Management by objectives (MBO) is a popular method of managing organizations that has been refined over the years to help them reap the benefits of this system. To maximize its effectiveness, it is important to examine the psychological assumptions that support it, expand it to include group evaluation and evaluation of superiors by subordinates, and consider the individual's personal goals. In the 1990s, Peter Drucker downplayed the importance of this method, saying it was “just another tool”. Organizations should not promise young people that they will have challenges because of management goals.
Instead, they should focus on creating an environment where managers feel secure and are not constantly defensive. This will give them more freedom to evaluate themselves based on their own needs. The objectives should include not only the personal and occupational goals of the individual manager, but also corporate goals and superior participation in common tasks. The employee and manager must also work together to determine the measures to evaluate each of the objectives.
For example, a group of managers (sales, promotion, advertising) who depend on a vice president of marketing should formulate their collective objectives and define ways to help each other and evaluate the effectiveness of others in the common task. Steve Kerr's 1975 article “On the Folly of Rewarding A, While Hoping for B” criticized the disconnect between reward systems and strategy. To be truly effective in the long term, MBO programs should be combined with some type of benefit-sharing program. This will help organizations share financial gains from ideas, productivity improvements, and cost savings that result from employee participation.
In cases where top management is emotionally, intellectually, and behaviorally invested in MBO, its performance effects tend to be stronger. Lower level managers will then see the company as human in their enlightened self-interest and will not have to create frightening fantasies about what were the conflicts of senior management that had caused a good person to leave.
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