MBO is basically used as a tool for strategic planning, employee, motivation and performance enhancement. It is intended to improve communication between employees and management and increase employees' understanding of the company's goals and provide a solid bridge between the pay and performance. A key factor in MBO system is its emphasis on the outcome achieved by the working staff rather than the activities performed in the process.
In order to implement a successful MBO program, the first step is setting long-range company goals in such areas as sales, competitive positioning etc. Such long-ranging planning provides a framework for charting the company's future staffing levels, marketing approaches, financing needs, product development focus and equipment usage.
Next up on the agenda should be the use of these long-range plans to choose the company-wide goals for the current year. Then the company goals can be broken down further into goals for different departments, and eventually into goals for individual employees. As the goal-setting process filters down through the organisation, special care should e taken to ensure that every department is involved in the MBO framework.
At a minimum, a successful MBO program requires each employee to produce five to ten specific measurable goals. In addition to a statement of the goal itself, each goal should be supported with a means of measurement and a series of steps toward completion. These goals should be proposed to the employee's manager in writing, discussed, and approved. It is the manager's responsibility to make sure that all employee goals are consistent with the department and company goals. The manager also must compare the employee's performance with his or her goals on a regular basis in order to identify any problems and take corrective action as needed.
Formulating goals is not an easy task for employees, and most people do not master it immediately. Small business owners may find it helpful to begin the process by asking employees and managers to define their jobs and list their major responsibilities. Then the employees and managers can create a goal or goals based upon each responsibility and decide how to measure their own performance in terms of results.A work plan would include the goal itself, the measurement terms, any major problems anticipated in meeting the goal, a series of work steps toward meeting the goal (with completion dates), and the company goal to which the
personal goal relates.
Small business owners may also find it helpful to break down employee goal setting into categories. The first category, regular goals, would include objectives related to the activities that make up an employee's major responsibilities. Examples of regular goals might include improving efficiency or the amount and quality of work produced. The second category, problem-solving goals, should define and eliminate any major problems the employee encounters upon performing his or her job. Another category is innovation, which should include goals that apply original ideas to company problems. The final category is development goals, which should include those goals related to personal growth or the development of employees. Dividing goal setting into categories often helps employees think about their jobs in new ways and acts to release them from the tendency to create activity-based goals. This body of approach as a whole can be directly linked to Taylor's Scientific Management and Fayolism, in that taylor's theory unfolded at the operational level, mainly concerned with the employees' output and how they could produce workflows of their own design to help achieve a higher level of efficiency. Fayolism also comes into play here in that it started spotting higher motivations for workers' being bent on work.Namely, a feeling of belonging and accomplishment, although these factors would remain unexposed until the rise of the Human Relationship theory.
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