When MBO is done right who does the review of a team members performance accomplishments?

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  Inhaltsverzeichnis Show

  • The “Ideal” Process
  • Major Problems.
  • The Missed Point
  • Personal Goals.
  • Psychological Needs.
  • The Mutual Task
  • Long-Run Costs.
  • Suggested Steps
  • Motivational Assessment.
  • Group Action.
  • Appraisal of Appraisers.
  • The Basic Consideration
  • Ego Concepts.
  • When using MBO managers should?
  • Which one of the following is the first step in the management by objectives MBO process?
  • Which of the following is the final step in the MBO cycle?
  • Is the overall goal of MBO?

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The Idea in Brief

Is this how your company’s performance management system works: it clarifies the overall work to be done, links employees’ performance to company goals, and bases salaries and promotions on individual achievement? You may be surprised to know that your system is founded on “management by objectives” (MBO)—a performance-measurement approach popularized in the 1960s (though the term has since fallen out of fashion).

The trouble with all performance measurement systems based on MBO is that they usually result not in a superior workforce, but in demoralized employees doing mediocre work. Why? Objective-based performance systems utterly ignore individuals’ needs, dreams, and goals—focusing only on what employees can do for their companies. But people feel most powerfully motivated by work that stretches and excites them while also advancing their company’s goals.

To build a dedicated, exceptional workforce, craft performance measurement systems that mesh individual and organizational needs.

The Idea in Practice

Fatal Flaws

Objective-based performance measurement has serious shortcomings:

• It misses the human point by ignoring key questions: What are employees’ personal objectives? What do they need from their work? What relevance do company objectives have to their dreams and aspirations? What will make them feel good about themselves?

Example: 

A salesman who relishes cultivating relationships with hard-earned but low-volume customers is pressured by management to focus only on high-volume customers. The shift would cost him his favorite way of operating, demand technical knowledge he doesn’t possess in sophisticated detail—and make him feel like a cog in a machine. Yet no one recognizes his new pressures.

• It sacrifices quality for quantity. By emphasizing quantification, it ignores the subtle, nonmeasurable elements of work that people find most satisfying.

Example: 

A company’s appraisal program emphasizes customer-service subgoals (such as “less time per customer” or “fewer customer calls”) over the overarching goal of improving customer service. Costs decline and profits rise—but customer-service managers are killing the business and experiencing no joy in their work.

A Better Way

To build an effective performance management system:

• Appraise your appraisal system. Does it view people as rats in a maze—driven and manipulated? Or, does it foster a genuine partnership between employees and the company—each influencing the other?

• Include group goal setting and appraisal. Employees’ jobs are interdependent. So, formalize group and individual, as well as long- and short-term goal setting. Have people meet regularly to help each other and to assess their effectiveness on shared tasks. Offer bonuses based on group success.

• Appraise appraisers. Have direct reports evaluate their managers’ performance—then compensate managers based on how well they help people do their jobs and develop professionally.

• Encourage self-examination. Hold regular conversations with individual employees to help them clarify their needs and goals. Talk about experiences they’ve found most gratifying or exhilarating. Discern their lives’ central thrusts, then relate these to company objectives. You’ll make it safe to explore such feelings. Your reward? A committed, energized, and focused workforce.

If an individual’s needs don’t mesh with your company’s, evaluate the discrepancy together. Decide if the person would be better off elsewhere—and the organization better off with someone whose needs do mesh.

At first glance this article seems to be about management by objectives, an approach to performance appraisal that’s gone out of fashion for the most part. But read more closely, it’s an indictment of the measurement systems we still use today. Harry Levinson, a gifted psychologist who has published 13 articles in HBR, identified a constellation of problems that cripple performance appraisal systems: Unit managers are forced to commit to goals they don’t believe are realistic. An obsession with objectivity and quantitative measures means that quality is neglected. Supervisors, who are profoundly uncomfortable rating people on their performance, make a hash of this critical task. Most important, in Levinson’s view, the individual’s needs and desires are absent from the performance measurement system; it’s assumed that these are in perfect alignment with corporate goals and that, if they’re not, the individual should move on.

Levinson’s suggestions for reform recall Frederick Herzberg’s findings: People are most deeply motivated by work that stretches and excites them while also advancing organizational goals.

