Managing in the fog? 
Or carrots and sticks for every activity?The origin
Peter Drucker, a famous management consultant and theoretician, developed the idea
of MBO - Management by Objectives in the middle of the 20th century.
MBO intends to make managers and employees, in an organization, conscious of
- and responsible for - their performance / efficiency in their area of
activity (resources, production, marketing, research & development, finance,
communication, support...).
The chosen
objectives are linked to the strategy, standards and operational
plans of the business or institution.
of MBO - Management by Objectives in the middle of the 20th century.
MBO intends to make managers and employees, in an organization, conscious of
- and responsible for - their performance / efficiency in their area of
activity (resources, production, marketing, research & development, finance,
communication, support...).
The chosen
objectives are linked to the strategy, standards and operational plans of the business or institution.
How it works
Periodical (yearly, monthly...) expected results are attributed to individual and/or teams.
They can be:
They can be:
- Quantitative, and, although harder to measure, qualitative.
- Short term and long term, but the later also less easy to monitor.
The system includes or not monetary incentives to help those objectives to be met.
The concept led to develop tools to measure, monitor, and if possible explain, the
deviation between objectives and results.
Among those tools let us mention
Reporting, Management control and
accounting, Project planning, Incentive pay system, and, with the help of
information technologies, the full bodied MIS - Management information system.
Let us also mention also benchmarking (comparison with other organizations that
are considered highly performing).
Wow, no place to hide your poor results, Jo Manager, but no drama here, maybe you
were just unlucky, better that you got informed, and you will perform better next time !
The concept led to develop tools to measure, monitor, and if possible explain, the
deviation between objectives and results. Among those tools let us mention
Reporting, Management control and accounting, Project planning, Incentive pay system, and, with the help of
information technologies, the full bodied MIS - Management information system.
Let us also mention also benchmarking (comparison with other organizations that
are considered highly performing).
Wow, no place to hide your poor results, Jo Manager, but no drama here, maybe you
were just unlucky, better that you got informed, and you will perform better next time !
The utilization of the system and its benefits
This normative system is now routinely employed in most businesses and in many
other institutions.
Its
benefits have been huge. It brought a better objectivity in judging
efficiency, and helped to increase the performance of the related entities,
a bonanza for society in general.
As for the operators themselves, MBO helps them not to work in the fog, by having
objective goals and references, to see how effective is their contribution, and to have
their performance valued fairly without too much subjectivity.
An example: see how MBO and MIS can be applied to a Marketing plan
other institutions.
Its
benefits have been huge. It brought a better objectivity in judging efficiency, and helped to increase the performance of the related entities,
a bonanza for society in general.
As for the operators themselves, MBO helps them not to work in the fog, by having
objective goals and references, to see how effective is their contribution, and to have
their performance valued fairly without too much subjectivity.
An example: see how MBO and MIS can be applied to a Marketing plan
Its limitations or deviations
But in practice the MBO has been also a way to 
tighten control over
people.
This monitoring was needed for the general efficiency of the business, but when
applied blindly without flexible openings, this straightjacket's could:
tighten control over people.
This monitoring was needed for the general efficiency of the business, but when
applied blindly without flexible openings, this straightjacket's could:
- Create unnecessary stress and loss of morale for the whole staff,
not only for those who are not the best performers, after all not anybody can
be a Stakhanov-type star and be accountable for a high performance on every
aspect of its activity.
Another thing is that, when teamwork is needed, individual objectives can go
against the group cohesion.
be a Stakhanov-type star and be accountable for a high performance on every
aspect of its activity.
Another thing is that, when teamwork is needed, individual objectives can go
against the group cohesion.
- Limit the individual freedom of action
all the more if the ability to find and experiment new productive paths is
ignored in the list of stated objectives.
It can be a bureaucratic (and time consuming) tool that freezes
creativity
as well as the adaptation to a more and more complex and changing
environment. In this respect, it is difficult to avoid that the choice of objectives
be biased and reductive.
ignored in the list of stated objectives.
It can be a bureaucratic (and time consuming) tool that freezes
creativity as well as the adaptation to a more and more complex and changing
environment. In this respect, it is difficult to avoid that the choice of objectives
be biased and reductive.
MBO can bring other unexpected effects, including perverse incentives that distort behaviors,
for example by privileging
short term goals over long term ones, or introducing other inappropriate criteria... and moral hazards (cooking the stats).
For example there is rather often a deviation towards privileging
financial objectives at the detriment of other major ones (safety, staff morale, customer interests,
integration with the outside world) a neglect that can be highly risky ...even financially.
Financial performance should be one of the results of good overall management, not
an alternative to it.
Also, MBO measures only what has been projected and can be measured and does not
fully replace the need to spot the external and internal evolutions and to see what really
happens at the ground level.
It shares some of the traps and limitations of economic models and projections and of
normative regulation.
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