A Time Tested Management Method That Works Just as Well More than Four Decades Later

By Bob Norton, Founder and CEO of AirTight Management

It never ceases to amaze me how few "professional" managers use the long proven best practices and techniques in Management Science. Even with decades of independent research showing about 56% higher value creation when this management technique is used, few companies use it, or use it properly today. This is like not using the wheel, blender or airplane and deciding to stick to the horse, hand chopping or hot air balloon decades after these inventions!  

Why? I really do not know. Maybe it is a flaw in our educational system? Maybe it is a problem with corporate culture and focus. A lack of priorities to train and develop managers? Certainly lots of industries are being built around Performance Management software that  tries to measure results but often lacks the foundational philosophies and principles around the art it is trying to measure.  Maybe it is a lack of discipline? I am sure all of these are at work on some level preventing companies from achieving higher performance.  However, the fact remains if you do not understand and use Peter Drucker's Management By Objective process and principles then your company is under-performing and you are losing a possible competitive edge.

Peter Drucker was named the "Father of Management" in the 1960s and every one of his books and principles are just as good today as they were back then because people really do not change that much. I have read all his books and recommend every manager read at least some.  Management by Objective (MBO) is the basic “blocking and tackling” of management.  It is simple, effective and can be used to some degree with most people who have some capability for forethought. Every manager needs this skill, though clearly not everyone has this ability.

Here is a simple step-by-step description of how to use this powerful classic management method, which should be in every manager’s repertoire.  It does not always work for every employee; as the book Good to Great says, “you have to have the right people on the bus,” as no one can manage incompetent people to do a great job. However, if you have good people, then MBO is an indispensable tool. MBO should have a consistent structure and format that people understand and expect for best results in pretty much any group over five people. It is a process and cycle that is repeated monthly so that you are not micromanaging, but giving people time to plan, achieve and grow personally to be more effective without a lot of overhead. In AirTight Management our "System#2: Performance, Accountability and Merrt System (PAMS)", we provide the training and framework for five styles of management and a cadence for meetings which allocates a total 5.4% of a manager's time to the tasks of management meetings, Strategic Planning and quarterly checkpoints testing progress against the company long-term objectives. 

Goal setting on paper is magic.  Some people claim, and I cannot dispute, that writing goals down once and then just sticking the paper away hidden for a while will greatly increase the chances of these goals ever being achieved.  My experience tells me this is absolutely true.  I do believe there is a human psychology at work here that opens up the brain to perform and ask powerful questions that help us achieve more by tapping into our deeper brain and subconscious capabilities.  Effectively, we send the subconscious mind on a mission to find answers and we will get back intuition, ideas and other results we are sometimes not even aware of consciously. A device in the mind called the "Reticular Activiating System (RAS)" has evolved over millions of years to engage your subconscience to accomplish tasks automatically, in the background of your mind.  Sometimes I get amazing answers in a dream, like Watson and Crick did in figuring out the double helix structure of DNA. I have even come up with some of my most brilliant solutions in dreams. The solution is sometime my first thought when I awaken in the morning. You can enhance this by asking yourself a key empowering question when you are falling asleep.  Your subconscious will set to work that night and offer help.

How to Manage By Objective

The first step in MBO is to define the objectives for the individual or the department (if this list is for a department manager).  This is mostly the boss’s responsibility, but should be a participatory process with interaction, buy-in and agreement. Typically this should be a monthly process. I would use the following steps, depending on the capability of the person or manager you are managing:

1.     Make a list of objectives for the coming month (or with managers ask them for the first draft of that list) at least a week before month end to force planning and thought.

2.     Review these together (manager and superior, or individual and manager) to see that they are consistent with broader corporate priorities, resources and other commitments.

