A Study on the Effects of the MBO Style in Organizations
Most, if not all organizations are rules by common objectives, a common vision that is upheld in the hierarchy, ideally embodied in all plans and activities that carry the company’s name. One way to ensure the realization of these goals is to translate the vision and mission into terms understandable on every level of the organization, measurable and attainable, and significant to each manager.
Created in 1954 by management guru Peter Drucker, Management by Objectives or MBO is the crystallization of this technique; it is an organized and systematic tool that allows managers to center on achievable goals, thus maximizing results from resources available (Kotelnikov, 2008). The application of MBO is possible in all departments of an organization, and is defined by specifying actual targets.
Unique to MBO is the SMART (Specific, Measurable, Achievable, Relevant, and Time-Specific) method of initiating each set objective, which is also used to validate the completion of each at the end of the period specified (LearnMarketing. net). While MBO may be heralded by many as the most effective and realistic management model, its approach has been criticized for its space in promoting passiveness and being conservative rather than challenge and a proactive stance among subordinates. II. MBO
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Four of the biggest global names in their respective fields have appropriated MBO as a means to improve and promote company performance and management. IT great Intel, which had suffered major setbacks due to earlier band judgment regarding their world-famous memory chip and microprocessor, has since adopted the MBO style; everyone, from the head honcho to each subordinate, has to come up with medium-term objectives which are consistently measured every week according to key results and performance reviews (Heller, 2006).
At Canon, specifically the Canon Production System, objectives are translated from the very particular QCDE model—representing Quality, Cost, Delivery, and Environment—into terms attainable by its suppliers, whom they term as Partners in Production; this is the company’s execution of MBO, expanded to refer to managing by results (Canon Virginia, 2008).
Hewlett-Packard, one of the pioneers of the personal computer, had subscribed to MBO early on; management instilled a greater understanding of the company’s operations among their employees by creating an informal business environment that encouraged discussion and creative thinking. By doing this, subordinates became equipped with the right knowledge to formulate progressive yet attainable objectives for themselves as part of the whole, taking into consideration Hewlett-Packard’s thrust of involving its employees, its clients, and the community in company performance (Hewlett-Packard Company, 2009).
On the other hand, Europe’s largest retailer Carrefour took a page out of Intel’s experience and deferred to MBO in its takeover of Belgium’s GB stores; using the Service Level Management solution of the MBO model to carry out the “complete loop”—delivery of the right product to the customer at the right time, with the right price at the absolute minimum cost—Carrefour managed to revive the already unprofitable chain (CBS Interactive, 2009). III. Conclusion
Management by Objectives may be viewed by some with much skepticism, considering the danger of producing lackluster, conservative performance and rigid mindsets, but key to the success of MBO is a change in organizational culture. Managers must be able to communicate the relevance of each set objective to both company and individual performance, and, according to the typical MBO cycle, connect team objectives with those specific to each member. Annual appraisals may result in rewards for company, team, and individual—a logical outcome if the right objectives are made.
By using MBO correctly, which pertains to a successful communication of its purpose, coercion or convention will not be part of the equation. As long as both management and subordinates believe in the benefits of MBO, through communicating and understanding common aims, success stories that range from innovation, as in Hewlett-Packard’s and Canon’s, to renewal, like Intel’s and Carrefour’s, will be easily realized. References CBS Interactive (2009). “Carrefour Belgium’s IT Subsidiary Uses SAS to Support ‘Management by Objectives’”.
ZD Net Asia website. Accessed on 19 January 2009 from http://www. zdnetasia. com/itlibrary/data-management/0,3800009948,39982263p,00. htm Canon Virginia (2008). “Canon Production System (CPS) Philosophy”. Canon website. Accessed on 19 January 2009 from http://cvi. canon. com/suppliers/canon-production-system. php Heller, R (2006). “New Management: The new model company needs a new management style”. Thinking Managers website. Accessed on 19 January 2009 from http://www. thinkingmanagers. com/management/new-management.
php Hewlett-Packard Company (2009). Encyclopedia Britannica website. Accessed on 19 January 2009 from http://www. britannica. com/EBchecked/topic/264529/Hewlett-Packard-Company/92974/Management-approach Kotelnikov, V (2008). “What is MBO? ”. Ten3 Business e-Coach website. Accessed on 19 January 2009 from http://www. 1000ventures. com/business_guide/mgmt_mbo_main. html LearnMarketing. net (2009). “Business Objectives”. LearnMarketing. net website. Accessed on 19 January 2009 from http://learnmarketing. net/smart. htm