Management by Objectives and Results Appraisal
and Performance-related Pay

This is why, together with the recording methods (see key result area diagram and MbO Form below) that were recommended, that John Humble's excellent MbO method, which was a flavour of the month as a "management technique", failed in the early 1970's. A fuller examination of MbO is available here.

Most organisations who tried comprehensive MbO frameworks ran out of steam in trying to implement the detail consistently across the organisation. Many line managers couldn't articulate/define objectives well enough, didn't have time to nor skill to work with their staff in the suggested ways. Lip-service and inconsistency crept in.

The recording methods for an MbO appraisal approach can become bureaucratic. By the time all MbO review meetings have been held, targets agreed and charted and over six months progress monitoring takes place - the firm will have gone into liquidation! An obsession with objectives and monitoring has the down-side of participants spending too much time on recording and bum-covering that they neglect getting on with their jobs and tackling things that were not originally defined as objectives.

Nevertheless - the MbO approach is used and it has much value. The tenets still ooze common-sense and are reflected today in many staff appraisal schemes that emphasise evaluation and rewarding of individual performance. Thus it is important for the budding manager to become skilled at defining job and performance related objectives - keeping these in sight is helpful. So, try the recording method, practice defining performance objectives.

The Law of the Trivial Many and Important Few

Focus on the 4/5 key areas of the job where results really matter. Most people at work comprehend what they are trying to achieve, what the organisation wants. They are trained, competent and in routine discussion with their manager, colleagues and customers. Give them credit and enough room to get on and perform.

If anyone really does not comprehend the performance standards of their job - then a more detailed, MbO type approach is a very useful means of defining expectations and targeting. With a new member of staff - such detailed discussions can usefully occur over the first few months of the job induction enabling the manager and new post holder to "shape" the role.

Objectives/targets will be of two types

• MAINTENANCE OUTCOMES (and CQI/Kaizen)
  
• NEW PROJECTS

With any job - work, standards, production, output which must be maintained. Slippage may occur with standards suffering from insufficient attention, tiredness, complacency, wear-and-tear. Be conscious of ENTROPY - the tendency of any organised system to decay and become disorganised. Key standards need planned maintenance work doing on them. A rolling review of an aspect of a job to confirm/ check standards and retarget is useful.

Maintenance review can be very creative. There is potential for continuous quality improvement. Not only do we maintain what exists but we also look for better ways - evolutionary improvements.

New projects are likely to be bigger programmes. The whole role may change as the individual is perhaps relieved of some routine tasks to concentrate on a larger project.

Remember an individual can only handle so many new projects at any one time. Too many and the projects will conflict. Be conscious of what he/she is taking on board or being asked to do.

Basic MbO Tenets

1. If people understand the standards or targets they are being asked to attain then they will be more focused and understand the efforts that are needed.
2. Targets and well-defined standards are "parameters" against which progress and the quality of performance can be evaluated by both performer and manager. Provided these have been discussed, are realistic and attainable within the scope of what be done and the person wants to do them, then they are more likely to engage the person's motivation. The standards and targets need to be agreed and accepted. A climate of consensus and sharing needs to prevail.
3. The manager who discusses and agrees standards and targets with their staff on a systematic basis has created a structure. The process involves sharing and mutual confidence. Responsibility is delegated. Plans and activities associated with the objectives should be feasible and attainable.
4. There should be sufficient challenge to meet the employee's needs for stimulus and self-esteem. The MbO process with the analysis, problem-solving and two-way feedback that is involved is a learning cycle of:
   • Experience
   • Reflection and Observation
   • Analysis and conceptualisation (developing new ideas and plans)
   • Experimentation (putting the ideas/plans into effect) to give renewed experience

5. Opportunities for personal growth/learning can be consciously built into the overall job plan.
6. Within this "job plan" the job holder should have the scope, authority and resources (budget, time, access to skills of others etc.) to handle the matters on their own initiative.
7. Empowerment
   This is what Tom Peters terms employee "empowerment" albeit that little is different from the classical notion of effective delegation. McGregor's Theory Y, Herzberg's recommendations in respect of job enrichment and of course - Drucker and Humble's framework for MbO/R.
8. In discussing targets and standards, internal and external constraints that the member of staff believes may block progress should be given an airing.
9. If the boss is the constraint - then it is highly unlikely that joint examination of the job situation will have occurred with any degree of mutual understanding. MbO discussion - requires trust and sharing.
10. It requires proper balancing of the needs of the individual. The latter may be ploughing their own furrow. Maybe they are in the wrong job. Maybe they don't really want a job at all.

