Objectives in management
MBO was yesterday - but what is today?
In the world of modern business, clear objectives are crucial, but the traditional method of management by objectives (MBO) is increasingly coming under fire. Companies are realizing that the changing world of work and the complexity of human relationships require an adaptation of traditional goal-setting approaches. In this article, we take a look at the evolution of goal setting in management, from its beginnings to current trends, and shed light on how SMART(e) goal setting works in practice.
A contribution from Lisa Rätze
The importance of goals and motives in leadership
Goals are one of the most important management tools today, both in the management of companies and in the leadership of teams and employees. In an increasingly complex working world, in which different industries, specialist areas and experts work together on a project, goals make it possible to manage this work without having to specify the concrete activities. Today, goals are therefore more oriented towards the result of the work than the way in which the work was done.
In order to create a common understanding of targets and target agreements for this article, we use the following definitions:
Goals describe anticipated results. They indicate the direction in which energy should be used. Those who neglect goal planning lose sight of the essentials. (6)
Target agreements are binding agreements made between two or more levels in a company. These include performance or results that are to be achieved within a certain period of time. (4)
Clear goals and effective leadership are inextricably linked and play a key role in determining a company's success. At a corporate level, goals serve as a guide and create a clear direction for activities and efforts. They enable progress to be measured and ensure that priorities can be set and decisions made correctly. The communication of goals also contributes to the corporate culture and should define the shared culture of values. Companies like to commit themselves to a "purpose", which is intended to appeal to the intrinsic motivation of employees and becomes a marketing tool. (5)
This is precisely where a widespread misunderstanding lies: it is assumed that the intrinsic motivation of employees is simply there and would be enough to motivate them to achieve the required goals. In fact, if the purpose is well chosen, it may be a reason to commit to the job. However, it will rarely be enough to motivate employees for all the tasks, to-dos and challenges that the job entails. It is therefore essential to manage goals and motives, as they are mutually dependent.
The terms goal and motive are often used synonymously, but they do not mean the same thing:
We can have a motive (e.g. thirst) without already knowing the goal (drinking a glass of water) to satisfy it. At the same time, we can also be given goals without being motivated to achieve them (the instruction to drink a glass of water without being thirsty). (5)
It now becomes even clearer why goals and motives are both of equal importance: An unmotivated goal lacks power, an uncontrolled motive lacks direction. If both are equally important and intertwine, this is the result of good management. And this is where managers come into play.
Managers as target ambassadors?
Encouraging motivation and setting targets for individual teams or employees is the responsibility of direct line managers. They must bring the target agreements that they themselves conclude into line with the company's objectives. They often have to perform a difficult balancing act: their employees must not be set targets without feeling the corresponding motivation to achieve them and, at the same time, managers are also given targets that put them under pressure.
Since the 1950s, management by objectives (MBO) has established itself as the standard in companies. Today, MBO is sometimes considered outdated and obsolete, especially since adherence to quantitative, measurable targets ignores the qualitative and emotional aspects of target achievement and motivation. At the latest since the linking of target achievement and bonus payout, MBO has increasingly become an instrument of productivity tracking. (7)
Two of the main problems that management styles such as MBO bring with them in today's working world are, on the one hand, the open question of why and whose goals are being pursued and, on the other, the increasing complexity of a task area that is increasingly difficult to break down into measurable goals. Managers increasingly found themselves forced to stick to goals that they themselves did not support. Or they neglected the individual goals of their employees, which led to an ever-increasing drop in motivation.
More modern target agreement systems no longer see managers as target ambassadors but as co-creators of targets. One of the currently most popular forms of target system is the Objectives and Key Results (OKR) concept developed by Andy Grove at Intel and popularized by John Doerr at Google. In this management system, targets are no longer agreed top-down but bottom-up and sideways. This means that the joint coordination and development process comes to the fore and objectives can also be developed at different levels. Managers therefore have an active role in which they must enter into discussions with their team. (2)
Modern goal setting means formulating goals together, exchanging ideas and not viewing them as fixed points, but rather constantly developing them further. In terms of motivation, one aspect must not be ignored, which John Doerr also impressively emphasizes: it is crucial to talk about the why. (2) Above all, managers must manage to find an individual approach to their employees, recognize their personal why and align it with the purpose of the company. In this way, motives and goals can also be in harmony with each other.
