The Management By Objectives, Its Phases, Advantages, And Limits

Overview

Peter Drucker, who died on November 11, 2005 at the age of 95 at his Californian home in Claremont, leaves us a monumental work. The formalization of MBO principles is one of its pillars. In 1940, observing Alfred Sloan's management at General Motors, he noticed the expression 'Management By Objectives'. A little later, in the context of the decentralization of General Electric, in which he is actively involved, the American consultant insists on the need to set objectives, cost criteria and deadlines for measuring results. In 1954, The Practice of Management was published with its famous chapter: 'Management by Objectives and Self Control'. The now 'Pope of Modern Management' presents MBO as'... a principle of leadership that gives free rein to individual energy and responsibility, that at the same time charts a common path of views and efforts, that establishes teamwork and aligns personal interests and common well-being'. This management philosophy is based on two essential principles. On the one hand, every manager, from the general manager to the supervisor, must have formalized objectives that are adapted to the company's purpose. On the other hand, if each manager is to be held accountable for the results of his or her activity, it is up to him or her alone to control what he or she does to achieve his or her objectives.

The cascading of objectives operationalizes the company's goal. It converts it into targets to be reached along the hierarchical line. The objectives make it possible to measure the performance of each of the contributors. You can never perform at all, always in relation to something. In MBO, performance is measured based on the result of the work, not how it is done. A successful one is one that, at the end of a given period, produces results that are in line with the objectives set within the framework of the resources allocated for this purpose. For Peter Drucker, therefore, without any objective, no performance.

MBO: a Three-Phase Cycle

The MBO cycle has three phases: objective setting, monitoring of work performance and evaluation of results achieved. Peter Drucker readily admits that they do not follow one another in a systematic, rigorous and linear way. On the contrary, they should be considered with simultaneity, interaction and reciprocal adjustments. But he insists on their presence and recurrence at all levels of management: 'Management by objectives is based on a certain idea of the individual's action, behaviour and motivation. It ultimately applies to any manager at any level and function and to any organization, large or small.

Objectives do not fall from the sky. According to the American consultant, they must be adapted to the company's purpose and missions. Why? Why? The division of labour, a centrifugal force that tears the company apart and transforms it into a disorganized confederation, diverts managers from a common goal. To overcome this difficulty, the latter must be able to apprehend the company as a whole and, in so doing, replace what is expected of them in a coherent whole shaped by objectives declined from those of the larger group to which they belong, themselves declined from the group 'above',... until going back to the goal of the company. The implementation of objectives is one of the most appropriate ways to coordinate the previously divided work. This is a method of coordination that Henry Mintzberg will later name standardization by results.

Peter Drucker joins Rensis Likert: every manager belongs to two 'pyramids'. The one composed of his 'peers' (managers at the same level as his own) and his own line manager, on the one hand, and the one he sets up with the team for which he is responsible, on the other hand. It is a part of the base of the first, the top of the second. The members of these two 'pyramids' have different information and, therefore, a different representation of the same realities. Located at the intersection, only the manager has access to the whole. In addition to the functions already codified as supervisors, in the exercise of power, their role is enhanced and renewed by DFO. Within the 'senior' pyramid, he expresses the point of view of his collaborators as clearly as possible, the constraints they have to deal with to do their work, the obstacles they have to overcome. With his team, he must make the messages intelligible 'from above', ensure that his employees are aware of them, that they hear them. It is not necessarily a question of them 'adhering' to it, but at least of integrating them into their work, of taking them into account, of not pretending that this discourse does not exist.

There are many advantages that encourage the implementation of management by objectives:

By deploying the main objectives to each department or person in the company, objective-based management makes it possible to empower employees. It also makes it possible to integrate a notion of results with each employee who is no longer 'disconnected' from the company's need for performance.

By empowering the departments, objective-based management develops the autonomy of each individual. The staff develops their ability to propose solutions, they are also more critical of what is proposed to them, which requires more personal requirements for managers in their study of the proposed solutions.

Objective-based management also leads to greater employee autonomy and a change in relationships that are based more on a contractual concept (achieving objectives, monitoring indicators, monitoring dashboards, etc.). Objective-based management also requires managers and executives to change the way they operate, because if employees move from a logic of consuming resources to a process of achieving results, they will be more demanding on management to make the company run properly and make the right decisions. Which is, in the end, a good thing for everyone.

Overall, management by objective advances all stakeholders, managers, executives, managers and employees, moving the lines in several areas:

Setting and achieving objectives requires management and employees to clarify what they want.

By focusing on priority objectives, this approach helps to focus the energy of all teams on what is important by being judged on its results, management by objectives makes each of the actors more accountable and requires greater competence. It makes it possible to measure everyone's achievements.

Management by Objectives Limits

Team management is not reduced to a management by objectives. The manager spends time solving various technical, human, organizational, logistical and other problems... He faces the unexpected, his strength lies in his ability to integrate objectives into his work, but sometimes management priorities can take precedence over other well integrated priorities.

The many changing situations do not always plead in the implementation of management by objectives. In an accelerating economic world, the truths of the day will no longer be those of the day after and it is sometimes necessary to accept to deeply modify the objectives set a few months earlier because they suddenly prove unsuitable to the situation. set up a management by objectives Sometimes a company's performance is sustained by the globalization of its activity.

Setting objectives by department or sector may then prove inappropriate and risk breaking an overall operating mode that drives business performance.

Be careful not to overvalue the result at the expense of the process. In other words, by focusing only on results, teams are encouraged to pursue short-term objectives. Management by objectives can be catastrophic when the company operates on log cycles (investment, prospecting cycle, market penetration, etc.). It is often by improving the process that results are improve.