Management by Objectives in the 21st Century

When Peter Drucker introduced the concept of Management by Objectives more than half a century ago, he probably didn’t imagine that it would remain one of the most problematic responsibilities for managers even 50 years after the initial release of “The Practice of Management”. The most common root causes for this situation is probably the missing link between the goals of the organization on one hand and the actions of the professional knowledge worker on the other – despite that he is the one who has to deliver the right results. One possible approach to create (or restore) this link is to acknowledge that goals – especially yearly performance goals – are often being defined based on a plain and simple job description. While there is nothing wrong with “plain and simple” per se, a “job” itself and most of the directly related aspects like roles (“Sales Manager”) and responsibilities (“Lead Generation”) are fairly static and abstract. And so the process of setting performance goals – more often than not done by someone who lacks the time, energy and appreciation for its importance – ends up being neither very action-oriented nor results-focused.

In strong contrast, this article focuses on the characteristics of a seemingly similar but actually quite different concept called “assignment”, which is much more directed towards performance and achievements. Despite the fact that both terms are often incorrectly being used interchangeably, assignments integrate context and situation, embody concrete actions and outcomes, and demand a greater focus on accountability, authority, competencies and resources. If combined with the clear understanding that goals, objectives and targets are three different and complementary concepts rather than just three terms for the same thing, your chances for creating an execution-oriented culture rise substantially.

It all begins by starting each individual assignment definition with a concrete discussion about the right results (goals, objectives, and targets) with every member of the team. While goals should be aligned with the companies vision and mission, and can therefore be wider and more visionary, objectives should be clear, realistic and specific. Last but not least, defined targets should than focus on the measurable aspects of objectives and be aligned closely with what the business unit is expected to deliver as part of the overall corporate strategy. After these three basic aspects have been defined, it is then necessary to discuss what is expected of the assignee (accountabilities and competencies) and what support he will receive (authorities and resources) to succesfully complete his assignment. In regard to accountabilities and authorities, it is essential to understand that they are two sides of the same coin – you cannot make someone responsible for something without granting him the right to make decisions about it. In addition, expecting certain competencies from employees also means to offer them the necessary resources to get the job done.

For this approach to be successful, effective managers should also avoid to make the assignments of employees either too big or too small. As it is inherently difficult to find exactly the right balance each and every time for each and every employee, it is usually better to aim a little higher and make the job a little bigger than to demand too little from someone. This technique is – if applied wisely – a very effective way to keep people on their toes. Again, every assignment must be achievable and aligned with the current reality, otherwise it will at some point start to kill off motivation by overstressing and overburdening the assignee. After an agreement has been reached and the assignment has been put in writing, it is now time to discuss a basic action plan and a number of pragmatic controlling procedures (which will be covered in another article).

However well defined the final assignment and its related action plan might be, there is one thing for sure: Nothing is going to work as planned. That doesn’t mean that plans and predictions are worthless – they are merely one of the byproducts of something much more important: The process of planning itself. Therefore, effective managers should always integrate certain checkpoints – for example every 90 days – with every plan, which can then be used to adapt the assignments and their implementation plans to the current reality.

In the end, developing well-defined assignments for every member of a team is probably the most important skill of a manager in the 21st century – it is what managers are meant to do: Transforming resources into benefits by enabling other people to perform well in their work, achieve the right kind of results and contribute to the bigger picture.