Set SMART goals
Although areas of responsibility are becoming increasingly complex and the strategies outlined above should therefore be taken into account, there are often enough situations in everyday working life where goals can be clearly defined: We want to publish a blog text every month and record 10% more website clicks at the end of the year compared to the previous year. How could this goal be formulated together with the employees in such a way that the steps required to achieve the goal are clear to everyone involved?
A popular method for formulating goals is the SMART principle. The acronym SMART stands for five criteria that should be taken into account when setting goals
1. specific
The goal should be defined in a clear, understandable and comprehensible way for everyone involved. Ideally, the goal should be set out in writing so that there is no room for interpretation.
2. measurable
This method involves objectives that can be traced back to quantifiable variables, such as click figures, sales or market share. The boundaries of measurability are vague, so caution is advised when measuring qualitative factors such as customer satisfaction.
3. demanding
The target agreement should be attractive and challenging for employees. If it does not require ambition to achieve a goal, then employee motivation will be correspondingly low.
4. realistic
This criterion relativizes the previous one to a certain extent. A good goal must not be too demanding. The ambition should always be measured against the performance potential and decision-making powers available and the individual resources available to the employee.
5. scheduled
An end of the goal or a state of goal achievement should be clearly formulated at the beginning. A date can then be set for this, which can often be broken down into sub-goals. There should also be clear deadlines for sub-goals.
(1 & 3)
How does coaching support the goal-setting process?
The subject area of goals, motives and target agreements is complex and repeatedly presents many managers with challenges. Especially in working environments that are moving away from traditional working and management methods, there is often a lack of personal support when adapting new approaches. Individual business coaching can be a valuable resource to strengthen managers in their role as motivators and goal-setters.
By identifying individual strengths and areas for development, coaches can help leaders set more effective and inspiring goals for their teams. With the evolution of goal setting approaches, such as the move from MBO to more modern methods such as OKR, business coaching can also support leaders in adapting to new systems. Coaches provide guidance and accompany the process of introducing new goal-setting methods to ensure that they are effectively integrated into leadership practice.
On an individual level too, coaching enables not only managers but also specialists to reflect on their personal goals and align them with the company's overarching objectives. Coaching can help to identify individual motivations and develop strategies for self-motivation, which is particularly important at a time when traditional approaches to motivation are being questioned.
Feel free to contact us for a personal consultation to find out more about how our coaching solution can sustainably and successfully promote goal setting.
Sources:
Bartscher, T., Frick, J. (2009, February). Targets and target agreements. Practical knowledge update. https://www.haufe-akademie.de/downloads_shop/documents/4118.pdf
Doerr, J. (2018). Measure What Matters: How Google, Bono, and the Gates Foundation Rock the World with OKRs. https://bpmtraining.net/wp-content/uploads/2021/07/Measure-What-Matters-John-Doerr.pdf
Eyer, E., & Haussmann, T. (2021). The formulation of goals - From corporate goals to employee goals. In Springer eBooks (pp. 39-50). https://doi.org/10.1007/978-3-658-35785-6_4
Fleig, J. (2022, May 17). Target agreement as a management task. business-wissen.de. https://www.business-wissen.de/hb/zielvereinbarung-als-fuehrungsaufgabe/
Innerhofer, C., & Innerhofer, P. (2022). Action-oriented leadership: Successfully managing motives and goals. Springer Gabler.
Kernen, H., & Meier, G. (2019). Managing your own resources - personal resource management for managers and employees. In: Handbook of applied psychology for managers. Springer.
Levinson, H. (2014, August 1). Management by whose objectives? Harvard Business Review. https://hbr.org/2003/01/management-by-whose-objectives
