Stripped to its basics, management by objectives (MBO) requires the manager to set specific measurable goals with each employee and then periodically discuss the latterâ€™s progress toward these goals. A manager could engage in a modest and informal MBO program with subordinates by jointly setting goals and periodically providing feedback. However, the term MBO generally refers to a comprehensive and formal organization wide goal setting and appraisal program consisting of six steps:
1. Set the organizationâ€™s goals: Establish, based on the firmâ€™s strategic plan, an organization wide plan for next year and set company specific goals.
2. Set department goals: Next, department heads take these company goals like boost next year profits by 20% and with their superiors jointly set goals for their departments.
3. Discuss departmental goals: Department heads discuss the departmentâ€™s goals with all subordinates, often at a department wide meeting. They ask employees to set their own preliminary individual goals; in other words, how can each employee contribute to the departmentâ€™s goals?
4. Define expected results (set individual goals). Department heads and their subordinates set short term individual performance targets.
5. Performance reviews: Department heads compare each employeeâ€™s actual and targeted performance.
6. Provide feedback: Department heads and employees discuss and evaluate the latterâ€™s progress.
There are three problems in using MBO. Setting unclear, un-measurable objectives is the main one. An objective such as â€œwill do a better job of trainingâ€ is useless. On the other hand, â€œwill have four subordinates promoted during the yearâ€ is s measurable objective.
Second, MBO is time-consuming. Setting objectives, measuring progress, and giving feedback can take several hours per employee per year, over and above the time you already spend each personâ€™s appraisal.
Third, setting objectives with the subordinate sometimes turns into tug-of-war, with the superior pushing for higher quotas and the subordinate pushing for lower ones. Knowing the job and the personâ€™s ability is important. To motivate performance, the objectives must be fair and attainable. The more a manager knows about the job and the personâ€™s ability, the more confident he can be about the standards set.
Several relatively inexpensive performance appraisal software programs are on the market. These generally enable managers to keep notes on subordinates during the year, and then to electronically rate employees on a series of performance traits. The programs generate written text to support each part of the appraisal.
Employee Appraiser developed by the Austin-Hayne Corporation, San Mateo, California presents a menu of more than a dozen evaluation dimensions, including dependability, initiative, communication, decision making, leadership, judgment, and planning and productivity. Within each dimension are various performance factors, again presented in menu form. For example, under â€œcommunicationâ€ are separate factors for writing, verbal communication, receptivity to feedback and criticism, listening skills, ability to focus on the desired results, keeping others informed, and openness. When the user clicks on a performance factor, the person sees a relatively sophisticated version of a graphic rating scale. Instead of a scale with numbers, Employee Appraiser uses behaviorally anchored examples. For example, for verbal communication, there are six choices, ranging from â€œpresents ideas clearlyâ€ to â€œlacks structure.â€ After the manager picks the phrase that most accurately describes the worker, Employee Appraiser generates sample text for the employeeâ€™s appraisal.
PerformanceReview.com, from Knowledge Point of Petaluma, California lets managers evaluate employees online based on their competencies, goals, and development plans. Managers can chose from standard competencies such as â€œcommunicationsâ€, or create their own.
The Web site improvenow.com lets employees fill out a 60-question assessment online with or without their supervisorâ€™s approval, and then gives the supervisor the teamâ€™s feedback with an over all score.