    We are confronted by employer demands. If the manager presses the employee to do more - when in the latter's terms may be physically impossible or psychologically stressful cutting across personal life aspirations. We either have a problem of coercive and exploitative organisational behaviour or an employee who does not accept reasonable expectations of employment.

Most of these generalisations are self-evident.... but they were refreshing ideas in the mid-1960s when MbO was being advocated as a management approach.

Defining standards and objectives

This is not as easy as may be thought.

Many line managers couldn't articulate/define objectives well enough, didn't have time to nor skill to work with their staff in the suggested ways. Lip-service and inconsistency crept in.

Beware of defining targets or standards which are probably

• not measurable, exaggerated, too general and vague,
• focus on activity without a clear purpose,
• are overoptimistic or pessimistic
• too numerous, lengthy and indeterminate in terms of time,
• give an unbalanced emphasis to the job.
• unethical

Sound definitions

• These should be measurable. Define the starting point and you know you will be able to present evidence that you have made progress and....hopefully...achieved the target/standard.
• when the standard or target is attained - it must be visible. Both you and your boss will be able to point to it (evidence, data) and say - there is is. You both need to be referring to the same figures, the same data and interpret these the same way.
• Link the target or improvement to a plan of action. Work out how it will be achieved.
• Sound targets are likely to be more focused on actual outcomes results and not just stated as efforts or activity.
• The standards and targets will be individually focused. If done in a team setting - the contribution of each individual needs to be clear particularly if some element of pay is performance and merit related.

Evaluate these Examples

• complete project X by date
• achieve 95% deliveries within 24 hours of order and 99% within 48 hours.
• maintain staff awareness about customer relations policy and programme. Formally induct all new staff in relation to the policy and programme. Conduct a six monthly review
• meet with all Gold Star customers within three months and renew service contracts.
• implement the Keynote promotion to secure 60 new Gold Star customers.
• de-commission the Helga line on schedule and on time with no disruption to production plans
• maintain all ISO9000 documentation for the department and secure re-accreditation in November.

Performance-related Pay

• Can an element of pay be reliably related to the achievement of objectives as defined by the methods described above.
• What % of pay can be linked to results?
• Clearly a sales person on commission has pay directly related to performance however there are other elements of performance which may not be so directly related. What are these?
• How may a nurse or a teacher's pay be linked to performance outcomes? What fctors/variables in the job context are outside the teacher's or nurse's control when it comes to linking a % of pay to performance? Put forward a case which may be translated into personnel policy.

For most salary schemes with an annual merit pay element each year, the merit element may only between 2 and 8% of individual earnings. The average and top limit may be dictated by central policy. In contrast, we can reflect on the large bonuses £100,000+ given to senior managers and high performers in the financial sector. Are these justifiable? To what degree can this question only be answered by reference to the politics of social and economic distribution?

There are many reasons why external influences might undermine individual efforts to attain performance targets.

• What if the individual has piled in the effort throughout the year but failed to achieve targets perhaps through no fault of his/her own?
• What if there was an economic downturn affecting the firm's performance?
• What if competitors launched a new product or service which undermined progress towards achieving objectives?
• What if the individual's manager failed to provide the right support?

Integrating Individual and Organisational needs

The values and beliefs of the individual in relation to the standards need to be in line with what the organisation wants. The individual needs to be able to identify with what is to be achieved. This illustrates the underpinning belief system of the organisation and MbO.

Targets should be realistic not pie-in-the-sky. They should not be demeaning however it should be noted that most jobs have routines associated with them that are not particularly interesting

If targets are unrealistic. These may become threatening to the person responsible. If they can't be achieved then why bother - they become meaningless. Assess the extent to which external events might move the goal-posts - i.e. the target is no longer meaningful, another standard or target is needed.

Exercises - Try the MbO analysis and recording method.

• A simple MbO Form
  Use this form to generate a list of ten, sound targets or yardsticks of performance for the public relations officer job of the Park Hospital Trust.
• Use the Form to complete this Workshop exercise.
• Adapt the MbO form so that it could be used in your organisation. Complete it in preparation for your next staff appraisal meeting.
  • Evaluate what you have achieved for each of the key standards and tasks of your job.
  • List significant items of evidence indicating that you have achieved your targets.
  • Identify the shortfalls - what you did not achieve or fully achieve. What prevented achievement - events within or beyond your control?
  • Define standards/targets - maintenance or improvement items - for the next period.
  • Confirm that you have the resources (time, expertise, budget, support from the boss/others and personal commitment). Verify that the objectives are attainable - individually and taken together.
  • List planned training/learning activities to assist you in achieving your work and personal development targets over the next period.
    
    

  Offer a copy of your analysis to your appraiser/manager and ask if it can be used as the main agenda item at the meeting.

© Created by Chris Jarvis for the BOLA Project.