Strategic Planning and Goal Setting: MBO and Effective Goal Criteria
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Strategic Planning Fundamentals: Goals and Plan Types
Plan Types Based on Frequency of Use
Single-Use Plans
A one-time plan specifically designed to meet the needs of a unique situation.
- Example: A floor plan designed for a company’s annual dinner.
Standing Plans
Ongoing plans that provide guidance for activities performed repeatedly.
- Example: A working schedule or standard operating procedures.
Traditional Goal Setting vs. Management by Objectives (MBO)
Understanding the differences between these two approaches is crucial for organizational effectiveness.
Traditional Goal Setting
Top managers set goals that then flow down through the organization and become subgoals for each organizational area.
The downside of traditional goal setting is the potential misalignment of mindsets across organizational levels. Top managers focus on overall company performance, while lower-level managers might prioritize short-term profit growth, and employees may simply focus on task completion. Consequently, this approach often fails to unite everyone and may be less effective.
Management by Objectives (MBO)
MBO is a process of setting mutually agreed-upon goals involving managers from all departments, and using those goals to evaluate employee performance.
6 Criteria for Effective Goal Writing
To determine if a goal is well-written and actionable, six key criteria must be met:
Written in Terms of Outcomes Rather Than Actions
Managers should focus on the desired outcome (the big picture, e.g., sales target) rather than the specific activities that lead up to the outcome (e.g., sales activities).
Measurable and Quantifiable
Goals must be quantifiable so progress can be tracked.
- Example: McDonald’s wants to increase sales by 30%.
Clear as to Time Frame
A deadline ensures accountability and urgency.
- Example: McDonald’s wants to increase sales by 30% by December 2019.
Challenging Yet Attainable
Goals should stretch the organization but remain realistic. Setting unrealistic goals leads to failure and demotivation.
- Unattainable Example: McDonald’s wants to increase sales by 300% by tomorrow.
Written Down
Goals must be documented so they can be referred to and tracked in the future.
Communicated to All Necessary Organizational Members
If McDonald’s wants to increase sales by 30% by December 2019, this goal must be communicated to relevant members throughout the organization, such as the sales manager and salespeople.