The Two Questions You Need
to Answer To Get The Whole Process Rolling
Where do I want to go ? (What is the
How will I pace myself to see if I am
getting there? (What are my milestones, or key results?)
Make sure that the answers are
Types of Objectives
(by Peter Drucker)
The objectives must be:
The Six MBO Stages
Define corporate objectives at board level
Analyze management tasks and devise formal
job specifications, which allocate responsibilities and decisions to
Set performance standards
Agree and set specific objectives
Align individual targets with corporate
Establish a management information system
to monitor achievements against objectives
MBO in Action at Intel: A
Start with a few well-chosen overriding objectives
Set your subordinates objectives that fit
in with your overriding objectives
Allow your subordinates to set their own
key results to enable them to meet their objectives
The Eight Key Result Areas
Where Managers Must Pursue Clear Objectives
Job Satisfaction Needs of
Personal Empowerment: The
Four Powers You Need To Do an Excellent Job
Freedom to challenge everything and
Continuous training and development on the
Knowledge of, and faith in, the
The ability to achieve and see results
Managing for Results: The
Resources and results exist outside, not
inside, the business
Results come from exploiting
opportunities, not solving problems
For results, resources must go to
opportunities, not to problems
"Economic results" do not go to minor
players in a given market, but to leaders
Leadership, however, is not likely to last
What exists is getting old
What exists is likely to be misallocated
(i.e. the first 10% of effort produces 90% of the results)
To achieve economic results, concentrate
Related how-to guides:
Objectives (MBO): Starting with Yourself
Yourself and Others
Measuring Performance: The Executive Diagnostic Toolkit
Managing Change: Continuous Innovation Strategy
What is MBO?
Management by objectives is about setting
yourself objectives and then breaking these down into more specific goals or
MBO is a systematic and
organized approach that allows management to focus on achievable goals and
to attain the best possible results from available resources. The principle
behind MBO is to make sure that everybody within the organization has a
clear understanding of the aims, or objectives, of that organization, as
well as awareness of their own roles and responsibilities in achieving those
aims. The complete MBO system is to get managers acting to implement and
achieve their plans, which automatically achieve those of the organization.
"The one thing an MBO system should provide is
focus", says Andy Grove who ardently practiced MBO at Intel. So, have your
objectives precise and keep their number small. Most people disobey this
rule, try to focus on everything, and end up with no focus at all.
For MBO to be
effective, individual managers must understand the specific objectives of
their job and how those objectives fit in with the overall company
objectives set by the board of directors. "A manager's job should be based
on a task to be performed in order to attain the company's objectives... the
manager should be directed and controlled by the objectives of performance
rather than by his boss."
The managers of the various units or sub-units,
or sections of an organization should know not only the objectives of their
unit but should also actively participate in setting these objectives and
make responsibility for them.
The review mechanism enables leaders to measure
the performance of their managers, especially in the key result areas:
marketing; innovation; human organization; financial resources; physical
resources; productivity; social responsibility; and profit requirements.
However, in recent years opinion has moved away
from the idea of placing managers into a formal, rigid system of objectives.
Today, when maximum flexibility is essential, achieving the objective
rightly is more important.
Achieving the Balance between Management and
The balance between management and
empowerment has to be struck, not by thinkers, but by practicing managers.
Turning their aims into successful actions, forces managers to master five basic operations:
These MBO operations are all compatible with
empowerment, if you follow the main principle of decentralization: telling
people what is to be done, but letting them achieve it their own way. To
make the principle work well, people need to be able to develop personally.
Further, different people have different hierarchy of needs and, thus, need
to be managed differently if they are to perform well and achieve their
Empowerment recognizes "the demise" of the
command-and-control system, but remains a term of power and rank. A manager
should view members of his or her team much as a conductor regards the
players in the orchestra, as individuals whose particular skills contribute
to the success of the enterprise. While people are still subordinates, the
superior is increasingly dependent on the subordinates for getting results
in their area of responsibility, where they have the requisite knowledge. In
turn, these subordinates depend on their superior for direction and "above
all, to define what the 'score' if for the entire organization, that is,
what are standards and values, performance and results."
Managing for Results
The only place where meaningful management
results can be won is the outside world. Managing for results is expansion
of MBO into the marketplace. It is the theory and practice of how to produce
results on the outside, in the market and economy.
To achieve these results, you should develop a
solid, sound, customer-focused, and entrepreneurial strategy, aimed at
market leadership, based on
and tightly focused on decisive opportunities.
MBO creates a link between top management's
strategic thinking and the
strategy's implementation lower down.
Responsibility for objectives is passed from the organization to its
individual members. It is especially important for knowledge-based
organizations where all members have to be able to control their own work by
feeding back from their results to their objectives.
Management by objectives is achieved through
self-control, the tool of effectiveness. Today the worker is a
decisions are of decisive importance for results.
In such an organization, management has to ask
each employee three questions:
What should we hold you accountable for?
What information do you need?
What information do you owe the rest of us?