culture or deteriorate into a negative corporate culture. This article from Fast Company
describes the brain and the way we work with others. The brain is built to mimic, and in that
way, we often conform subconsciously to the energy and actions of those around us. Obviously,
this has huge implications for corporate culture. Think, if employees are motivated and
committed, how mimicry can build to create a powerful, embedded positive culture.

No matter how powerful our neurological impulses may be, it still takes real,
demonstrable and measurable behavior to build a sustainable, positive corporate
culture of performance. Getting to behavioral change requires understanding, open-
mindedness and an appreciation of diversity.

 It is important that leadership have an understanding of the thinking and behavioral

tendencies of their employees and how mental energy manifests itself in outward
behavior.
 Leadership must relate corporate goals in a way that allows each employee to identify
with and internalize those goals.
 Leaders need to promote diverse thinking and a shared knowledge base to create a true
sense of collaborative cohesion within the organization, which propels culture forward
positively.

Corporate culture is an ongoing system of checks and balances that needs to be

reinforced at all levels of the organizational and employee life cycle. New hires to the
organization can be attracted by a strong corporate culture (look at the thousands of
applications that Facebook and Google receive for every open position), but motivation and job
fit must match a desire to integrate into the culture. Unmotivated employees breed a negative
culture with those around them and all that work can quickly disintegrate, so realizing what
drives all employees from a motivational standpoint and matching that with work and thinking
and behavioral preferences is a better, more holistic approach to hiring, training, and retaining
the employees who make up an organization–and who make up the culture of an organization.

Source :
Mark Miller , https://www.emergenetics.com/blog/corporate-culture-affect-
performance/(12 September 2018)
 Corporate Governance

What is 'Corporate Governance'

Corporate governance is the system of rules, practices and processes by which a firm is directed
and controlled. Corporate governance essentially involves balancing the interests of a
company's many stakeholders, such as shareholders, management, customers, suppliers,
financiers, government and the community.

Source :
https://www.investopedia.com/terms/c/corporategovernance.asp (12 September
2018)

The Agency Theory

What is the 'Agency Theory'

The agency theory is a supposition that explains the relationship between principals and agents
in business. Agency theory is concerned with resolving problems that can exist in agency
relationships due to unaligned goals or different aversion levels to risk. The most common
agency relationship in finance occurs between shareholders (principal) and company executives
(agents).

What is the role of agency theory in corporate governance?

Agency theory is used to understand the relationships between agents and principals. The
agent represents the principal in a particular business transaction and is expected to represent
the best interests of the principal without regard for self-interest. The different interests of
principals and agents may become a source of conflict, as some agents may not perfectly act in
the principal's best interests. The resulting miscommunication and disagreement may result in
various problems within companies. Incompatible desires may drive a wedge between each
stakeholder and cause inefficiencies and financial losses. This leads to the principal-agent
problem.
The principal-agent problem occurs when the interests of a principal and agent are in conflict.
Companies should seek to minimize these situations through solid corporate policy. These
conflicts present normally ethical individuals with opportunities for moral hazard. Incentives
may be used to redirect the behavior of the agent to realign these interests with the principal's.
Corporate governance can be used to change the rules under which the agent operates and
restore the principal's interests. The principal, by employing the agent to represent the
principal's interests, must overcome a lack of information about the agent's performance of the
task. Agents must have incentives encouraging them to act in unison with the principal's
interests. Agency theory may be used to design these incentives appropriately by considering
what interests motivate the agent to act. Incentives encouraging the wrong behavior must be
removed and rules discouraging moral hazard must be in place. Understanding the mechanisms
that create problems helps businesses develop better corporate policy.
Source :
https://www.investopedia.com/terms/a/agencytheory.asp (12 September 2018)
https://www.investopedia.com/ask/answers/031815/what-role-agency-theory-
corporate-governance.asp (12 September 2018)

Vision and Company Mission, Longterm Objective, Corporate Culture, Corporate

Governance dan The Agency Theory
Pada PT. X (Perusahan Trading Batu Bara yang memiliki lini bisnis dari hulu sampai
hilir dalam industri batubara)

1) Vision and Company Mission,

Telah didefinisikan dengan baik, saat ini sedang digiatkan lagi (refresh) kepada seluruh
karyawan mengenai Visi, Misi dan Value Perusahaan
Vision :
To be recognized and the company of choice in the region for its integrated competencies
on coal energy resources and infrastructure services in Indonesia.
Mission :
To perform end-to-end integrated coal energy infrastructure service activity, from mining,
systematic hauling & quality refining, port management, marketing, to shipment, to
ensure customer satisfaction and the prosperity of our corporate stakeholders while
contributing to the local & national economies.

2) Longterm objective,

Sesuai dengan misinya, perusahaan ingin menjadi perusahaan pilihan karena memeiliki
kemampuan sistem yang terintegrasi dalam sumber daya batubara dan infrastruktur
pendukungnya.
Dalam 5 tahun ke depan, guna menunjang jalan batubara (hauling) yang telah dimiliki
kurang lebih 120 KM, maka perusahaan terus mencari lahan di sekitar jalan hauling
tersebut guna memaksimalkan jalan yang telah dimiliki dan menambah pangsa pasar.

3) Corporate Culture,

Perusahaan memiliki nilai - nilai:

INNOVATIVE
We realize that integrated energy infrastructure services requires complex multi discipline
skills & systems, where constant improvements from a hardworking team of enthusiastic
and smart staff is a must to achieve excellence.

EXCELLENCE
We firmly believe that high ethical standards, corporate governance, integrity and actions
in the interest of the society and the nation is the right and only way to ensure long term
success in the coal mining business.
 SYNERGY
These days nobody can succeed alone. Teamwork and partnership based on mutual
respect, trust & commitment within Titan Infra Energy and with our suppliers, contractors,
community, local government, and regulators, will create the synergy needed to drive
production and delivery’s speed, quality, quantity, and cost efficiency.

Pada prakteknya tidak semua karyawan menanamkan nilai – nilai tersebut di dalam
dirinya. Tantangan bagi perusahaan saat ini adalah untuk membangun kembali nilai – nilai
tersebut bisa menjadi Budaya di dalam perusahaan melalui aktifitas dalam pekerjaan
sehari – hari.

4) Corporate Governance,

Dalam hal ini perusahaan masih terus menerus melakukan perbaikan, terutama terkait
dengan proses pengambilan keputusan. Proses pengambilan keputusan dibuat berjenjang
, namun mulai mengurangi proses keputusan yang sifatnya terpusat untuk hal – hal yang
bisa dikontrol oleh masing – masing Strategic Business Unit.

5) The Agency Theory,

Dalam hal ini, perusahaan masih memiliki masalah yang sama dengan umumnya
perusahaan lainnya, dimana agent yang diamanahkan kepada Manager ataupun pimpinan
SBU masing – masing masih memiliki kepentingan Pribadi yang terkadang berpengaruh
pada keputusan yang diambil.

Daftar Pustaka :
http://www.titaninfra.com/vision-mission-belief/ (12 September 2018)