Management by objective
What is meant by management by objectives?
Management by objectives is a key HR practice related to employee performance. In this practice, the HR team, along with managers, sets goals and objectives for employees based on the organization's mission and vision. Employees then start working towards these goals, aligning their performance with the overall organizational strategy. The aim is to use company objectives to set performance goals for employees.
Why does your organization need management based on objectives?
Here are some of the key benefits that management by objectives can bring to your organization:
- Offers employees a clear picture of what is expected from them in terms of their performance by setting SMART (specific, measurable, achievable, relevant, and time-bound) goals.
- Keeps managers and employees on the same page regarding what employees should be working on.
- Creates a sense of belonging and ownership and keeps employees accountable, motivated, and engaged by involving them throughout the goal-setting process.
- Makes it easy for managers to delegate different jobs to their team members, as goals are clearly defined.
- Enables HR teams and managers to run fair and meaningful performance reviews, as management by objectives makes it easier for them to track progress and measure outcomes.
How does management by objectives differ from traditional performance reviews?
Management by objectives differs from traditional performance reviews in multiple aspects. To begin with, under management by objectives, employee success is measured by how well they have achieved the goals that they've set, whereas traditional performance reviews take a holistic—but often less clear—approach by considering a variety of aspects with broad targets.
Additionally, goals are well-defined in the management by objectives approach, so it's easy to measure success. In contrast, traditional performance reviews may become subjective due to the lack of goal clarity.
Furthermore, with traditional performance reviews, employee performance may only be analyzed once or twice a year. With management by objectives, managers regularly track goal progress, offering continuous constructive feedback.
What are the different stages in adopting management by objectives?
Here are some of the key steps involved in implementing management by objectives for your organization:
Step 1:
Involve your C-level leaders and senior managers to get a better understanding of your organizational goals and what it strives to achieve.
Step 2:
Once you understand the broader objectives and goals of your organization, break it down into different departments based on their roles and responsibilities.
Step 3:
Sit with each team member to set SMART goals that remain consistent with their everyday responsibilities, while also supporting the organization's mission.
Step 4:
Encourage managers to set a timeline (like every 15 days or once a month) to track progress, offer feedback, and provide the support required by employees to achieve their goals.
Step 5:
Review how employees have achieved their goals once their review period is completed. Make it a point to recognize employees for their good work, help employees identify areas of improvement, and offer promotions and salary hikes as applicable.
What is an example of management by objectives?
Let's assume that an organization wants to improve its employee retention rate by 20% in the next year. To achieve this, the goals set for different HR team members would look like this:
- Conduct stay interviews for at least 90% of employees every quarter.
- Design and implement learning and development programs for each department.
- Conduct monthly pulse surveys and ensure a 75% completion rate for those surveys.
- Have structured performance reviews to improve employee appreciation and recognition.
What are some drawbacks associated with management by objectives?
Management by objectives can sometimes:
- Be rigid and inflexible, focusing solely on organizational goals and neglecting individual needs and preferences.
- Fail to deliver the desired outcomes if the organizational goals are misunderstood at some level.
- Neglect qualitative aspects of an employee's performance, like creativity, innovative thinking, teamwork, decision-making, and more.
- Lead employees to only focus on goals, compromising the quality of their work.