Identify and Discuss Management by Objects (MBO’s) and Design Scorecard Management by Objectives, or MBO as it is affectionately called, is a concept expressed by Peter Drucker more than 50 years ago. This strategy for managing people, which focuses on managing teams based on their ability to complete individual and team goals, has been used in larger organizations since its inception. Small to midsize organizations, however, can also benefit from adopting this strategy, particularly if you also take on the S. M. A. R. T. specific, measurable, attainable, realistic, and time-linked) method of implementation. According to Drucker (1954), managers should “avoid the activity trap”, getting so involved in their day to day activities that they forget their main purpose or objective. Instead of just a few top managers, all managers should: participate in the strategic planning process, in order to improve the implement ability of the plan, and implement a range of performance systems, designed to help the organization stay on the right track. The MBO process starts with organization defining its objectives.
The process of strategic planning, goal setting, or visioning generates from its process a set of objectives that the organization should strive to achieve. From there it is up to the individual departments to form their objectives, most if not all of which should align and support the organizational objectives. Individual objectives are the established to support the departmental objectives. MBO is designed to improve the management process and maximize the effectiveness of the member of individual teams (Bogue, 2005).
You need to explain that the MBO process is focused on helping team members understand the individual roles they play and how their jobs contribute to company success. By focusing on the message that MBO is meant to help the employee assess and prioritize efforts to make certain those effects are focused on the bottom line and organizational values. The process also helps your team understand what the organization does not value and what it may not need to do any more. High-performing companies are able to archive their objectives and outpace the competition because they have created the right conditions for their success (Hodgetts, 1998).
In doing so, their initial focus is on measuring operating results such as error rates, cycle time, or inventory control. Rather, it is on careful consideration of the environment in which they are operating and identification of the changes that will have to be created if they are to be successful in the future. One of method that we are going to discuss today is SMART (Specific, Measurable, Attainable, Realistic, and Time-Linked). The outcomes of this evaluation of effectiveness present evidence against which external auditing and inspection bodies can pass judgment (Levacic, 1989).
Drucker (1954) defined management by objectives using SMART methodology which to set employees’ performance goals. S=specific: specific goals are much more likely to be achieved than non-specific goals. There are several key factors which should be presented in the objectives that are set in order for them to be effective. They should be specific and answer these questions: Who is involved? What do you want to accomplish? Where, When, and Why?. M=measurable: measuring progress towards a goal helps you stay on track, reach your target dates, and experience achievement.
Staying on track results in a cycle that continually motivates you to put forth the effort toward reaching your goal. On the case study from Hodgetts (1989), AT&T Consumer Communication Services employs a variety of feedback forms to help identify service requirements. This feedback comes from satisfaction survey results, competitive analysis data, operational results, and the company’s own understanding of customer requirements. These data allow AT&T to answer the question “What does the customer want, and what types of quality measures can we develop for meeting these requirements? Through personal interaction with customers, the requirements are identified; requirements that AT&T strives to meet, and in each case there are quality measures that are used to ensure that performance continues to meet or exceed customer expectations (p. 64). A=attainable: at first goal may seem too overwhelming to achieve. A goal will seem much more attainable if you can break down into steps. Each step should be something that moves you closer to that goal. R=realistic: personal and situational factors may influence your ability to reach your goal.
Some personal factors to consider are tiredness, physical well being, and other commitments you may have. T=time-linked, goals without deadline or schedules for completion tend to put aside for the day-to-day crises that invariably arise in a person’s life. Scorecard The scorecard is an integrating tools used in both the team and individual incentive components; the process of performance planning is key to achieving the right balance of alignment between priorities and needs (Wilson, 1999). The scorecard serves as the catalyst for important decision making and resource allocation.
Each scorecard is structured in a similar manner. There are between three and six measures for each card, a weighting of each measure, and five levels of performance. Below is my sample scorecard to measure IT staff’s performance. Conclusions For many people working in modern business environments, it is hard to remember a time when non-managerial employees were not involved with, and interested in, corporate strategy and goals. We are regularly reminded about the corporate mission statement, we have strategy meetings where the “big picture” is revealed to us, and we are invited to participate in some decisions.
And we are aware of how our day-to-day activities contribute to these corporate goals. This type of managing has not been around forever: it is an approach called Management by Objectives; a system that seeks a align employees’ goals with the goals of the organization. This ensures that everyone is clear about what they should be doing. It is quite easy to see why this type of managing makes sense – when the parts work in unison the whole works smoothly too. And by focusing on what you are trying to archive, you can quickly discriminate between tasks that must be completed, and those that are just a waste of valuable time.
The scorecard is an important one for managing people to deliver the goals of your business. “Balance” comes from the alignment of financial performance measures with those relate to customers, internal business processes, and innovation and learning: Financial measures alone will not ensure success nor will any of the other performance measures taken in isolation. The scorecard is just that: Balanced. And while it will not measure the “correctness” of your strategy, it will help you monitor and measure the progress you are making to archive that strategy across all areas of operations. References Drucker, P. (1954).
The Practice of Management. New Jersey, Harper & Row Publisher. Field,K. , Holden, P. , Lawlor, H. (2002). Effective Subject Leadership. London, New York Routledge. Hodgetts, M. R. (1998). Measures of Quality and High Performance: Simple Tools and Lessons Learned from America’s Most Successful Corporations. New York, AMACOM Books. Levacic, R. (1989) ‘Managing a Delegate Budget: Three school’s experience’. In Levacic, R. (ed). Financial Management in Education. Milton Keynes: Open University Press. Wilson, T. (1999). Rewards That Drive High Performance: Success Stories from Leading Organizations. New York, AMACOM Books.