Staffing Management

Dear Workforce What Is “Management by Objective” How Do We Apply Its Principles to Measure Employee Performance

By Staff Report

Sep. 7, 2011

Dear Moving Toward MBOs:

Management by objective is gaining wide adoption in the business community. Here are a few observations on both the good and the bad.


Many organizations recognize the clear advantages of an MBO practice. First, setting objectives often creates an organization-wide focus on delivering results. When the right objectives are clearly identified, an MBO practice often improves the focus on execution. However, too much attention on results can backfire (e.g., Enron). Organizations should balance the emphasis on results with an equal focus on the methods employed to achieve those results.


Additionally, an MBO format clarifies the performance expectations between employees and managers, often increasing perceptions of fairness among employees. Giving your workforce a clear line of sight between their objectives and higher-level business strategies sparks greater employee innovation and creativity.


Getting managers and employees to agree on objectives can be a challenge. Getting them to identify the best objectives is an even bigger challenge. Train them on setting goals using the SMART best practices methodology. (The acronym stands for goals that are specific, measurable, attainable, realistic and timely.) Well-written goals should feature these attributes. This is absolutely critical to avoid the pitfall of misallocating your resources. Following are some key considerations when introducing MBOs.


Know your endgame and think long term. Business drivers should be used to tailor an MBO practice to your organization’s needs. Additionally, communicate the company’s long-term vision to managers and employees. This enables you to introduce smart change over multiple years, in an apparent and systematic fashion.


Know your starting point and consider a pilot. Take a methodical and prudent approach to goal-setting. We know of one company that started with senior and midlevel management, as these groups were more acquainted with results-based evaluations. Another company started with one business unit and gradually introduced the practice to other groups. Both companies completed a deep “lessons learned” analysis after their initial pilots, which included employee surveys to understand perceptions and recommendations.


Keep it simple. Start with a fairly simple format for setting goals, saving more advanced goal-setting practices (e.g., weighting goals or cascading goals) for subsequent performance periods. A good communication plan sets expectations that the practice will evolve over time, especially if your organization knows where it wants to be in three to five years.


SOURCE: James Harvey, Knowledge Infusion, San Ramon, California, December 29, 2005.


LEARN MORE: Please read about how to combine different formats for performance appraisals. Also, ways to manage performance year-round and a link to about 100 more articles on performance appraisals.


The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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