7 Tips to Apply Management by Objectives

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Setting objectives usually puts pressure on both: individuals and organizations every year as they evaluate the previous objectives and develop new ones. Objectives are set for various positions and functions and be in different forms like: sales targets, projects, new performance levels and so on.

 

Organizations and individuals who continuously achieve their objectives grow faster and hence considered “high performers” while those who fail or rarely achieve their objectives decline or grow slowly and considered “unsuccessful or low performers”.

 

Throughout my career, I worked in various organizations with different managements in the commercial, industrial, services, local, multinational in the private and public sectors. Based on observations, I came up with the following tips to get the utmost from applying Management by Objectives (MBO) and reach high performing organizations.

 

  1. Start with the highest management level.

Upper management at the C-level are responsible and accountable to achieve the vision and mission of the organization which requires setting and achieving organizational objectives. A senior manager should be dealt with like any other individual in the organization, he is rewarded or penalized based on agreed-upon objectives translated to key performance indicators (KPI’s). This approach presents “leadership by example” which is essential to convince the followers accept their challenging objectives and work hardly to achieve them.

 

  1. Quantify the objectives for all managerial levels.

Low performers tend to have “qualitative description” of their objectives, like: improving sales, creating a proper work environment and so on. Such description usually has different meanings from different perspectives. Objectives shall be specific and measurable which is the first part of SMART definition. You need to have “quantitative description” for objectives for all managerial levels taking into consideration that what you can’t measure you can’t manage.

 

  1. Go “top down” with “equal sums” in breaking down the objectives.

Some managers have the tendency to protect themselves against low performance of their staff, so they expand the objectives which they require from their staff. The sum of objectives for the followed is higher than the objectives of their manager. [For example: a sales manager has the objective to achieve $30 million; he distributed $33 million among his staff where $3 million is a buffer for low performance of any individual]. Although seems good to add buffers, but this leads to ignorance of certain staff when the manager doesn’t care whether they achieved or not achieved their objectives. Individuals shall be fully monitored and supported by their upper management.

 

  1. Get “buy in and commitment” before publishing the objectives.

Organizations who hurry up announcing their objectives especially at the C-level face the challenge of dividing and distributing those objectives to the staff and hence tend to force them accept unrealistic ones. Objectives can’t be achieved without committed teams. Although, a senior manager may direct and guide the development of the detailed objectives but still he needs to get the staff involved so they understand, investigate, negotiate, and accept their objectives outside power of upper management.

 

 

  1. Link objectives with management approach.

Objectives are not achievable without proper strategies, initiatives, and action plans. When developing the performance appraisal criteria, the execution approach should be taken into consideration with proper weighting for the objectives and the approach based on the organizational and individual readiness as guided in the below matrix.

 

 

Objectives Approach When to use?
70% 30% Create a “results-based” environment and culture.

Results are more important but implementing the right approach is still needed. Useful for traditional objectives with low to moderate risk.

 

30% 70% Create a “do what you can” environment and culture.

Putting efforts and implementing a proper approach has more priority. Useful for “high risk” objectives.

 

50% 50% Create a “fair” environment and culture.

Results and the approach have the same importance. Useful to encourage the staff feel safer while trying new ways.

 

 

 

  1. Deal with objectives as “targets” not as “knifes”.

Although objectives are set to be accomplished but on the other hand they should not be thought of as “holey books” or knifes on necks of the staff. The moment an organization sets its objectives it’s targeting the future based on its better forecasts.

 

Use the following approach to distinguish “low performance” from “unrealistic objectives”.

  • Categorize performance appraisal into (a) individuals, (b) groups, and (c) organization.
  • Compare performance of individuals to their group of reference where the individuals have similar circumstances.
  • If the group of reference is not achieving their total objectives that indicates a “common cause of variation” which shall be treated separately. In some cases, you need to revise the but not more than once a year. The revision point may after the first or second quarters.
  • If the group of reference is achieving its objectives but the individual is not achieving his objectives that indicates the need to take preventive or corrective actions with a specific individual. Consider giving another chance. Good persons take it positively and benefit from the second chance. If it doesn’t succeed consider other options like termination or changing area of responsibility. Do not give more than two chances within a year otherwise it will be misused.

 

  1. Identify “across organization” minimum acceptable performance.

Having a score that represents a minimum acceptable performance is a key to stay focused on achieving objectives. Divide the annual objectives into smaller periods, quarters are most likely used for monitoring and evaluation.

 

Identify the “score of minimum acceptable performance” and make it common for staff at all managerial levels across the organization. A proper score takes into consideration the overall organizational and market circumstances. For example:

  • Set 85% or more if the organization performed well in the last years and market situation appears encouraging.
  • Set 65% or less if the organization is new or facing certain financial, legal, or other difficulties and doesn’t want to lose its good staff.

 

Least but not last, either in the private or public sector, management by objectives (MBO) can’t be implemented without real commitment from the “governance board” of the organization. They are the ones who transfer MBO to be so-rigid or so-soft. In reality; MBO methodology is “smart” enough to be agile with commitment.

 

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