What is the main asset of any successful organization? State-of-the-art equipment? Production facilities? Unique technologies? Of course not. People, talented professionals, are those who make the system work, reach challenging goals and gain the company profit. However, sometimes even talented employees are unable to achieve the objectives set up by the manager. As a result of employee frustration and the manager dissatisfaction the company may lose an expert and bear additional costs on searching a new employee, training him and so on. However, the solution often lies in the management system, and in the abovementioned case management by objectives (MBO) can be effective for both manager and employee. The term, first introduced by Peter F. Drucker (1957) outlines the approach when the employee’s objectives are set commonly by him and his supervisor, they contribute to the company strategic goals and their achievement is easily measured. Let us find out what features currently makes this approach efficient and what are the conditions for its successful implementation.
The MBO system suggests cascading the company strategic goals throughout the whole organization and breaking them down for clear objectives for all employees according to their responsibilities. Why is it that important? This way employees can realize visible connection between their everyday assignments and the company development which definitely increases their commitment and engagement in the work process. If you review any engagement survey you will for sure find questions referring to importance of clear goals in the organization and the link between employees’ work and the company results. The fact is that feeling the part of something great is one of the key engagement drivers, which enables people not only to fulfill their work in a responsible manner but bring innovations, introduce improvement suggestions and overall exceed employer’s expectations.
Cascading the company goals has another strategic effect for the organization. Every company, if it is not a charity-oriented, pursues a major goal – to gain profit. Using the company objectives, which finally support this major goal, as a guidance point, helps the managers to hold right direction when defining the employee goals. According to Thomson research, this is one of the major outcomes of the MBO approach as it facilitates managers thinking in terms of their organization future needs and the setting of objectives to meet those needs (Thomson, 1998, p.3). In this case the question of objective appropriateness can be addressed easily by answering the checklist questions: Does it help the company to meet the goals? Will it contribute to enlarging the company’s profit? If not, maybe there is a need to think over the necessity of the activity. Evidently, such selection can help to get rid of redundant tasks and processes in the company to concentrate on significant goals. Development Dimension International, one of the world’s experts in engagement, called it “aligning the efforts with strategy” and pointed it out as one of the five things a manager should do to create a highly engaged workforce (Wellins, Bernthal, and Phelps, 2005, p.29).
Paying primary attention to the company interests in reviewing the approach we shouldn’t neglect the impact of it on the employees. Let’s get back to the situation we’ve depicted in the introduction and assume the option of negotiating Managing by objectives with the boss MBO. In this case the objectives would be more clear to the employee, as they would have been discussed in cooperation of manager with subordinate, not just handed in. Understanding that he plays a part in formulating his own goals would definitely increase employee’s commitment and consequently, performance. As the system implies regular control towards goals accomplishment, an employee would get a tool to track his own progress timely. Therefore, any issues would be have been discussed and resolved before they would lead to failing the targets’ meeting. Taking into account that the goals set up in MBO should be measurable and specific, performance review based on the results of these goals would be more predictable, impersonal and less stressful. It is self-evident that upon application of MBO method properly, the abovementioned case would have another ending, a way more beneficial both for employee and the company.
It would be unfair not to mention the fact that MBO approach, as any popular one, has its detractors. One of the most famous and cited of it was W. Edwards Deming, American engineer and popular management consultant. He was convinced that without proper understanding of the system objectives would be misinterpreted and results tampered. Besides, Deming (1994) declared a change of strict objectives and management practices to leadership that inspires employees for outstanding results through understanding the system.
Summing up the discussion, we may conclude that the system of Management by Objectives is not ideal, but its main principals are reasonable and enable creation of a healthy productive environment in the company. The main outcome we’d like to share is that effective system introduction requires attention not only to figures, measures and dates, but to the leadership skills of the management. It is vital that the management would have strong interpersonal skills to discuss objectives properly and conduct effective performance appraisal meetings. All in all, for success the system should be perceived not as a static stool of pressure for results, but as a flexible instrument for dialogue and growth.
References
Deming, W. E.,(1994). Out of the Crisis. Cambridge: The MIT Press.
Drucker, P.F. (1954). The Practice of Management. New York: Harper & Row.
Thomson, T. M. (1998). Management by Objectives. The Pfeiffer Library Volume 20, 2nd Edition.© JosseyBass/Pfeiffer, p. 1-4.
Wellins, R.S., Bernthal, P., Phelps, M.(2005) Employee Engagement: The key to realizing competitive advantage. Development Dimensions International, Inc., MMV. [PDF document]. Retrieved from http://www.ddiworld.com. p.29