Despite the fact that the concept of management by objectives (MBO) has by this time become an integral part of the managerial process, the typical MBO effort perpetuates and intensifies hostility, resentment, and distrust between a manager and subordinates. As currently practiced, it is really just industrial engineering with a new name, applied to higher managerial levels, and with the same resistances intact.

Obviously, somewhere between the concept of MBO and its implementation, something has seriously gone wrong. Coupled with performance appraisal, the intent is to follow the Frederick Taylor tradition of a more rational management process. That is, which people are to do what, who is to have effective control over the process, and how compensation is to be related directly to individual achievement. The MBO process, in its essence, is an effort to be fair and reasonable, to predict performance and judge it more carefully, and presumably to provide individuals with an opportunity to be self-motivating by setting their own objectives.

The intent of clarifying job obligations and measuring performance against an employee’s own goals seems reasonable enough. The concern for having superior and subordinate consider the same matters in reviewing the performance of the latter is eminently sensible. The effort to come to common agreement on what constitutes the subordinate’s job is highly desirable.

Yet, like most rationalizations in the Taylor tradition, MBO as a process is one of the greatest of managerial illusions because it fails to take adequately into account the deeper emotional components of motivation.

In this article, I shall indicate how I think management by objectives, as it is currently practiced in most organizations, is self-defeating and serves simply to increase pressure on the individual. By doing so, I am not rejecting either MBO or performance appraisal out of hand.

Rather, by raising the basic question, “Whose objectives?” I propose to suggest how they might be made into more constructive devices for effective management. The issues I shall raise have largely to do with psychological considerations, and particularly with the assumptions about motivation that underlie these techniques.

The “Ideal” Process

Because management by objectives is closely related to performance appraisal and review, I shall consider these together as one practice, which is intended:

• To measure and judge performance,

• To relate individual performance to organizational goals,

• To clarify both the job to be done and the expectations of accomplishment,

• To foster the increasing competence and growth of the subordinate,

• To enhance communications between superior and subordinate,

• To serve as a basis for judgments about salary and promotion,

• To stimulate the subordinate’s motivation, and

• To serve as a device for organizational control and integration.

Major Problems.

According to contemporary thinking, the “ideal” process should proceed in five steps: 1) individual discussion with the superior of the subordinate’s own job description, 2) establishment of the employee’s short-term performance targets, 3) meetings with the superior to discuss the employee’s progress toward targets, 4) establishment of checkpoints to measure progress, and 5) discussion between superior and subordinate at the end of a defined period to assess the results of the subordinate’s efforts. In ideal practice, this process occurs against a background of more frequent, even day-to-day, contacts and is separate from salary review. But, in actual practice, there are many problems:

No matter how detailed the job description, it is essentially static—that is, a series of statements.

However, the more complex the task and the more flexible an employee must be in it, the less any fixed statement of job elements will fit what that person does. Thus, the higher a person rises in an organization and the more varied and subtle the work, the more difficult it is to pin down objectives that represent more than a fraction of his or her effort.

With preestablished goals and descriptions, little weight can be given to the areas of discretion open to the individual but not incorporated into a job description or objectives.

I am referring here to those spontaneously creative activities an innovative executive might choose to do, or those tasks a responsible executive sees need to be done. As we move toward a service society, in which tasks are less well defined but spontaneity of service and self-assumed responsibility are crucial, this becomes pressing.

Most job descriptions are limited to what employees do in their work.

They do not adequately take into account the increasing interdependence of managerial work in organizations. This limitation becomes more important as the impact of social and organizational factors on individual performance becomes better understood. The more employees’ effectiveness depends on what other people do, the less any one employee can be held responsible for the outcome of individual efforts.

If a primary concern in performance review is counseling the subordinate, appraisal should consider and take into account the total situation in which the superior and subordinate are operating.

In addition, this should take into account the relationship of the subordinate’s job to other jobs. In counseling, much of the focus is on helping the subordinate learn to negotiate the system. There is no provision in most reviews and no place on appraisal forms with which I am familiar to report and record such discussion.

The setting and evolution of objectives is done over too brief a period of time to provide for adequate interaction among different levels of an organization.

This militates against opportunity for peers, both in the same work unit and in complementary units, to develop objectives together for maximum integration. Thus, both the setting of objectives and the appraisal of performance make little contribution to the development of teamwork and more effective organizational self-control.

Coupled with these problems is the difficulty that superiors experience when they undertake appraisals.

