Management by Objectives - SMART?
Weiß & Senninger | Principles of Good Leadership
Munich, 23.06.2024
Management by Objectives - really SMART?
Is the method from the 1950s still current and effective?
Leadership mistakes often prevent the method's success
What is Management by Objectives?
Peter Drucker first defined "Management by Objectives" (MbO) in his 1954 book "The Practice of Management". In his original definition, Drucker described MbO as a method where managers and employees jointly set specific goals that are measurable and time-bound. This method is intended to increase the efficiency and motivation of employees by setting clear expectations and involving those concerned in the goal-setting process.
The process originally defined by Drucker comprises the following 6 steps:
- Goal setting through mutual agreement:
Managers and employees jointly define specific, achievable goals. - Action Plan:
Both parties develop a plan to achieve these goals. - Individual Responsibility:
Each employee is responsible for achieving the set goals, which increases self-responsibility and commitment. - Implementation:
Employees work to achieve the goals, while managers provide support and resources. - Clear Performance Measurement:
Goals are measurable so that performance can be objectively evaluated. - Regular Review and Feedback:
Progress is regularly reviewed and evaluated to make adjustments if necessary.
Source: Drucker, P. F. (1954). The Practice of Management. Harper & Row. Management by Objectives (MbO) | Definition, Steps, Benefits & Examples
Is Management by Objectives (MbO) practiced as Drucker defined it?
Common mistakes made in practice that deviate from Drucker's model
Management by Objectives (MbO) is a widely used concept, but in practice, it often deviates from Drucker's original definition. Drucker's concept emphasizes the importance of clear, jointly set goals and regular review. In practice, however, there are often deviations that can impair the effectiveness of the method. Deviations in Practice| Drucker's Approach | Actual Practice | |
Goals given or agreed? |
Goals should be jointly agreed upon by managers and employees to promote commitment and accountability. Scientific studies show: Agreed goals have twice the success rate compared to imposed goals. | Goals are often imposed top-down by management, without involving employees. This can lead to a lack of commitment and motivation, as employees often perceive imposed goals as too unrealistic and overwhelming. |
How realistic and concrete are goal formulations? |
Goals must be specific, measurable, and achievable. Therefore, effort and available resources such as time and budget should also be discussed during the goal agreement meeting. | Goals are often set too high or formulated too vaguely, which can lead to frustration and inefficiency. Time expenditure and specific deadlines are also frequently not discussed. |
How often and regularly are goals and progress discussed in everyday work? |
Progress should be regularly reviewed and evaluated to make adjustments and ensure that goals are met. | In many companies, there is a lack of regular review of goal achievement. Feedback loops are often insufficient or do not occur regularly. (Example: annual goal agreement meeting instead of monthly updates) |
How meaningful is the pursued goal? |
Goals should consider both short-term and long-term aspects. | Companies often focus on short-term goals and neglect long-term strategic goals, which can hinder sustainable development. |
How do reward systems support the goal process? |
Rewards should be based on the achievement of jointly set goals. | Reward systems are often not sufficiently linked to MbO goals, which can impair employee motivation. |
How many goals are pursued simultaneously? |
The purpose of goals is focus and prioritization. Therefore, goals should not be processed simultaneously but sequentially (one after another). | In practice, too many goals are often set simultaneously - sometimes even competing with each other. This leads to a loss of focus and prioritization and thus the meaning of leading with goals. |
Scientific Studies and Findings
Studies have shown that MbO can improve employee performance and motivation when implemented correctly. A study by Locke and Latham (2002) emphasizes the importance of specific and challenging goals for improving performance. Another study by Drucker (2008) shows that MbO leads to higher satisfaction and productivity when employees are actively involved in the goal-setting process.Why the SMART formula is out and the SMARAGD formula is better
The classic SMART method (Specific, Measurable, Achievable, Relevant, Time-bound) is widespread, but often insufficient in modern work environments. Therefore, I have supplemented the old SMART rule with three important criteria that correspond to the current scientific standard. I call the new formula "SMARAGD":
S | Seen (Sichtbar) | Goals must be visible and transparent to all involved to increase commitment. Writing them down increases the clarity of the formulation. It prevents misunderstandings. Publicly visible goals have a 30% higher chance of success! Therefore, make your goals visible on a chart, in a calendar, or on a (Kanban) board! |
M | Measurable (Messbar) | Without a clear measurement criterion, success cannot be verified. If you don't have a key figure, you should define observable criteria for goal achievement. A special effect of leading with goals is the prospect of a sense of achievement. This increases motivation, for which clear criteria are required. |
A | Attractive (Attraktiv) | The attractiveness of a goal arises from its meaningfulness and the expected benefit. Therefore, talk about the importance of your projects and the associated meaning and benefit. |
R | Realistic (Realistisch) | Check whether the necessary resources are sufficiently available. The most important resource is time. How much time do you estimate? Do you have these time resources? Plan directly with your calendar to combine your goal with your time management. Also important: authorizations. Do your employees have explicitly agreed (decision-making) authorizations to pursue the goals without detours? Goals that are outside one's own scope of decision are unrealistic. |
A | Agreed (Abgestimmt) | Goals should be agreed with the affected employees. An agreement has been reached when both the manager and the employees have explicitly consented.
Agreed goals have twice the success rate as imposed goals! |
G | Checked (Geprüft) | Regularly check the progress of your (intermediate) goals. Use regular appointments to follow the common thread. Frameworks such as SCRUM ensure through regular reflection appointments ("sprints") that progress is recognized and undesirable developments or obstacles are corrected early on. |
D | Dated (Datiert) | Without a deadline or concrete time definition, this is not yet a complete goal formulation, but rather a wish or an idea. |
Conclusion
Management by Objectives is a powerful leadership tool, but in practice, it is often not applied in the way Drucker originally conceived it. The most common deviations concern top-down goal setting, unrealistic or vague goals, lack of review, focus on short-term goals, and insufficient reward systems. To unleash the full effect of MbO, companies must ensure that they adhere to the principles of joint goal setting, regular review, and clear, realistic goal setting.The extension of the SMART formula to the SMARAGD formula offers additional advantages and contributes to better implementation and success control.
Sources:
- Locke, E. A., & Latham, G. P. (2002). Building a practically useful theory of goal setting and task motivation: A 35-year odyssey. American Psychologist, 57(9), 705.
- Drucker, P. F. (2008). The Essential Drucker: The Best of Sixty Years of Peter Drucker's Essential Writings on Management HarperBusiness.
- Drucker, P. F. (2006). The Practice of Management. Harper & Row. Management by Objectives (MbO) | Definition, Steps, Benefits & Examples
About the Author:
 Tom Senninger |
Tom Senninger is a human resources and organizational development expert, and has been conducting leadership development programs for 25 years.
With his leadership blog, he aims to contribute to improving leadership quality in companies: less management - more leadership! Weiß & SenningerThe Leadership Professionals Platenstr 6 80336 München Germany
+49 89 97392288 |