MANAGEMENT BY OBJECTIVES

1 The Pfeiffer Library Volume 20, 2nd Edition. Copyright 1998 Jossey-Bass/Pfeifferzx 1zxMANAGEMENT BY OBJECTIVES Thomas M. ThomsonManagers always have been challenged to produce results, but the modern managermust produce them in a time of rapid technological and social change. Managers mustbe able to use this rapid change to produce their results; they must use the change andnot be used or swallowed up by it. Both they and the organizations they manage need toanticipate change and set aggressive, forward-looking goals in order that they mayultimately begin to make change occur when and where they want it to and, in that way,gain greater control of their environments and their own most important tool the manager has in setting and achieving forward-lookinggoals is people, and to achieve results with this tool the manager must: first, be able toinstill in the workers a sense of vital commitment and desire to contribute toorganizational goals; second, control and coordinate the efforts of the workers towardgoal accomplishment; and, last, help his or her subordinates to grow in ability so thatthey can make greater hopes of increasing individual production and contribution, managers haveresorted to many different approaches: they have tried to get commitment and hard workthrough economic pressure and rewards.

2 They have sought greater production byteaching the workers the best or most efficient ways to do a job; and they have tried tocajole their employees into a sense of well-being, hoping that their comfort wouldproduce a desire to contribute. All these approaches had some success, but nonesucceeded totally in injecting enough of that element of vitality and adaptability intoorganizational life to allow it to thrive and remain viable in this age of change andsociotechnological MANAGEMENT by Objective (MBO) approach, in the sense that it requires allmanagers to set specific OBJECTIVES to be achieved in the future and encourages them tocontinually ask what more can be done, is offered as a partial answer to this question oforganizational vitality and creativity. As a term, MANAGEMENT by OBJECTIVES was firstused by Peter Drucker in 1954. As a MANAGEMENT approach, it has been furtherdeveloped by many MANAGEMENT theoreticians, among them Douglas McGregor, GeorgeOdiorne, and John Humble.

3 Essentially, MBO is a process or system designed forsupervisory managers in which a manager and his or her subordinate sit down and Originally published in The 1972 Annual Handbook for Group Facilitators by J. William Pfeiffer & John E. Jones (Eds.), San Diego,CA: Pfeiffer & Pfeiffer Library Volume 20, 2nd Edition. Copyright 1998 Jossey-Bass/Pfeiffer2 xzjointly set specific OBJECTIVES to be accomplished within a set time frame and for whichthe subordinate is then held directly organizations exist for a purpose, and, to achieve that purpose, top managementsets goals and OBJECTIVES that are common to the whole organization. In organizationsthat are not using the MBO approach, most planning and objective setting to achievethese common organizational goals is directed downward. Plans and OBJECTIVES arepassed down from one managerial level to another, and subordinates are told what to doand what they will be held responsible for.

4 The MBO approach injects an element ofdialogue into the process of passing plans and OBJECTIVES from one organizational levelto another. The superior brings specific goals and measures for the subordinate to ameeting with this subordinate, who also brings specific OBJECTIVES and measures that heor she sees as appropriate or contributing to better accomplishment of the job. Togetherthey develop a group of specific goals, measures of achievement, and time frames inwhich the subordinate commits himself or herself to the accomplishment of those subordinate is then held responsible for the accomplishment of the goals. Themanager and the subordinate may have occasional progress reviews and reevaluationmeetings, but at the end of the set period of time, the subordinate is judged on the resultsthe he or she has achieved. He or she may be rewarded for success by promotion orsalary increases or he or she may be fired or transferred to a job that will provide neededtraining or supervision.

5 Whatever the outcome, it will be based on the accomplishmentof the goals the subordinate had some part in setting and committed himself or herself IN PRACTICEIn practice, this MBO approach, of necessity, varies widely, especially in regard to howformalized and structured it is in a given organization and to what degree subordinatesare allowed to set their own goals. In some organizations, MBO is a very formalmanagement system with precise review scheduling, set evaluation techniques, andspecific formats in which OBJECTIVES and measures must be presented for review anddiscussion. In other organizations, it may be so informal as to be described simply as we get together and decide what we ve done and what we re going to do. However, inmost organizations, MBO takes the form of formal objective setting and appraisalmeetings held on a regular basis often quarterly, semi-annually, or more situational than the degree of formality and structure is the degree towhich a subordinate is allowed to set his or her own goals.

