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MANAGEMENT BY OBJECTIVES

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In 1954, management guru Peter Drucker came up with a novel way to generate and communicate a company’s intentions (its mission, goals, and objectives): You simply involve all the employees who have to actually carry them out, giving each her or his own specific list. Not surprisingly, he also coined a term for his method, calling it management by objectives (MBO).

MBO turned out to be a wildly successful idea when it was introduced. By the mid-1970s, more than half of the U.S. Fortune 500 companies were using the technique. Granted, not everybody was happy with the process. Some companies balked at the time and effort that it took to set MBO goals and related objectives. Other companies failed to carry out the paperwork that the system requires. Still other companies, basking in an authoritarian regime lodged at the top, found the entire concept of shared decision-making to be just plain weird and the new culture to be too alien. Pity them.

For companies that commit to using it correctly, however, MBO has proven to be a valuable management tool — a process capable of generating new ideas, communicating business intentions, and focusing the company’s energy on an agreed-upon set of goals and objectives. Management by objectives works because it involves people themselves fashioning the company’s future. Employees commit more to that future because they have a greater stake in the process that gets them there. As you begin to work on your company’s goals and objectives, invest some well-spent hours in figuring out ways to bring the spirit of MBO into your collaborative process.

Too many companies simply forget their broad business intentions when they go about the detailed work of setting goals and tying them to measurable objectives. Managers start with what’s close at hand. They look at employee activities and behavior, and they come up with incentives and rewards that seem to do the right thing at the time, motivating workers toward specific objectives. But these types of goals and objectives tend to be nearsighted and may be totally out of sync with the larger aims of the company. So yet again, don’t let the trees shield the forest in which they reside.

Business Plans For Dummies

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