Douglas McGregor complained that the major reason appraisal failed was that superiors disliked playing God by making judgments about another person’s worth.1 He likened the superior’s experience to inspection of assembly-line products and contended that his revulsion was against being inhuman. To cope with this problem, McGregor recommended that an individual should set his or her own goals, checking them out with the superior, and should use the appraisal session as a counseling device. Thus, the superior would become one who helped subordinates achieve their own goals instead of a dehumanized inspector of products.

Parenthetically, I doubt very much that the failure of appraisal stems from playing God or feeling inhuman. My own observation leads me to believe that managers experience their appraisal of others as a hostile, aggressive act that unconsciously is felt to be hurting or destroying the other person. The appraisal situation, therefore, gives rise to powerful, paralyzing feelings of guilt that make it extremely difficult for most executives to be constructively critical of subordinates.

Objectivity Plea. Be that as it may, the more complex and difficult the appraisal process and the setting and evaluation of objectives, the more pressing the cry for objectivity. This is a vain plea. Every organization is a social system, a network of interpersonal relationships. A person may do an excellent job by objective standards of measurement, but may fail miserably as a partner, subordinate, superior, or colleague. It is a commonplace that more people fail to be promoted for personal reasons than for technical inadequacy.

Furthermore, because all subordinates are a component of their superiors’ efforts to achieve their own goals, subordinates will inevitably be appraised on how well they work with superiors and help the latter meet goals. A heavy subjective element necessarily enters into every appraisal and goal-setting experience.

The plea for objectivity is made in vain for another reason. The greater the emphasis placed on measurement and quantification, the more likely the subtle, nonmeasurable elements of the task will be sacrificed. Quality of performance frequently, therefore, loses out to quantification.

A case example:

One manufacturing plant that produces high-quality, high-prestige products, backed by a reputation for customer consideration and service, has instituted an MBO program. It is well worked out and has done much to clarify individual goals and organizational performance. It is an important component of the professional management style of that company, which has resulted in commendable growth.

But an interesting, and ultimately destructive, process has been set in motion. The managers are beginning to worry because now when they ask why something has not been done, they hear from one another, “That isn’t in my goals.” They complain that customer service is deteriorating. The vague goal, “improve customer service,” is almost impossible to measure. There is therefore heavy concentration on those subgoals that can be measured. Thus, time per customer, number of customer calls, and similar measures are used as guides in judging performance. The less time per customer and the fewer the calls, the better the customer service manager meets his objectives. He is cutting costs, increasing profit—and killing the business. Worse still, he hates himself.

Most of the managers in that organization joined it because of its reputation for high quality and good service. They want to make good products and earn the continued admiration of their customers, as well as the envy of their industry. When they are not operating at that high level, they feel guilty. They become angry with themselves and the company. They feel that they might just as well be working for someplace else that admittedly does a sloppy job of quality control and could hardly care less about service.

The same problem exists with respect to the development of personnel, which is another vague goal that is hard to measure in comparison with subgoals that are measurable. If asked, each manager can name a younger employee as a potential successor, particularly if a promotion depends on doing so; but no one has the time, or indeed is being paid, to thoroughly train the younger person. Nor can one have the time or be paid, for there is no way in that organization to measure how well a manager does in developing another.

The Missed Point

All of the problems with objectives and appraisals outlined in the example discussed in the foregoing section indicate that MBO is not working well despite what some companies think about their programs. The underlying reason it is not working well is that it misses the whole human point.

To see how the point is being missed, let us follow the typical MBO process. Characteristically, top management sets its corporate goal for the coming year. This may be in terms of return on investment, sales, production, growth, or other measurable factors.

Within this frame of reference, reporting managers may then be asked how much their units intend to contribute toward meeting that goal, or they may be asked to set their own goals relatively independent of the corporate goal. If they are left free to set their own goals, these in any case are expected to be higher than those they had the previous year. Usually, each reporting manager’s range of choices is limited to an option for a piece of the organizational action or improvement of specific statistics. In some cases, it may also include obtaining specific training or skills.

Once a reporting manager decides on the unit’s goals and has them approved by his superior, those become the manager’s goals. Presumably, he has committed himself to what he wants to do. He has said it and he is responsible for it. He is thereafter subject to being hoisted with his own petard.

Now, let us reexamine this process closely: The whole method is based on a short-term, egocentrically oriented perspective and an underlying reward-punishment psychology. The typical MBO process puts the reporting manager in much the same position as a rat in a maze, which has choices between only two alternatives. The experimenter who puts the rat in the maze assumes that the rat will choose the food reward. If that cannot be presumed, the rat is starved to make sure it wants the food.

