Most of us have personally set or have been provided with objectives. Objectives are commonly used in organizations of all size. However objective setting is often haphazard and objectives are not aligned towards organizational strategy. A framework for effective objective setting is also often lacking.

Peter Drucker, the well known management ‘guru’, introduced and recommended Management by Objectives (MBO). MBO, very simplistically, is about defining and communicating, at all levels of an organization, which objectives need to be realised in order to meet the aims of the organization (strategy, values and so on). Drucker was one of the first proponents of using objectives to meet the goals of an organization, for objectives to be complimentary and for formalising the objective setting process.

Below is a practical and simple guide for implementing the basics of MBO.

Objectives must align with Strategy

 

The Objective Setting Process
Per the diagram above, lower objectives are set for the specific audience and align to the higher objectives and ultimately organizational strategy. All objectives work towards common organizational goals.

Objectives should be set for departments and individuals. For example, a strategic objective may be ‘Improve market share of supermarket soap sales to 10% by March 2011’. Every sales person may then be given an objective of ‘Sell 500 cartons of soap to supermarkets each month’ (which will result in the 10% market share being reached). Each individual sales person will then be set further aligning objectives; Joe the salesman may be great at selling to existing customers however needs training in attaining new customers therefore may be set an objective of ‘Attend BEI training in personal networking techniques by March 2010’)

So, what makes a good objective?

Good Objectives are SMMART Objectives
SMMART objectives are extremely effective in aligning employees and the organization towards common goals. When setting objectives it is important that objectives are SMMART:

• Specific: The objective must not be too broad and must be clearly defined.
• Measurable: You must be able to measure success against the objective.
• Measured: Measurement of performance against the objective as well as feedback to the person/people to whom the objective was set is critical.
• Achievable: It must be realistic to achieve the objective.
• Relevant: The objective must compliment higher objectives and strategy and be relevant to the person/department for whom the objective is being set.
• Time-based: Don’t leave objectives open-ended. Have a specific date as to when the objective must be met.

MBO in Small Organizations
MBO was originally designed for large organizations. MBO is however often more effective in small organizations (and is usually far simpler to implement). Small organizations may benefit greatly from the entire organization having common objectives. Need assistance with aligning your objectives with strategy? Contact Gary at +61 (0)4-1092-3445, gary@eckstein.id.au, http://eckstein.id.au