3.    Now convert these "goals" or "objectives" into MBOs (a noun) by attaching the following attributes to each:

a) Attach an owner who is responsible for delivery, and is willing to stand up in front of their peers and say "I will deliver this by X date" to get input and feedback. This taps the management brain trust in the monthly meeting and forces great communications too.

b) Attach an end date, a specific day, not a month, quarter or year

c) Attach a specific measure which is defined to mean the MBO is complete that is binary (a clear Yes/No)  (i.e. software installed at 5 customer sites, $X in sales under contract, Avg.call time drops to XX)

d) Attach a complete description of the task with all its objectives

These MBOs should be "bite size" not huge and fit into a month at most. You may have to divided larger tasks into several milestones. The point is there is 100% clear communications on what is expected, when it is delivered and what is the result. Ideally these should be not just activities but desirable results. For example, let's say you want to set an MBO for someone in the collections department who is chasing customers for payments that are overdue collected $10,000 in fees is far better than made 50 calls to collect overdue funds. One is aligned with the corporate goal, the other is an activity that has zero value in itself. You can also fake calls, but not actual collections.

Any given erson should have no more than seven MBOs in a monthanda department should likely not have more than 7-12 either. 

Every MBO should then be objectively measurable, ideally with hard numbers compared to historical and consistent benchmarks. Some people use the acronym SMART for:

Specific – A clear definition of what is to be achieved. This may be as simple as a number, or as complex as a detailed specification document. 

Measurable – Quantify the indicator of achievement, preferably in a number, in a binary way.

Assignable – Specify who will do it. This is ownership and they must have both the authority and the needed resources to get it done in the given time.

Realistic – or "Achievable". State what results can realistically be achieved, given available resources. This means agree with the person owning it in the context of all their other work, not assigning it in a dictatorial management fashion. You would be amazed how much harder people try to achieve "their goals", rather than "your goals". 

Time-bounded – Specify the end date.

4.     Meet with the person to review each objective and talk through any detail that needs to be added to insure complete buy-in and acceptance of accountability for achieving these goals without excuses based on others or outside forces that may be out of their control. This step is necessary and should be done one-on-one and in person as this sends the message this is serious business and you will hold them to these objectives. This meeting need not last more than 15-30 minutes though.

5.     Most of the time you should meet monthly just before the first of the month for a meeting just on MBO goal setting with all the management staff. This is AFTER you have individual agreements with each person. The meeting with flush out surprises, ideas and interdependencies that otherwise ma prevent on-time delivery and avoid failures.  Publish each individual’s list to all other managers on the same level, merged with all their individual goals. This is the broader division, department or corporate goal list for the month. Ideally every department should have one and each level of management with larger objectives.

6.     Benchmark weekly progress at weekly staff meetings, requiring people to report where they are on each goal so far that month IN FRONT OF ALL OTHER MANAGERS.

7.     Always include at the special monthly MBO meeting a separate time to report the level of completion achieved on each goal. Do not mix it with other business that can fog the reporting.  Some will not be accomplished and will be ongoing.  If everything always is accomplished, you are probably not setting aggressive enough goals and should challenge your people more.  People should never be scolded for not making goals (at least not in public), but they are required to “stand up” and explain why a goal was missed in front of the group. Once this is standard operating procedure, the group understands the process and knows that this person bought into that goal as achievable just four weeks ago.  Maybe something has changed – that happens – but odds are there is some peer pressure and competition to look good that motivates people that little extra bit to achieve more than they would without any goals. In fact it is probably a lot more.

8.     Go back to #1 and start all over again for the next month. Each month will get better as people get the system down and begin to challenge themselves, and sometimes even enjoy their work more and look forward to it.

By being consistent with this process and holding everyone accountable you will create a culture of responsibility, performance and reward for results. You will help to avoid the idea that cuddling up to the boss gets you somewhere, as everyone sees what everyone else does, and you will also be coordinating the troops to arrive at the destination at the same time.  Would the army send in four battalions without communications among them? Never, that would be disaster, but some senior managers do this.

Having the discipline to stick to this process will make you a market leader over time. Be consistent, fair and challenge people and you can get double the results of the average team. MBO does not allow people to coast through their job and most will actually get more fulfillment and will respect their boss for doing a good job too.

AirTight Management helps companies install an MBO system for any organization in any industry. This can cost as little as $5,000 with a combination of video training, consulting and coaching included. Click here for more information on our Management Best Practices System #2 which includes a comprehensive set of five management methods and everything needed to use them well. 

Bob Norton has been a CEO since 1989 and a CEO Coach, Consultant and Thought Leader in Leadership, Management and Systems since 2002. He is the creator of AirTight Management, The CEO Boot Camp and hundreds of training programs for executives and managers.