MBO has been successful for over half a century. It saw the first stages of its development in...
to bring ethics to it.The setting of goals that are specific, measurable, aligned, realistic, and time bound
(SMART) serve ...
autonomy to people in their work, these businesses are somewhat unique in the skills and work
required.The same cannot be ...
Consider the person in the business without MBO, who may not get recognition for their efforts given
they are subject to a...
agreement.The agreements can also address topics like communication, conduct, information sharing,
and responsibilities of...
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Preview of “MBO” (1)

Published on: Mar 4, 2016

Transcripts - Preview of “MBO” (1)

  • 1. MBO MANAGEMENT BY OBJECTIVES MBO has been successful for over half a century. It saw the first stages of its development in the 1950s. The ideas on which it is founded began their development as early as the time of the first businesses that operated in a sophisticated manner. Its approach of setting goals as part of managing work and bringing alignment to the work of an organization, personified by the Hoshin strategic planning/management methodology, will allow a business to best reach its goals.The amount of redundant and superfluous work will be reduced by using MBO, and a higher impact to an organization and its people by the work done will be seen. MBO is one of the most proven planning/strategic management methodologies.This is a point about it that should not to be dismissed. Detractors of the method rationalize it with the label of fad, and discount the integral nature of MBO to successful businesses, yesterday and today.Their attempts to downplay the longstanding methodology are somewhat mute however, for not being very germane to the topic. To argue that MBO does not consider nongoal areas, for instance, seems to indicate a lack of appreciation of what the method is. A key aspect of MBO is creating goals for people throughout an organization, which have been chosen because they focus on areas that require goals to be set for them. In this sense, to say that nongoals are not considered represents somewhat of an oxymoron. Other attempts to slight the method also show the same limited insight, or are inappropriate. The latter are directed at the complexities encountered when people work together in a business, and have little to do with a goal-setting process. Whether MBO is used or not these 5 concerns are still present: risk preferences/aversion, evidence of unethical behaviour, inhibited learning, corrosion of organizational culture, and reduced intrinsic motivation.After some discussion about these criticisms of MBO I will look at often seen outcomes of organizations that do not use it. Risk preference is not a valid criticism of MBO for the fact that objectives are established through agreement between manager and employee. It is the process of establishing agreement that ensures risk preference does not have undue affect on the goals set. If the other attempts at criticisms of the method are similarly considered, it is seen that they also are not very germane to the topic, and are more to do with the broader topic of managing employees, not managing work, plans, and strategies through a goal setting process. Intrinsic motivation. If a person is not in a position that fundamentally allows them to use those skills which give them a natural sense of satisfaction, any goals set for their work are irrelevant to the problem.Trying to lay blame on MBO for a problem that is about a person in the wrong position is aiming criticism at the wrong place.This is the type of thinking that would place someone in customer service because they are friendly with customers, thinking the person is intrinsically motivated by it. The reality of the matter however, is that the person understands the importance of managing the business’ image, and their motivation is truly driven when using skills of analysis, and data mining. Abraham Maslow’s work which is mentioned later addressed precisely this aspect of work and motivation. Corrosion of organizational culture is heavily influenced by employee behaviour, and it can easily overlap with the issue of unethical behaviour. These two areas are offered by some as downfalls of MBO when they have little to do with the method, and are more about the people hired and supervision of them. MBO helps reduce unethical behaviour which affects the work through its ability
  • 2. to bring ethics to it.The setting of goals that are specific, measurable, aligned, realistic, and time bound (SMART) serve to deter the presence of unethical behaviour. What also seems to be missed by detractors of MBO is how goal setting can positively influence what are perceived as pitfalls of it.The nature of goals set can address issues like inhibited learning when the goal itself is to complete a course of study, or learn about an aspect of a business. In the case of intrinsic motivation problems, goals can be set that help the employee move into a position they are better suited for. For people who have the insight of having worked in MBO organizations as well as organizations without its planning and managing focus, or with a poor application of MBO, they can appreciate how bad criticisms of the method are formed.To instruct an employee that they will set their own goals, with no agreement to them sought by another, nor any later checking of accomplishment of them, it is easy to see how MBO-based thinking can be wrongly blamed for other organizational problems. The planning aspect of MBO, brought to its highest levels of performance in Hoshin, is looked upon with doubting eyes by some. The argument offered is that unforeseen changes will affect any plan developed; however, the skill of foresight in decision making can minimize any potential problems. Contingencies can be planned for in the event an unexpected change occurs, and goals can be specifically set to address, and prepare for, those potential changes. Detractors who accuse MBO of being an off-the-shelf ready-to-use program to affect motivation seem to miss the difference between proper and poor uses of it. Motivation is not a primary objective