Management by objectives differs only in that it permits the manager to determine his or her own bait from a limited range of choices. Having done so, the MBO process assumes that the manager will a) work hard to get it, b) be pushed internally by reason of this commitment, and c) be responsible to the organization for doing so.

In fairness to most managers, they certainly try, but not without increasing resentment and complaint for feeling like rats in a maze, guilt for not paying attention to those parts of the job not in their objectives, and passive resistance to the mounting pressure for ever-higher goals.

Personal Goals.

The MBO process leaves out the answers to such questions as: What are the managers’ personal objectives? What do they need and want out of their work? How do their needs and wants change from year to year? What relevance do organizational objectives and their part in them have to such needs and wants?

Obviously, no objectives will have significant incentive power if they are forced choices unrelated to a person’s underlying dreams, wishes, and personal aspirations.

For example: If a salesperson relishes the pleasure of his relationships with his hard-earned but low-volume customers, this is a powerful need for him. Suppose his boss, who is concerned about increasing the volume of sales, urges him to concentrate on the larger-quantity customers rather than the smaller ones, which will provide the necessary increase in volume, and then asks him how much of an increase he can achieve.

To work with the larger-quantity customers means that he will be less likely to sell to the individuals with whom he has well-established relationships and be more likely to deal with purchasing agents, technical people, and staff specialists who will demand of him knowledge and information he may not have in sophisticated detail. Moreover, as a single salesperson, his organization may fail to support him with technical help to meet these demands.

When this happens, not only may he lose his favorite way of operating, which has well served his own needs, but he may have demands put on him that cause him to feel inadequate. If he is being compelled to make a choice about the percent of sales volume increase he expects to attain, he may well do that, but now he’s under great psychological pressure. No one has recognized the psychological realities he faces, let alone helped him to work with them. It is simply assumed that because his sales goal is a rational one, he will see its rationality and pursue it.

The problem may be further compounded if, as is not unusual, formal changes are made in the organizational structure. If sales territories are shifted, if problems of delivery occur, if modes of compensation are changed, or whatever, all of these are factors beyond the salesperson’s control. Nevertheless, even with certain allowances, he is still held responsible for meeting his sales goal.

Psychological Needs.

Lest the reader think that the example we have just seen is overdrawn or irrelevant, I know of a young sales manager who is about to resign his job, despite success in it, because he chooses not to be expendable in an organization that he feels regards him only as an instrument for reaching a goal. Many young people are refusing to enter large organizations for just this reason.

Some may argue that my criticism is unfair, that many organizations start their planning and setting of objectives from below. Therefore, the company cannot be accused of putting a person in a maze. But it does so. In almost all cases, the only legitimate objectives to be set are those having to do with measurable increases in performance. This highlights, again, the question, “Whose objectives?” The question becomes more pressing in those circumstances where lower-level people set their objectives, only to be questioned by higher-level managers and told their targets are not high enough.

You may well ask, “What’s the matter with that? Aren’t we in business, and isn’t the purpose of the employee’s work to serve the requirements of the business?” The answer to both questions is, “Obviously.” But that is only part of the story.

If a person’s most powerful driving force is comprised of needs, wishes, and personal aspirations, combined with the compelling wish to look good in her own eyes for meeting those deeply held personal goals, then management by objectives should begin with her objectives. What does she want to do with her life? Where does she want to go? What will make her feel good about herself? What does she want to be able to look back on when she has expended her unrecoverable years?

At this point, some may say that those are her business. The company has other business, and it must assume that the employee is interested in working in the company’s business rather than her own. That kind of differentiation is impossible. Everyone is always working toward meeting his or her psychological needs. Anyone who thinks otherwise, and who believes such powerful internal forces can be successfully disregarded or bought off for long, is deluded.

The Mutual Task

The organizational task becomes one of first understanding the employee’s needs, and then, with him or her, assessing how well they can be met in this organization, doing what the organization needs to have done. Thus, the highest point of self-motivation arises when there is a complementary conjunction of the individual’s needs and the organization’s requirements. The requirements of both mesh, interrelate, and become synergistic. The energies of employee and organization are pooled for mutual advantage.

