Page 168 - Fundamentals of Management Myths Debunked (2017)_Flat

CHAPTER 5 • Foundations of Planning 167
the responsibilities of that level, passed to the next level, and so forth. Then, at some later time, means-ends chain
performance is evaluated to determine whether the assigned goals have been achieved. Or that’s An integrated network of goals in which higher-
the way it’s supposed to happen. But in reality, it doesn’t always do so. Turning broad strategic level goals are linked to lower-level goals, which
goals into departmental, team, and individual goals can be a difficult and frustrating process. serve as the means for their accomplishment
Another problem with traditional goal setting is that when top managers define the organiza- management by objectives
tion’s goals in broad terms—such as achieving “sufficient” profits or increasing “market leader- (MBO)
ship”—these ambiguous goals have to be made more specific as they flow down through the A process of setting mutually agreed-upon goals
organization. Managers at each level define the goals and apply their own interpretations and biases and using those goals to evaluate employee
performance
as they make them more specific. Clarity is often lost as the goals make their way down from the
top of the organization to lower levels. But it doesn’t have to be that way. For example, at Tijuana-
based dj Orthopedics de Mexico, employee teams see the impact of their daily work output on
company goals. The company’s human resource manager says, “When people get a close connec-
tion with the result of their work, when they know every day what they are supposed to do and how
they achieved the goals, that makes a strong connection with the company and their job.” 28
When the hierarchy of organizational goals is clearly defined, as it is at dj Orthopedics,
it forms an integrated network of goals, or a means-ends chain. Higher-level goals (or ends)
are linked to lower-level goals, which serve as the means for their accomplishment. In other
words, the goals achieved at lower levels become the means to reach the goals (ends) at the
next level. And the accomplishment of goals at that level becomes the means to achieve the
goals (ends) at the next level and on up through the different organizational levels. That’s how
traditional goal setting is supposed to work.

Management by Objectives. Instead of using traditional goal setting, many organizations use
management by objectives (MBO), a process of setting mutually agreed-upon goals and using
those goals to evaluate employee performance. If a manager were to use this approach, he or
she would sit down with each member of his or her team and set goals and periodically review
whether progress was being made toward achieving those goals. MBO programs have four

◂▪◂▪◂ From the Past to the Present ▸▪▸▪▸

All you need to know about MBO! • Research on goal-setting gives us some answers:
Management by objectives (MBO) isn’t new—it was a popular + Specific, difficult-to-achieve goals—an important
management approach in the 1960s and 1970s. The concept part of MBO—produce a higher level of output than
can be traced back to Peter Drucker, who first popularized the do no goals or generalized goals such as “do your
29
term in his 1954 book The Practice of Management. Its appeal best.”
lies in its emphasis on converting overall objectives into specific + Feedback—also an important part of MBO—favorably
objectives for organizational units and individual members.
affects performance because it lets a person know
How Is MBO Used? whether his or her level of effort is sufficient or needs

• MBO makes goals practical and operational as they “cas- to be increased.
cade” down through the organization. − Participation—also strongly advocated by MBO—has
• Overall broad objectives are translated into specific objec- not shown any consistent relationship to performance.
tives for each succeeding organizational level—division, aBsolutely critical to success of MBo program:
departmental, and individual.
Top management commitment to the process. When top
• Result: a hierarchy that links objectives at one level to managers have a high commitment to MBO and are per-
those at the next level. sonally involved in its implementation, productivity gains are
• For each individual employee, MBO provides specific per- higher than without that commitment.
sonal performance objectives.
If your professor has assigned this, go to the Assignments
• If all individuals achieve their goals, then the unit’s goals section of mymanagementlab.com to complete these
will be attained. If all units attain their goals, then the di- discussion questions.
visional goals will be met until . . . BOOM . . . the organiza-
tion’s overall goals are achieved! Talk About It 5: Why do you think management com-
mitment is so important to the success of MBO programs?
Does MBO Work?
Talk About It 6: How could you use MBO for your per-
• Assessing MBO effectiveness is not easy! sonal goals?