Management by Objectives

USED WITH the right people in the right situation, management by objectives is a vital tool that can dramatically increase your output and build your subordinates. Most managers don't use MBO, or if they do, they use it incorrectly or inappropriately.

MBO is used for competent employees who have demonstrated their ability to get the job done to an acceptable level of quality. When you have a job that needs to be done, you bring in a person you feel is capable of doing this job in an excellent fashion. It could be the achievement of a certain level of sales, the start and completion of a project, or the transformation of an entire department or division. Your goal is to assign the complete task to one person who has demonstrated an ability to do this type of job in the past.

Remember, successful task completion is the key to getting onto the fast track in business. The ability to plan, organize, and complete a task or a project to an acceptable level of performance is the most important skill that you can develop in your business life.

Clarity Is Your Friend

With MBO, clarity is your best friend. Once you have selected the person to whom you are going to give the job, you mutually agree with that person on what exactly it is that needs to be accomplished and how it will be measured. It takes a good deal of discussion, back and forth, until you are both clear on a definition of the task to be completed and in agreement about how it will be measured.

Some years ago, my boss asked me to take over a real estate development project on the edge of a small town about 300 miles from the home office. I was hungry and ambitious and accepted the assignment immediately.

The next day, I flew to the nearest large city and then drove to the town and inspected the property that my company had purchased. It was of no value until it was developed into parcels and sold. That was my job, even though I had never done it before.

My boss, a brilliant businessman, had purchased this property off a plot map from a real estate agent. He had never visited the town or seen the property when he turned it over to me to turn into a viable financial investment.

I was an eager student. I asked questions of everyone, took notes, then compared the notes. I hired expert engineers who gave me good advice and introduced me to other experts in other areas of activity. As a result, within eighteen months, I was able to complete a development plan for the property. It was subdivided, with lots and streets for 335 homes, an industrial park, and a commercial shopping center.

With these plans, I worked with the town council to get approval, retained an engineering firm to put in all the underground utilities and build the roads, and then sold all the parcels in the land holding to developers, who subsequently built out the residential neighborhoods, the industrial park, and the retail shopping center.

Manage with a Clear Goal

The interesting part of this story, aside from the amount that I learned and the more than $3 million in profit that I took back to my company, was that my boss never did visit the property. He entrusted 100 percent of the responsibility to me to complete all the hundreds of details necessary to bring this project to successful fruition. He was a master at the use of management by objectives.

Once you have agreed on the task to be completed, you then agree on measurements and standards of performance, as well as the schedule for work and completion. The exact details can be discussed, negotiated, and even changed later if you get new information.

Remain Available

The next part of management by objectives is for you to remain available to the person who's been assigned the task. You make it clear that the individual is completely responsible for the task that you've assigned, but that if the person needs any help or assistance, you are always available.

Leave the person free to do the job. Once both of you have agreed on the end result or the final goal of the project, allow the individual to accomplish the goal using his own ideas, methods, and techniques. Even if you think that you would or could do it differently, give people the greatest amount of freedom possible to find creative ways to deal with the “situation on the ground” as the project evolves. Don't be reluctant to offer ideas and advice, but let the people you've assigned the work to make the final decision about how to do the job.

Finally, plan to review the project on a prearranged basis, once a week, once every two weeks, or even once a month. The more important the task that you have assigned, the more important it is that you check on it regularly to make sure that it is on schedule and on budget.

Multiply Your Input

Management by objectives is an effective way to multiply your output by passing off critical jobs and areas of responsibility to experienced staff. The assignment of complete responsibility for a project is also one of the most powerful ways of all to grow people in competence and confidence. All successful executives have become excellent at managing by objectives, because it enables them to accomplish vastly more than the average manager.