of MBO. It is, however, designed with a consideration of motivation theories. Using the methodology to improve motivation is as much to do with the supervision/management of people, job design, and hiring practices, as it is to do with MBO itself.Warnings of MBO are misdirected. Like most things that are not done well, if the methodology is not prepared for, implemented, and executed appropriately, problems will show themselves. MBO has been successful for over half a century. Arguably it is one of the longest standing comprehensive business methodologies since businesses have needed the skill of managing. The history that affected MBO goes back many eras of business. From the first movements seen at the times of the industrial revolutions that brought the resources of people and machinery together in one place of work, a need to deal with; manage, the complexity of the new workplace showed itself. MBO’s earliest ideas started to be formed by the Industrial Engineering profession, when American Fredrick Taylor, in the first years of the 1900s, created Scientific Management. French Henri Fayol then fathered Operations Management in 1916. After Fayol’s work was Australian Elton Mayo who conducted the Hawthorn Studies in the 1930s, in the area of behaviour and work.Then later in 1943 Psychologist Abraham Maslow gave us the Hierarchy Of Needs, and Douglas McGregor of MIT developed Theory X,Y Of Motivation in the 1950s. In1968 Psychologist Fredrick Herzberg introduced the Motivator-Hygiene Theory, and most recently in the 1950s Austrian Peter Drucker established Management By Objectives. There is no question that MBO is founded by ideas and research that go back to the beginning of the sophisticated business. If we stop to consider what has happened to many businesses that have not embraced the idea of MBO, and the ideas it is formed from, we see similarities in the outcomes. Starting with one idea which is that people should not be supervised in their work.This is short sighted in its application to many organizations. While some progressive companies have used this approach, giving much
  • 3. autonomy to people in their work, these businesses are somewhat unique in the skills and work required.The same cannot be applied to organizations in general. The use of teams or work circles or work groups, whatever name might be given to them, will at some point in the movement of information and resources throughout the business need to report what has been done. Alternatively, they will need to receive information about what needs to be done.This approach of eliminating a role tends to flatten out an organization causing it to have fewer levels in it, but this should not be mistaken with eliminating the action of supervising work. Some businesses are more complex than others, requiring this action to take place more regularly. Other businesses that are less complex can have the action done less regularly. However, it should be understood that the supervising action is always there, howbeit in different forms. An attempt to eliminate the supervising action from a regular frequency requires careful planning. It is done but with due consideration and foresight of potential problems, and appropriate steps taken to prevent them and ensure a smooth transition to the new organizational design. That said, the discussion begins to sound like the goal setting and strategic planning process of MBO. Perhaps the advocates of workplaces without supervision are confused about terminology and the meanings behind actions involved; because, essentially, in order to implement such a change successfully requires the skills and practices seen in MBO. The alternative to not using MBO often results in scattered work and workplace problems. A manger who asks people to offer something of work begins a process of organizational confusion. Overlap of work and perceived responsibilities will soon follow. This occurs between people, groups, and departments. With no alignment and path in which goals; work offered in this case, are directed, it is inevitable that confusion will be created. A manager will then be forced to delegate, albeit casually, a new and needed responsibility of co-ordinating the work activities, or they may even create a new formal role for it. However, this somewhat reverse approach; reactive response to problems now experienced, which is intended to adjust the organization’s design would be avoided had a planned and goal-oriented approach been used at the start. The subsequent problems in the workplace culture caused by this approach are not difficult to anticipate. People are left to ‘work out’ differences among themselves, responsibilities and shared resources, which can easily lead to conflict. People are not working with the security of knowing where they fit in the organization in this scenario. It is somewhat unrealistic to expect harmony among people when it is possible a person, group, or even an entire department risks losing its position, and ultimately its place in the business.The more likely outcome is difficult relationships, low trust, and turf wars. While some try to rationalize this outcome as a way to identify leaders, or force a situation where only those needed in the business prevail, it is a lengthy approach with damaging results along the way. Even those who remain after the organizational dust has settled, so to speak, are the result of a process that could have just as easily put them out of a job.The commitment, motivation, and loyalty sought by an organization will not be found for its own manner of managing its people.The business struggles to the problems of workplace culture and has difficulty getting and keeping good people.The organization is better off to recruit people at the onset who have planning and strategic-thinking skills, and leadership skills if they are sought.The question now becomes, why would the business not use MBO for the problems they will suffer otherwise? The idea of motivation has become a bit of a marvel in recent years, it seems. Perhaps this is for the reason that a sound understanding of it and how it is created has been missing. MBO, by design, serves to help motivate the people of an organization.