If the two sets of needs do not mesh, then a person has to fight him- or herself and the organization, in addition to the work that must be done and the targets that have been defined. In such a case, this requires the subordinate and the boss to evaluate together where the employee wants to go, where the organization is going, and how significant the discrepancy is. This person might well be better off somewhere else, and the organization would do better to have someone else in place whose needs mesh better with the organization’s requirements.

Long-Run Costs.

The issue of meshed interests is particularly relevant for middle-aged, senior-level managers.2 As people come into middle age, their values often begin to change, and they feel anew the pressure to accomplish many long-deferred dreams. When such wishes begin to stir, they begin to experience severe conflict.

Up to this point, they have committed themselves to the organization and have done sufficiently well in it to attain high rank. Usually, they are slated for even higher levels of responsibility. The organization has been good to them, and their superiors are depending on them to provide its leadership. They have been models for the younger employees, whom they have urged to aspire to organizational heights. To think of leaving is to desert both their superiors and their subordinates.

Because there are few avenues within the organization to talk about such conflict, these managers try to suppress their wishes. The internal pressure continues to mount until they finally make an impulsive break, surprising and dismaying both themselves and their colleagues. I can think of three vice presidents who have done just that.

The issue is not so much that they decide to leave, but the cost of the way they depart. Early discussion with superiors of their personal goals would have enabled both to examine possible relocation alternatives within the organization. If there were none, then both the managers and their superiors might have come to an earlier, more comfortable decision about separation. The organization would have had more time to make satisfactory alternative plans, as well as to have taken steps to compensate for the manager’s lagging enthusiasm. Lower-level managers would then have seen the company as humane in its enlightened self-interest and would not have had to create fearful fantasies about what the top management conflicts were that had caused a good person to leave.

To place consideration of the managers’ personal objectives first does not minimize the importance of the organization’s goals. It does not mean there is anything wrong with the organization’s need to increase its return on investment, its size, its productivity, or its other goals. However, I contend that it is ridiculous to make assumptions about the motivations of individuals, and then to set up means of increasing the pressures on people based on these often questionable assumptions. While there may be certain demonstrable short-run statistical gains, what are the long-run costs?

One cost is that people may leave; another, that they may fall back from competitive positions to plateaus. Why should an individual be expendable for someone else and sacrifice for something that is not a personal, cherished dream? Still another cost may be the loss of the essence of the business, as happened in the case example we saw earlier of the manufacturing plant with the problem of deteriorating customer service.

In that example, initially there was no dialogue. Nobody heard what the managers said, what they wanted, where they wanted to go, where they wanted the organization to go, and how they felt about the supposedly rational procedures that had been initiated. The underlying psychological assumption that management made unconsciously was that the managers had to be made more efficient; ergo, management by objectives.

Top management typically assumes that it alone has the prerogative to a) set the objectives, b) provide the rewards and targets, and c) drive anyone who works for the organization. As long as this reward-punishment psychology exists in any organization, the MBO appraisal process is certain to fail.

Many organizations are making this issue worse by promising young people they will have challenges because they assume these employees will be challenged by management’s objectives. Managements are having difficulty, even when they have high turnover rates, hearing these youngsters say they could hardly care less for management’s unilaterally determined objectives. Managements then become angry and complain that the young people do not want to work or that they want to become presidents overnight.

What the young people are asking is: What about me and my needs? Who will listen? How much will management help me meet my own requirements while also meeting its objectives?

The power of this force is reflected in the finding that the more a subordinate participates in the appraisal interview by presenting personal ideas and beliefs, the more likely he or she is to feel that a) the superior is helpful and constructive, b) some current job problems are being cleared up, and c) reasonable future goals are being set.3

Suggested Steps

Given the validity of all the MBO problems I have been discussing to this point, there are a number of possibilities for coping with them. Here, I suggest three beginning steps to consider.

Motivational Assessment.

Every MBO program and its accompanying performance appraisal system should be examined as to the extent to which it a) expresses the conviction that people are patsies to be driven, urged, and manipulated, and b) fosters a genuine partnership between employee and organization, in which each has some influence over the other, as contrasted with a rat-in-maze relationship.

It is not easy for the nonpsychologist to answer such questions, but there are clues to the answers. One clue is how decisions about compensation, particularly bonuses, are made. For example: A sales manager asked for my judgment about an incentive plan for highly motivated salespeople who were in a seller’s market. I asked why one was needed, and he responded, “To give them an incentive.” When I pointed out that they were already highly motivated and apparently needed no incentive, he changed his rationale and said that the company wanted to share its success to keep the sales staff identified with it, and to express its recognition of their contribution.

