The aim of a Management by Objectives (MBO) system is to create a link between the completion of the company’s goals – i.e. of its results – and the development of individuals, as well as of their commitment to the company. It can be regarded as the alpha and omega of the company’s sustainable development.
Ideally, organizational development should rely on 3 strongly interdependent concepts that make up the pillars of every HR development policy: Management Development (MD) programs, Management by Objectives (MBO) and Training programs (guidelines).
This process is quite simple, as it basically consists in setting up development goals. However, it may also be regarded as complex, due to its many interactions with the company’s strategic orientations and areas of activity (Human Resources, Customer Management, Production, Sales, etc.).
Finally, please note that a Management by Objectives approach has to be based on a win-win relationship between the company's leadership and the personnel.
I. Financial resources: a Management by Objectives approach should integrate a budget and take into account both the amount of training necessary to the conduct of the interviews and the hidden costs represented by the time spent doing the interviews and ensuring their follow-up.
An average 2 hours per year should be budgeted for each employee; in addition, 5% of the total time spent for the interviews should be counted for consolidation meetings at the superior hierarchical level, as well as management and control tasks.
II. Human resources: we make a distinction between internal resources – that designate the support offered by the HR Department and mixed resources that combine internal means and the occasional support of external advisors. In the latter case, the consultants should receive very precise specifications.
Please note that the use of consultants, although tempting, should not be prolonged indefinetely; the company should indeed gain autonomy in this respect within the shortest deadlines.
III. Technological resources: The implementation will have to include technological resources (ITs, infrastructures, etc.) which are often limited.
Prior to implementing an MBO system, the values that it will promote should be defined and agreed upon with the top management. These values will have to be directly derived from the corporate values and will impact the whole MBO implementation process. It is the company's organizational identity that is at stake here.
The mission statement of the MBO system then aims to make the goals set through the definition of the process’ values tangible. In order to clearly state the end goal of the Management by Objectives system, this mission statement should specify:
The goals as such will be set on a yearly basis, with an intermediary assessment during the year. MBO-based performance appraisals (guidelines) should rely on the 4 following principles:
Moreover, the setting of development goals should respect the following rules:
Finally, it may prove most useful to synthesize all the information that ought to be communicated to the personnel all along the implementation of the Management by Objectives system. To do so, you may use a communication plan (sample) that will allow you to continuously steer the communication process.
Also note that feedbacks to the personnel contribute to continually improving the MBO system and can provide useful indications on what development action is required in order to reach the goals set by the company's top management.
Examples of values applicable to a Management by Objectives (MBO) system:
Examples of mission statements applicable to a Management by Objectives (MBO) system: