Leaders don't put up with old practices; with methods which allow game playing; with procedures that are geared to artificially inflated yearly bonuses without accompanying real performance. Yet the typical application of Management by Objectives (MBO), which permeates decades of management literature and practice, fits those negative characteristics like a glove.
Determining specific objectives, managing by those objectives, identifying specific stated goals, and holding individuals responsible for and grading them on their performance toward those objectives is a great concept. Managing any organization without written, specific and measurable objectives would be difficult. I doubt that it is done often; and when it is, I doubt it is done for long. However, while fundamentally correct, it is also well out of date.
First, the process has become so entrenched most everyone with any savvy knows how to play the game. Managers can structure objectives to optimize their own bonuses or payouts rather than the organization’s performance goals.
Second, MBOs hardly ever precisely target a company’s true priorities. Accurately setting a stretch but achievable target which is sufficiently difficult so that it takes over a year to accomplish implies the ownership of a really powerful crystal ball. The pace of business today is way too rapid to lock in a program with your CFO, let's say, in October and calculate his reward fourteen or so months later.
Third, defining objectives is a labor-laden process, so it’s performed only once a year, and as a result no further learning occurs during the course of the year. Typcial objective programs lack any real-time feedback, recalibration, and all those things you do in the normal course of management.
So throw out your existing MBO program. You need a specific process that targets your corporation’s top priorities in detail and lives and breathes and grows as circumstances and markets change. The process must be straight-forward, it must generate intelligence and improvements through constant review, and the execution must challenge the organization. I’ve developed a fourth generation MBO process that meets all these criteria.
Take this week to think about the problems in your existing MBO or objectives or bonus-criteria program. Next week we'll lay out the "how to" concerning this 4th generation approach.
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