I asked, “Why not let them establish the reward related to performance?” The question startled him; obviously, if they were going to decide, who needed him? A fundamental aspect of his role, as he saw it, was to drive them ever onward, whether they needed it or not.

In a plastic-fabricating company, a middle-management bonus plan tied to performance proved to be highly unsatisfactory. Frustrated that its well-intentioned efforts were not working and determined to follow precepts of participative management, ranking executives in the company involved many people in formulating a new one: personnel, control, marketing executives, and others—in fact, everyone but the managers who were supposed to receive the bonuses. Top management is now dismayed that the new plan is as unsatisfactory as the old and bitter that participation failed to work.

Another clue is the focus of company meetings. Some are devoted to intensifying the competition between units. Others lean heavily to exhortation and inspiration. Contrast these orientations with meetings in which people are apprised of problems and plan to cope with them.

Group Action.

Every objectives and appraisal program should include group goal setting, group definition of individual and group tasks, group appraisal of its accomplishments, group appraisal of each individual member’s contribution to the group effort (without basing compensation on that appraisal), and shared compensation based on the relative success with which group goals are achieved. Objectives should include long-term as well as short-term goals.

The rationale is simple. Every managerial job is an interdependent task. Managers have responsibilities to one another as well as to their superiors. The reason for having an organization is to achieve more together than each could alone. Why, then, emphasize and reward individual performance alone, based on static job descriptions? That approach can only orient people to incorrect and self-centered goals.

Therefore, where people are in complementary relationships, whether they report to the same superior or not, both horizontal and vertical goal formulation should be formalized, with regular, frequent opportunity for review of problems and progress. They should help one another define and describe their respective jobs, enhancing control and integration at the point of action.

In my judgment, for example, a group of managers (sales, promotion, advertising) reporting to a vice president of marketing should formulate their collective goals and define ways of helping one another and of assessing one another’s effectiveness in the common task. The group assessment of each manager’s work should be a means of providing each one with constructive feedback, not for determining pay. However, in addition to their salaries, they should each receive, as part of whatever additional compensation is offered, a return based on the group effort.

The group’s discussion among itself and with its superior should include examination of organizational and environmental obstacles to goal achievement, and particularly of what organizational and leadership supports are required to attain objectives. One important reason for this is that often people think there are barriers where none would exist if they initiated action. (“You mean the president really wants us to get together and solve this problem?”)

Another reason is that frequently when higher management sets goals, it is unaware of significant barriers to achievement, which makes managers cynical. For example, if there is no comprehensive orientation and support program to help new employees adapt, then pressure on lower-level managers to employ disadvantaged minority group members and to reduce their turnover can only be experienced by those managers as hollow mockery.

Appraisal of Appraisers.

Every management by objectives and appraisal program should include regular appraisals of the manager by subordinates, and be reviewed by the manager’s superior. Every manager should be specifically compensated for how well he or she develops people, based on such appraisals. The very phrase “reporting to” reflects the fact that although a manager has a responsibility, the superior also has a responsibility for what he or she does and how it’s done.

Every management by objectives and appraisal program should include regular appraisals of the manager by subordinates, and be reviewed by the manager’s superior.

In fact, both common sense and research indicate that the single most significant outside influence on how a manager performs is the superior. If that is the case, then the key environmental factor in task accomplishment and managerial growth is the relationship between manager and superior.

Therefore, objectives should include not only the individual manager’s personal and occupational goals, but also the corporate goals manager and superior share in common. They should together appraise their relationship vis-à-vis both the manager’s individual goals and their joint objectives, review what they have done together, and discuss its implications for their next joint steps.

A manager rarely is in a position to judge a superior’s overall performance, but he or she can appraise how well the superior has helped the manager to do the job, how well the superior is helping to increase the manager’s proficiency and visibility, what problems the superior poses for the manager, and what kinds of support the superior can use. Such feedback serves several purposes.

Most important, it offers some guidance on the superior’s own managerial performance. In addition, and particularly when the manager is protected by higher-level review of this appraisal, it provides the supervisor with direct feedback on his or her own behavior. This is much more constructive than behind-the-back complaints and vituperative terminal interviews, in which cases there is no opportunity either for self-defense or corrective behavior. Every professional counselor has had recently fired executive clients who did not know why they had been discharged for being poor superiors when, according to their information, their subordinates thought so much of them. In his or her own self-interest, every manager should want appraisal by subordinates.

