The Introduction of a Management by Objectives (MBO) Concept – Sample Communication Plan

The aim of a Management by Objectives (MBO) system is to link up employee development programs to the achievement of organizational goals, while strengthening company loyalty. It may be regarded as the cornerstone of organizational sustainability.

Ideally, organizational development should be based on 3 strongly interdependent concepts that make up the pillars of HR development management: Management Development (MD) programs, Management by Objectives (MBO) and Training programs (guidelines).

In a way, this development process may be regarded as quite simple, as it basically consists in setting personal and collective development goals. However, it may also be regarded as complex, due to the many underlying interactions with the company’s strategic orientations and fields of activities (Human Resources, Customer Management, Production, Sales, etc.).

Finally, please note that the successfulness of a Management by Objectives approach mainly depends on the existence of an actual win-win relationship between the company’s leadership and its people.

TOOLS

I. Financial resources: a Management by Objectives approach should include a budget and take into account 1) the fact that an amount of training will be necessary to prepare for the conduct of the interviews and 2) that the time spent on the interviews and their follow-up represents a hidden cost for the organization.

Concretely speaking, an average 2 hours per year may be budgeted for each employee. Moreover , 5% of the total time spent on interviews should also be dedicated to consolidation meetings, when dealing with top managers.

II. Human resources: a distinction should be made here between internal resources – that relate to the support offered by the HR Department – and mixed resources, which may refer to the combination of internal resources with the occasional support of external advisors. In the latter case, the consultants should receive very precise instructions as to what the specifications of their mission are.

Although it may be tempting to resort to consultants for such jobs, such arrangements should however not be prolonged indefinetely; the company should indeed gain autonomy in this respect within the shortest deadlines.

III. Technological resources: the implementation of the MBO system will also have to be supported by IT resources (hardware, software, etc.), which tend to have limited availability.

PRACTICE

Prior to implementing an MBO system, the values that it is meant to convey  will have to be outlined 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 an MBO system then has to outline its goals in accordance with the organizational values it will be based on. In order to clearly state the final goal of an MBO system, the corresponding mission statement should specify:

1. the role played by the MBO system within the company
2. the public that will benefit from MBO programs
3. the way in which these programs will be implemented
4. the way in which these programs will be evaluated

The goals as such will be set on a yearly basis, with an intermediary assessment at some point during the year. MBO-based performance appraisals (guidelines) should rely on the 4 following principles:

1. Reciprocity: the interview is prepared by both parties; the outline of the appraisal’s contents is then jointly worked out in the course of a dedicated interview
2. Transparency: the forms’ contents are known; both partners sign the documents
3. Fairness: all employees are entitled to a yearly interview
4. Confidentiality: the confidentiality of the documents and of the personal data they may contain is guaranteed by those in charge

Moreover, the development goals contract should be subject to the following rules: