Managers use strategic, tactical and operational goals to direct employees and resources toward achieving specific outcomes that enable the organizations to perform efficiently and effectively. Managers use a number of planning approaches. Among the most popular are management by objectives, single use plans, standing plans, and contingency plans.
Management by Objectives:
Management by objectives (MBO) is a method whereby managers and employees define goals for every department, project and person and use them to monitor subsequent performance. A model of the essential steps of the MBO process is presented in Exhibit. Four major activities must occur in order for MBO to be successful.
Set goals: This is the most difficult step in MBO. Setting goals involves employees at all levels and looks beyond day to day activities to answer the question what are we trying to accomplish? A good plan should be concrete and realistic, provide a specific target and time frame and assign responsibility. Goals may be quantitative or qualitative. Quantitative goals are described in numerical terms such as salesperson Jones will obtain 16 new accounts in December. Qualitative goals use statements such as Marketing will reduce complaints by improving customer service next year. Goals should be jointly derived. Mutual agreements between employees and supervisors creates the strongest commitment to achieving goals. In the case of teams, all team members may participate in setting goals.
Develop action plans: An action plan defines the course of action needed to achieve the stated goals. Action plans are made for both individuals and departments.
Review progress: A periodic progress review is important to ensure that action plans are working. These reviews can occur informally between the managers and subordinates where the organization may wish to conduct three, six, or nine month’s reviews during the year. This periodic check-up allows managers and employees to see whether they are on target or whether corrective action is necessary. Managers and employees should not be locked into predefined behaviour and must be willing to take whatever steps are necessary to produce meaningful results. The point of MBO is to achieve goals. The action plan can be changed whenever goals are not being met.
Appraise overall performance: The final step in MBO is to carefully evaluate whether annual goals have been achieved for both individuals and departments. Success or failure to achieve goals can become part of the performance appraisal system and the designation of salary increase and other rewards. The appraisal of departmental and overall corporate performance shapes goals for the next year The MBO cycle repeats itself on an annual basis.
Many companies including Intel, Tenneco, Black & Decker and DuPont have adopted MBO, and most managers think MBO is an effective management tool. Managers believe they are better oriented toward goal achievement when MBO is used. In recent years the US congress has required that federal agencies use a type of MBO system to help focus government employees on achieving specific outcomes rather than focusing only on activities and work processes. Like any system MBO, achieves benefits when used properly but results in problems when used improperly. Benefits and problems are summarized.
The benefits of the MBO process can be many. Corporate goals are, more likely to be achieved when they focus on manager and employee efforts. Using a performance measurement system, such as MBO, helps employees see how their jobs and performance contribute to the business giving them a sense of ownership and commitment. Performance is improved when employees are committed to attaining the goals, are motivated because they help decide what is expected and are free to be resourceful. Goals at lower levels are aligned with and enable the attainment of goals at top management levels.
Source: New Era Management