Goal-Setting

Management by Objectives (MBO) is a system, which was firstly described by the American Peter Drucker, in 1954, in his book The Practice of Management. Since then, MBO has attracted enormous interest from the business world, and its principles have been applied in many of the world’s largest companies.

In his book, Peter Drucker emphasised that an organization and its staff must have clear goals. Each individual must understand the goals of the enterprise he/she works for, and must make contribution to them. It is also vital, in Drucker’s view that the individual knows what his/her manager expect of him/her. He/She must know what sort of results he/she is expected to achieve.

If an organization uses the MBO approach, it must pay careful attention to planning. This is because each individual has clearly defined objectives. And these will contribute to the overall objectives of the enterprise. With MBO, individual and organisation objectives are linked. A special feature of MBO is that the subordinate participates with his/her manager in developing objectives. After these have been worked out, his/her performance, in relation to the goals, can be assessed. MBO, therefore, focuses on results. The subordinate’s performance is judged in terms of how worse or badly he/she has achieved his/her goals.

Various kinds of MBO systems are used in organisations. Here is an example of how a programme might work in a company.

The programme consists of several stages. First, the subordinate’s job is defined. Next, his/her current performance is evaluated. Then new objectives are developed by the subordinate and his/her manager. Finally, the programme is put into action. Later, there are periodic reviews of the person’s perfomance, and his/her progress is checked.

Let us consider these phases in more detail. At the first stage the subordinate and his/her manager define the job separately. They also rank the tasks in order of importance. Both parties then meet and discuss the statements they have made in writing. It is quite possible that they will not agree about certain aspects of the job. They discuss their differences of opinion. In the end, they both have a clearer idea of what the job involves.

At stage two, the subordinate and his/her manager examine each task. They try to decide how well or badly it is being performed. Again, they do this evaluation separately. They meet and discuss their assessments. All being well, the manager will have the chance to praise the subordinate for some of his/her work. On the other hand, the subordinate or the manager – or even both parties – may point out areas where there are problems – tasks which are not performed properly.

Developing objectives comes next. The subordinate and his/her manager try to develop goals which are challenging but realistic. The manager may set performance standards which can be measured or quantified. But this is not essential. The objectives probably spell out results that must be achieved. There will be dates by which the subordinate must achieve his/her goals.

The subordinate and the manager discuss the objectives and make some plans for achieving them. The manager may have to help in some way, perhaps by providing more training for the subordinate or buying more modern machines.

Finally, the subordinate sets about (начинать) achieving the goals. From time to time, the subordinate and the manager meet to discuss progress. It is vital that the manager receives feedback from the subordinate on performance and achievements.

There are many benefits of MBO. The system helps tha subordinate to see clearly his/her role in the organisation and the tasks he/she must carry out. He/She has a say in how his/her job is performed, and what his/her goals should be. As a result he/she feels more responsible and motivated and is therefore likely to be more committed to the objectives of the organisation.

MBO is a good technique for assessing an individual’s performance. He/She is judged on results, rather then on the personal feelings or prejudices of the manager. An MBO programme should lead to better coordination and communication within an enterprise. The subordinate must liaise closely with his/her manager. The manager acts as teacher and guide. The individual is encouraged to identify with the goals of the organization. Most important of all, MBO makes the individual think of results, of the contribution he/she is making – or should make – to the enterprise. The main limitations of the system are that it is time-consuming and may create a lot of paperwork. In practice, MBO programmes are often not fully supported by managements. This could be because managers are not always skilled at interviewing and giving guidance.

A few years ago, it was discovered that 70% of the 500 biggest companies in the USA were using MBO. However, a later survey showed that only 15% of the programmes were considered successful. In spite of this finding, there is little doubt that MBO has helped to increase the efficiency of both subordinates and their managers.