The Basic Consideration

When the three organizational conditions we have just seen do in fact exist, then it is appropriate to think of starting management by objectives with a consideration of each employee’s personal objectives; if the underlying attitude in the organization toward the subordinate is that he or she is but an object, there is certainly no point in starting with the person. Nor is there any point in trying to establish confidence in superiors when there is no protection from their rivalry, or being pitted against peers. Anyone who expressed personal fears and innermost wishes under these circumstances would be a damned fool.

For reasons I have already indicated, it should be entirely legitimate in every business for these concerns to be the basis for setting individual objectives. This is because the fundamental managerial consideration necessarily must be focused on the question: “How do we meet both individual and organizational purposes?” If a major intention of management by objectives is to enlist the self-motivated commitment of the individual, then that commitment must derive from the individual’s powerful wishes to support the organization’s goals; otherwise, the commitment will be incidental to any personal wishes.

The fundamental managerial consideration necessarily must be focused on the question: “How do we meet both individual and organizational purposes?”

Having said that, the real difficulty begins. How can any superior know what a subordinate’s personal goals and wishes are if even the subordinate—as most of us are—is not clear about them? How ethical is it for a superior to pry into an employee’s personal life? How can he or she keep from forming a negative judgment about someone who is losing interest in work, or is not altogether identified with the company? How can the superior keep that knowledge from interfering with judgments he or she might otherwise make, and opportunities he or she might otherwise make, and opportunities he or she might otherwise offer? How often are the personal goals, particularly in middle age, temporary fantasies that are better not discussed? Can a superior who is untrained in psychology handle such information constructively? Will he or she perhaps do more harm than good?

These are critically important questions. They deserve careful thought. My answers should be taken as no more than beginning steps.

Ego Concepts.

Living is a process of constant adaptation. An individual’s personal goals, wishes, and aspirations are continuously evolving and being continuously modified by experiences. That is one reason why it is so difficult for an individual to specify concrete personal objectives.

Nevertheless, each of us has a built-in road map, a picture of his or her future best self. Psychologists speak of this as an ego ideal, which is comprised of a person’s values, the expectations parents and others have held out for competences and skills, and favorite ways of behaving. An ego ideal is essentially the way an individual thinks he or she ought to be. Much of a person’s ego ideal is unconscious, which is another reason why it is not clear.

Subordinates’ self-examination:

Although people cannot usually spell out their ego ideal, they can talk about those experiences that have been highly gratifying, even exhilarating. They can specify those rare peak experiences that made them feel very good about themselves. When they have an opportunity to talk about what they have found especially gratifying and also what they think would be gratifying to them, people are touching on central elements of their ego ideal.

Given the opportunity to talk about such experiences and wishes on successive occasions, people can begin to spell out for themselves the central thrust of their lives. Reviewing all of the occupational choices they have made and the reasons for making them, people can begin to see the common threads in those choices and therefore the momentum of their personalities. As these become clearer, they are in a better position to weigh alternatives against the mainstream of their personalities.

For example, an individual who has successively chosen occupational alternatives in which she was individually competitive, and whose most exhilarating experiences have come from defeating an opponent or single-handedly vanquishing a problem, would be unlikely to find a staff position exhilarating, no matter what it paid or what it was called. Her ideal for herself is that of a vanquishing, competitive person.

The important concept here is that it is not necessary that an individual spell out concrete goals at any one point; rather, it is helpful to both the individual and the organization if he or she is able to examine and review aloud on a continuing basis personal thoughts and feelings in relation to his or her work. Such a process makes it legitimate to bring his or her own feelings to consciousness and talk about them in the business context as the basis for a relationship to the organization.

By listening, and helping the subordinate to spell out how and what he or she feels, the superior does not do anything to the subordinate, and therefore by that self-appraisal process cannot be hurtful. The information serves both employee and superior as a criterion for examining the relationship of the employee’s feelings and, however dimly perceived, personal goals to organizational goals. Even if some of these wishes and aspirations are mere fantasy and impossible to gratify, if it is legitimate to talk about them without being laughed at, the individual can compare them with the realities of his or her life and make more reasonable choices.

Even in the safest organizational atmosphere, for reasons already mentioned, it will not be easy for managers to talk about their goals. The best-intentioned supervisor is likely to be something less than a highly skilled interviewer. These two facts suggest that any effort to ascertain a subordinate’s personal goals is futile; but I think not.

