Q&A: What Is "Managing by Objective"? How Do We Apply Its Principles to Measure Employee Performance?

What Is "Managing by Objective"? How Do We Apply Its Principles to Measure Employee Performance?
	How do we prepare a performance management plan that utilizes "management by objective"? What are some key advantages to this structure, as well as potential pitfalls? —Moving Toward MBOs, manufacturing, Hong Kong
	Management by objective is gaining wide adoption in the business community. Here are a few observations on both the good and the bad. Many organizations recognize the clear advantages of an MBO practice. First, setting objectives often creates an organization-wide focus on delivering results. When the right objectives are clearly identified, an MBO practice often improves the focus on execution. However, too much attention on results can backfire ( e.g., Enron). Organizations should balance the emphasis on results with an equal focus on the methods employed to achieve those results. Additionally, an MBO format clarifies the performance expectations between employees and managers, often increasing perceptions of fairness among employees. Giving your workforce a clear line of sight between their objectives and higher-level business strategies sparks greater employee innovation and creativity. Getting managers and employees to agree on objectives can be a challenge. Getting them to identify the best objectives is an even bigger challenge. Train them on setting goals using the SMART best practices methodology. (The acronym stands for goals that are specific, measurable, attainable, realistic and timely.) Well-written goals should feature these attributes. This is absolutely critical to avoid the pitfall of misallocating your resources. Following are some key considerations when introducing MBOs. Know your endgame and think long term. Business drivers should be used to tailor an MBO practice to your organization's needs. Additionally, communicate the company's long-term vision to managers and employees. This enables you to introduce smart change over multiple years, in an apparent and systematic fashion. Know your starting point and consider a pilot. Take a methodical and prudent approach to goal-setting. We know of one company that started with senior and midlevel management, as these groups were more acquainted with results-based evaluations. Another company started with one business unit and gradually introduced the practice to other groups. Both companies completed a deep "lessons learned" analysis after their initial pilots, which included employee surveys to understand perceptions and recommendations. Keep it simple. Start with a fairly simple format for setting goals, saving more advanced goal-setting practices (e.g., weighting goals or cascading goals) for subsequent performance periods. A good communication plan sets expectations that the practice will evolve over time, especially if your organization knows where it wants to be in three to five years. SOURCE: James Harvey, Knowledge Infusion, San Ramon, California, December 29, 2005.