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Goal Setting, MBO

Goal Setting

In any small business, setting goals and practicing time management techniques are two necessary elements for success. Annually, at a minimum, small business owners and managers should meet to determine the business goals for the upcoming period. The business goals that are set should be SMART–specific, measurable, attainable, realistic and timely. Time management comes into play with the measurable and timely aspects of goal setting.

Features/Importance of Goal Setting

(i) Provide Direction

Setting goals in a small business provides direction for everyone who is a part of the business. When employees and managers are aware of the goals, it puts everyone on the same page and working toward, the same outcome. By setting goals, employees know where the bulk of their time each day should be focused. They are better able to prioritize their workload based on the goals of the business, and manage their time better while they are at work.

(ii) Meet Deadlines

All goals that are set should be timely, meaning that there is a set deadline attached to the goal. This gives employees motivation to meet the goal within a certain time period. It also provides the information needed to develop an action plan so that the goal can be met within the stated timeframe. Employees will then be able to manage their time better during the day as they have an action plan for each goal that will guide their tasks throughout the work day.

(iii) Avoid Wasted Time

When goals have been set within the organization, it is less likely that employees will be wasting time while at work. With a set number of specific goals, employees will always have a task that can be done to work toward accomplishing the goals. This can avoid times at work when employees are left wondering what should be done next. One major detractor from effective time management is dealing with time wasters during the day. By having set goals in place, it is easier to effectively manage all work time.

(iv) Manage Distractions

Employees are often faced with distractions during the work day from phone calls to other co-workers’ personal issues that have been brought into the workplace. There may also be smaller projects that are introduced or new projects that could possibly improve the business. When the employee has a set plan with business goals to follow, it helps to effectively manage their time. When a distraction arises, they can easily review the goals of the business to see if working on that task will help to meet the goals. If it will not, they can simply move on to a more effective task.

(v) Improve Overall Business

A business that is focused on goal setting, action plans and time management techniques for employees is likely to be more effective in the industry. Time will not be wasted on tasks that do not contribute toward the overall goals of the business while employees will be focused on what needs to be done to ensure success. By managing all working hours of the business, the business can improve productivity as well as the bottom line of the small business.

Management by Objectives (MBO)

Management by objectives (MBO) is a strategic management model that aims to improve the performance of an organization by clearly defining objectives that are agreed to by both management and employees. According to the theory, having a say in goal setting and action plans encourages participation and commitment among employees, as well as aligning objectives across the organization.

Management by objectives (MBO) is the establishment of a management information system to compare actual performance and achievements to the defined objectives. Practitioners claim that the major benefits of MBO are that it improves employee motivation and commitment and allows for better communication between management and employees. However, a cited weakness of MBO is that it unduly emphasizes the setting of goals to attain objectives, rather than working on a systematic plan to do so.

In his book that coined the term, Peter Drucker set forth several principles. Objectives are laid out with the help of employees and are meant to be challenging but achievable. Employees receive daily feedback, and the focus is on rewards rather than punishment. Personal growth and development are emphasized, rather than negativity for failing to reach objectives.

Drucker believed MBO was not a cure-all but a tool to be utilized. It gives organizations a process, with many practitioners claiming that the success of MBO is dependent on the support from top management, clearly outlined objectives, and trained managers who can implement it.

Management by Objectives in Practice

Management by objectives outlines five steps that organizations should use to put the management technique into practice.

  1. The first step is to either determine or revise organizational objectives for the entire company. This broad overview should be derived from the firm’s mission and vision.
  2. The second step is to translate the organizational objectives to employees. Drucker used the acronym SMART (Specific, Measurable, Acceptable, Realistic, Time-bound) to express the concept.
  3. The Step three is stimulating the participation of employees in setting individual objectives. After the organization’s objectives are shared with employees, from the top to the bottom, employees should be encouraged to help set their own objectives to achieve these larger organizational objectives. This gives employees greater motivation since they have greater empowerment.
  4. The Step four involves monitoring the progress of employees. In step two, a key component of the objectives was that they are measurable in order for employees and managers to determine how well they are met.
  5. The fifth step is to evaluate and reward employee progress. This step includes honest feedback on what was achieved and not achieved for each employee.

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