The important point is not the specificity of the statement that any person can make, but the nature of a superior-subordinate relationship that makes it safe to explore such feelings and gives first consideration to the individual. In such a context, both subordinate and superior may come closer to evolving an employee-organization fit than they might otherwise.

Superior’s introspection:

An employee-organization relationship requires the superior to engage in some introspection, too. Suppose he has prided himself on bringing along a bright young manager who, he now learns, is thinking of moving into a different field. How can he keep from being angry and disappointed? How can he cope with the conflict he now faces when it is time to make recommendations for advancement or a raise?

The superior cannot keep from being angry and disappointed. Such feelings are natural in that circumstance. He can express feelings of disappointment to his protégé without being critical of the latter. But, if he continues to feel angry, then he needs to ask himself why another person’s assertion of independence irritates him so. The issues of advancement and raises should continue to be based on the same realistic premises as they would have been before.

Of course, it now becomes appropriate to consider with the individual whether—in view of his feelings—he wants to take on the burden of added responsibility and can reasonably discharge it. If he thinks he does, and can, he is likely to pursue the new responsibility with added determination. With his occupational choice conflict no longer hidden, and with fewer feelings of guilt about it, his commitment to his chosen alternative is likely to be more intense.

And if an employee has earned a raise, he or she should get it. To withhold it merely punishes him or her, which puts the relationship back on a reward-punishment basis.

The question of how ethical it is to conduct such discussions as part of a business situation hinges on the climate of the organization and on the sense of personal responsibility of each executive. Where the organization’s ethos is one of building trust and keeping confidences, there is no reason why executives cannot be as ethical as lawyers or physicians.

If the individual executive cannot be trusted in relationships with subordinates, then he or she cannot have their respect or confidence in any case, and the ordinary MBO appraisal process simply serves as a management pressure device. If the organization’s ethos is one of rapacious internal competition, backbiting, and distrust, there is little point in talking about self-motivation, human needs, or commitment.

Management by objectives and performance appraisal processes, as typically practiced, are inherently self-defeating over the long run because they are based on a reward-punishment psychology that serves to intensify the pressure on the individual while really offering a very limited choice of objectives. Such processes can be improved by examining the psychological assumptions underlying them, by extending them to include group appraisal and appraisal of superiors by subordinates, and by considering the personal goals of the individual first. These practices require a high level of ethical standards and personal responsibility in the organization.

Such appraisal processes would diminish the feeling on the part of the superior that appraisal is a hostile, destructive act. While superior and subordinate would still have to judge the latter’s individual performance, this judgment would occur in a context of continuing consideration for personal needs and reappraisal of organizational and environmental realities.

Not having to be continuously on the defensive and aware of the organization’s genuine interest in having him or her meet personal as well as organizational goals, a manager would be freer to evaluate him- or herself against what has to be done. Because there would be many additional frames of reference in both horizontal and vertical goal setting, the manager would need no longer feel under appraisal, attack, or judgment as an isolated individual against the system. Furthermore, there would be multiple modes for contributing ideas and a varied method for exerting influence upward and horizontally.

In these contexts, too, the manager could raise questions and concerns about qualitative aspects of performance. Then manager, colleagues, and superiors could together act to cope with such issues without the barrier of having to consider only statistics. Thus, a continuing process of interchange would counteract the problem of the static job description and provide multiple avenues for feedback on performance and joint action.

In such an organizational climate, work relationships would then become dynamic networks for both personal and organizational achievements. A not-incidental gain from such arrangements is that problems would more likely be solved spontaneously at the lowest possible levels, and free superiors simultaneously from the burden of the passed buck and the onus of being the purveyors of hostility.

1. “An Uneasy Look at Performance Appraisal,” HBR May–June 1957, p. 89. (Reprinted as an HBR Classic, September–October 1972.)

2. See my article, “On Being a Middle-Aged Manager,” HBR July–August 1969, p. 51.

3. Ronald J. Burke and Douglas S. Wilcox, “Characteristics of Effective Employee Performance Reviews and Developmental Interviews,” Personal Psychology, Vol. 22, No. 3, 1969, p. 291.

A version of this article appeared in the January 2003 issue of Harvard Business Review.

When using MBO managers should?

Which one of the following is the first step in the management by objectives MBO process?

Which of the following is the final step in the MBO cycle?

Is the overall goal of MBO?