  • 4. Consider the person in the business without MBO, who may not get recognition for their efforts given they are subject to a ‘work it out’ process. They may not end up doing the actual task of work for duplication of it, or they may find its impact to the business is marginalized because of the work of another. In contrast, the person in the MBO business is given a goal to accomplish. It is agreed to by them self and their manager and is aligned/planned such that it will not be redundant for the work of others. Once they accomplish the item of work, they are given recognition for it and know that the process will reward them for the goals they have satisfied. This example is only a mere look at what motivation involves and what MBO is, however it serves to make a basic and important point. Using MBO effectively requires some things from an organization. For instance, a key aspect of it is knowing the objectives to be set.Without the proper objectives, the business risks not moving in the right direction. Peter Drucker, known as the modern-day management guru, is known for advocating that 90% of the time companies do not set the right objectives.The path-goal theory on which MBO is partly based becomes ineffective in satisfying broad organizational objectives when proper goals are not established.While the theory has several steps, it is the 2nd that is important to setting objectives. The 3 steps of goal-setting theory are: remove obstacles so a person can realistically achieve a goal, clarify the path to the goal so the work done will lead to it, and offer a reward to the person for accomplishing the objective. In spite of uninformed slights of MBO it is certainly not over-the-counter, off-the-shelf, or ready-to- use. The people of an organization need to understand their business and know how to set objectives.The cascade effect from the strategy developed by the senior team causes objectives to be set in every part of the business. One accomplished objective serves to satisfy another, and so on, until, like a design of toppling dominos, every goal has been realized. When this happens the organization will have accomplished its overall goal and have achieved success. Cultural differences in using MBO give rise to the concept of power distance and its affect on manager-employee relationships. Power distance is a dimension of cultural variability which affects leadership in different cultures. One description of it is the extent to which a society accepts the fact that power in organizations is distributed unequally. While this dimension exists in any culture the research behind power distance also explains that all cultures must find ways of eliciting responsible behaviour from their members, and that there are different ways of doing so. More specific to the workings of MBO in the context of culture, regardless of the dynamics of the manager-employee relationship, there are still ways to effectively apply the methodology.The cultural nuances will be present as much for the employee as for the manager.Whether subordinates see their managers as well-meaning autocrats in high power-distance countries, or as resourceful democrats in low-power distance countries, within the same culture MBO will execute accordingly. The option exists to go beyond manager-employee agreement solely in the establishment of goals, but to find agreement also in how their working relationship will be. Should an employee feel they must consult their boss on every decision simply because he is the boss, as is seen in high power-distance cultures, or should they feel to consult their boss only when they think he will have the answer to a problem, regardless of the culture a manager-employee agreement can be effective. The manager-employee agreement addresses precisely these types of issues. An employee who can work with a high degree of autonomy can seek agreement that they meet with their manager less; and conversely, the employee who wants more regular supervision of their work can seek this in their
  • 5. agreement.The agreements can also address topics like communication, conduct, information sharing, and responsibilities of decision making, among others. When considering MBO in an organizational sense in Hoshin Kanri, the business is helped in 4 ways: focus on a shared goal, communication of that goal to all leaders, involving all leaders in planning to achieve the goal, and holding participants accountable for achieving their part of the plan.This assumes of course that daily controls and performance measures are in place. Short term activities, daily, monthly, and quarterly, when confronted with business pressures need to be determined and managed within the strategic plans, not the other way around. If you or your organization are not yet supporting MBO, it is a matter of accepting that the business and its people will have unexpected problems. -- References: Organizational Behaviour Course Material, MBA Program, Edinburgh School of Business, Heriot Watt University, UK, 1995 A.Yoji, ed. Hoshin Kanri, policy deployment for successful TQM. NewYork: Productivity Press (Originally Japanese Standards Association) (Jap: 1988, Eng: 1991). L. Ordóñez, M. Schweitzer ,A. Galinsky, M. Bazerman, Goals Gone Wild:The Systematic Side Effects of Overprescribing Goal Setting, ACAD MANAGE PERSPECT February 1, 2009 vol. 23 no. 1 6-16 Den Hartog, Deanne N. "Power Distance." Encyclopedia of Leadership. Ed. .Thousand Oaks, CA: SAGE, 2004. 1225-30. SAGE

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