A company works to reach its strategic goals through an action plan. “An action plan states what actions are going to be taken, by whom, during what time frame, and with what expected results.” (Hunger and Wheelen. 2008. pg. 253) Action plans are used to drive programs set within a specific company strategy.
Action plans are a very useful tool in the evaluation and control of a strategy. They can help determine areas that may require adjustments in daily operations. An action plan will set responsibilities into motion and the detailed direction will act as a motivating factor. Furthermore, action plans develop a time table for anticipated progress and completion. They evaluate the targeted financial results of the actions and offer alternative scenarios as needed.
An action plan is a primary driver. The plan itself determines what resources will be used to accomplish the anticipated results. However, employee’s are assigned to tasks, with the emphasis on the activity, not the results or resources needed to accomplish the task and achieve the desired results in an efficient manner. In contrast, Management By Objectives (MBO) strives to increase the performance of a company by synchronizing goals and objectives throughout the operations. “MBO links organizational objectives and the behavior of individuals.” (Hunger and Wheelen. 2008. pg. 255). It matches employee competencies to individual tasks within the plan. MBO assigns the best man or woman for the job.
Management by objectives is a logical and organized process that allows management to focus on obtainable goals and to achieve the best possible results from available resources. Furthermore, it works to increase a company’s performance by matching goals and employee objectives throughout the corporation. “The principles behind Management By Objectives (MBO) is to make sure that everyone within the organization has a clear understanding of the aims, or objectives, of that organization, as well as awareness of their own goals and responsibilities in achieving those aims. The complete MBO system is to get plans, which automatically achieve those of the organization.” (Management Help. Date. Para. 6)
Action plans focus on creating a system and applying resources to a function based on a broad spectrum of options. The plan starts with a desired result and is formulated and executed by management, driving it to fit within the development. Managers work toward the end result by assigning tasks to employees without a relevant connection to the entire plan. They provide detailed agendas to follow step by step, leaving little room for employee input. Management dictates the execution of the plan regardless of inefficiencies or imperfections.
MBO breaks down the process to an individual level, based on employee competencies and expertise. It matches goals with specific performance “Management by Objectives (MBO) is about setting your self objectives and then breaking these down into more specific goals or key results.” (Management Help. Date. Para. 5) Management clearly advises employees of the goals and objectives of the plan, and states the overall desired results. They then allow the employees to use their knowledge and competency to work towards the assigned goals. Since these employees have the greatest knowledge of their job, they are given the responsibility to create success in the individual task. “MBO managers focus on the result, not the activity. They delegate tasks by negotiating a contract of goals with their subordinates without dictating a detailed roadmap for implementation.” (Management Help. Date. Para. 5)
MBO will help improve the implementation of strategy in many ways. MBO creates focus on individual tasks for management and empowered employees. Instead of diluting focus with concern on multiple tasks within an action plan, each manager and employee knows what is expected of them, and develops a more detailed focus on an individually assigned task.
MBO fosters organizational characteristics within groups and units. Management and employees are provided details and acknowledge the desired results. In order to succeed, they have to work together in an organized fashion to build individual results into combined unit results. It’s a system of building blocks. Management and empowered employees accomplish individual tasks that when combined, formulate the unit task and ultimately develop into the overall company goal.
MBO motivates individuals to perform at high levels. Since employees are provided with important decision making processes and responsibilities, MBO’s fosters a sense of pride and importance related to the individual task. “Empowerment recognizes ‘the demise’ of the command-and-control system, but remains a term of power and rank. A manager should view members of his or her team much as a conductor regards the players in the orchestra, as individuals whose particular skills contribute to the success of the enterprise.” (Management Help. Date. Para. 16) In addition, individual tasks can be measureable in time and performance as a direct result of the individual’s effort. An individual effort that is performed at sub par levels, can not be blanketed within the overall effort, hiding its lack of effort and deficiencies. Since employees must take ownership of their work, performance levels are increased.
MBO increases the need for cooperation and communication as a team. Since many individuals are working as individual parts of the larger picture, communication is needed for progress and coordination of various efforts. In addition, individuals develop an increased awareness of various aspects of the plan as they are subjected to various communications regarding the plan. The end result is a unification of efforts and an increased knowledge of how each part works together in the process, thus increasing overall employee knowledge and awareness of the functions within the unit.
MBO, as stated earlier, requires a building block system to achieve the overall goals of the plan. This building block system creates synergy among units, in various locations with different cultures, as they work together to complete the company wide plan. As units become familiar with each other and their associated functions within the company, increased resource awareness can develop. Management and employees of various units work together and start developing competitive advantages with increased levels of synergy. This can lead to new productive systems such as virtual teams or even concurrent engineering.
These examples are just a few of the advantages Management By Objectives fosters in the implementation of strategy.
Hunger, David J. & Wheelen, Thomas L. (2008). Concepts on Strategic Management and Business Policy. New Jersey: Pearson Prentice Hall.
eCoach Effective Management. Management By Objectives – The Five Step MBO Process. Retrieved March 7, 2008, from eCoach. Website: http://www.1000ventures.com/business_guide/mgmt_mbo_main.html