Management by Objectives

Abstract

Levinson (2003) examined the concept of Management by Objectives (MBO). He addressed the limitations of MBO as a process and suggested solutions for coping with the problems MBO programs present. He also outlined group goal setting and shared compensation on the relative success with which the group goals are achieved along with regular appraisals of the manager by subordinates.

This article seems to be about management by objectives, an approach to performance appraisal that's gone out of fashion for the most part. However, the intent of this article is to scrutinize the measurement systems we still use today. Levinson (2003) identified a constellation of problems that cripple performance appraisal systems: Unit managers are forced to commit to goals they don't believe are realistic. An obsession with objectivity and quantitative measures means that quality is neglected. Supervisors, who are profoundly uncomfortable rating people on their performance, make a hash of this critical task. Most important, in Levinson's view, the individual's needs and desires are absent from the performance measurement system; it's assumed that these are in perfect alignment with corporate goals and that, if they're not, the individual should move on. Levinson's suggestions for reform recall Frederick Herzberg's findings: People are most deeply motivated by work that stretches and excites them while also advancing organizational goals.

According to Levinson (2003), despite the fact that the concept of management by objectives (MBO) has become an integral part of the managerial process, the typical MBO effort intensifies distrust between a manager and subordinates. Coupled with performance appraisal, the intent is to approach a more rational management process. That is, which people are to do what, who is to have control over it, and how compensation is to be related directly to individual achievement. The MBO process is an effort to be fair and reasonable, to predict performance and judge it more carefully, and to provide individuals with an opportunity to be self-motivating by setting their own objectives. Yet, MBO as a process is one of the greatest of managerial illusions because it fails to take into account the deeper emotional components of motivation. In most organizations, MBO simply increases pressure on the individual.

To see how the human point of MBO is being missed, let us follow the typical process. Top management sets its corporate goal for the year. Reporting managers may then be asked how much their units will contribute to meeting that goal. If managers are left free to set their own goals, these are expected to be higher than in the previous year. Once reporting managers decide on their units' goals and have them approved by their superiors, those become the managers' goals.

Now, let us re-examine this process: the method is based on a short-term, egocentrically oriented perspective and a reward-punishment psychology. The typical MBO process puts the reporting manager in much the same position as a rat in a maze, who has choices between only two alternatives. MBO differs only in that it permits managers to determine their own bait from a limited selection. Having done so, the MBO process assumes that managers will (a) work hard to get it, (b) be pushed internally by their own commitment, and (c) make themselves responsible to their organizations for doing so (Levinson, 2003).

This process leaves out the answers to such questions as: What are managers' personal objectives? How do their needs change each year? What relevance do organizational objectives and managers' part in them have to such needs? Obviously, no objectives will have much incentive power if they are unrelated to a person's underlying personal aspirations (Hilgert & Leonard, 2004).

According to Levinson (2003), making managers' personal objectives a priority does not minimize the importance of the organization's goals. It is ridiculous, however, to make assumptions about the motivations of individuals and then to increase the pressure on people based on these assumptions.

There are a number of possibilities for coping with the problems MBO programs present:

First possibility is the Motivational Assessment. Every MBO program and its accompanying performance appraisal system should be examined regarding the extent to which it expresses the conviction that people are patsies to be driven and manipulated, and fosters a real partnership between people and the organization, in which each has some influence over the other. It is not easy for the non-psychologist to answer such questions, but there are clues to the answers. One clue is how decisions about compensation, particularly bonuses, are made.

Second possibility is the Group Action. Every objectives and appraisal program should include group goal setting, group definition of both individual and group tasks, group appraisal of its accomplishments, group appraisal of each individual's contribution to the group effort (without basing compensation on that appraisal), and shared compensation based on the relative success with which group goals are achieved. According to Lumsden, and Lumsden, (2003), managers have responsibilities to each other as well as to their superiors. Emphasizing and rewarding individual performance alone, based on static job descriptions, can orient people only to self-centered goals. The rationale is simple. Every managerial job is an interdependent task. Managers have responsibilities to one another as well as to their superiors. The reason for having an organization is to achieve more together than each could alone. Why, then, emphasize and reward individual performance alone, based on static job descriptions? That approach can only orient people to incorrect and self-centered goals.

Therefore, where people