6 In this regard, the kind ofwork that an organization does plays a large part in determining how much and on whatlevel a subordinate will be allowed to participate in formulating his or her own goals. Insome organizations a subordinate is almost told what he or she needs to do and is simplyasked if he or she will commit to achieve that goal, while in others the subordinate isgiven great latitude and room for innovation. For example, there is a contrast between aproduction situation in which a supervisor informs a subordinate that so many widgetsThe Pfeiffer Library Volume 20, 2nd Edition. Copyright 1998 Jossey-Bass/Pfeifferzx 3must be made over the next six months and simply asks which part of that productionburden the subordinate is willing to shoulder and a university situation in which adepartment head informs a subordinate of the need to develop more community-orientedprograms and asks how the subordinate thinks he or she can contribute to this goal.

7 Inthe latter circumstance, the subordinate has much more room for innovation andpersonal contribution as well as a greater part in designing the specifics of the programthan does the production worker who is simply asked which part of a very specificactivity he or she cares to commit ADVANTAGESNo matter what form the MBO approach takes in a given organization, it is essentially aprocess that helps to (a) direct managers attention toward results, (b) force members ofthe organization to commit themselves to specific achievement, and (c) facilitate theirthinking in terms of their organization s future needs and the setting of OBJECTIVES tomeet those needs. In addition, the MBO approach can supply the manager with greatermeasures of three of the tools he or she needs to make the best use of the organization sgreatest resource: people. The manager can:1. Gain greater commitment and desire to contribute from subordinates by (a)allowing them to feel that the OBJECTIVES they are working toward were not justhanded to them but are really theirs because they played a part in formulatingthem, (b) giving subordinates a better sense of where they fit in the organizationby making clear how the subordinates OBJECTIVES fit into the overall picture, and(c) injecting a vitality into organizational life that comes with the energyproduced as a worker strives to achieve a goal to which he or she has taken thepsychological and (sometimes economic) risk to Gain better control and coordination toward goal accomplishment by (a) havinga clearer picture of who is doing what and how the parts all fit together, (b)having subordinates who are more likely to control and coordinate their ownactivities because they know what will help and what will hinder their goalachievement, and (c)

8 Being able to see which subordinates consistently produceand which do Gain an increased ability to help subordinates develop by (a) being better able tosee their strengths and weakness in operation on a specific objective and (b)using a MANAGEMENT approach that teaches the subordinates (and the manager,for that matter) to think in terms of results in the future an approach thatteaches them to try to anticipate change, to define clear and specific OBJECTIVES ,and to delineate concrete measurements that will tell them when they haveachieved their Pfeiffer Library Volume 20, 2nd Edition. Copyright 1998 Jossey-Bass/Pfeiffer4 xzPOTENTIAL FOR MISUSEMBO easily can be misused and often is. What is supposed to be a system that allowsfor dialogue and growth between boss and subordinate with a view to achieving resultsoften degenerates into a system in which the boss puts constant pressure on thesubordinate to produce results and forgets about using MBO for commitment, desire tocontribute, and MANAGEMENT development.

9 Sometimes even well intentioned managersmisuse MBO because they do not have the interpersonal skills or knowledge of humanneeds to keep their appraisal sessions from becoming critical, chewing-out , many managers have a tendency to see MBO as a total system that, onceinstalled, can handle all MANAGEMENT problems. This has led to forcing issues on theMBO system that it is not equipped to handle and that frustrate whatever good effects itmight have on the issues with which it is designed to , P. (1954). The practice of MANAGEMENT . New York: Harper & , J. (1968). Improving business results. New York: , J. (1970). MANAGEMENT by OBJECTIVES in action. New York: , D. (1966). Leadership and motivation. Cambridge, MA: , G. (1970). MANAGEMENT by OBJECTIVES . New York: , (1971). Managerial effectiveness. New York: Pfeiffer Library Volume 20, 2nd Edition. Copyright 1998 Jossey-Bass/Pfeiffer zx 5zxMcGREGOR S THEORY X-THEORY Y MODEL Albert J.

10 RobinsonThe first acquaintance with X and Y for many of us was as unknowns in Algebra the decade of the sixties, X and Y took on some additional meanings forreaders in the behavioral sciences and contemporary MANAGEMENT 1961, Douglas McGregor published The Human Side of Enterprise. This bookwas a major force in the application of behavioral science to MANAGEMENT s attempts toimprove productivity in organizations. McGregor was trying to stimulate people toexamine the reasons that underlie the way they try to influence human activity,particularly at work. He saw MANAGEMENT thinking and activity as based on two verydifferent sets of assumptions about people. These sets of assumptions, called X and Y,have come to be applied to MANAGEMENT styles; , an individual is a theory X manageror a theory Y looked at the various approaches to managing people in organizations not only industrial organizations but others as well and in services, schools, and publicagencies and concluded that the styles or approaches to MANAGEMENT used by people inpositions of authority could be examined and understood in light of those manager sassumptions about people.