It all started with Peter Drucker, the godfather of modern management
. In 1954 P. Drucker published the book "The Practice of Management
", in which he was the first one to look at management as a separate responsibility. He admitted that managers get caught in the "activity trap," unable to spend time on the broader company vision and the long-term strategy. To fix that, he introduced MBO
— Management by Objectives.
The main principles of the MBO were:
- Clearly defining and agreeing on the objectives of both employees and managers/supervisors increase the performance of the organization.
- The process involved 5 steps: review organizational goal, set worker objective, monitor progress, evaluate, give a reward.
- Having input in the goal setting and the action plan increases the engagement and motivation of the workers.
Yeah, I know, it sounds obvious in the 21st century, but it was something unheard of in the 1950s.
However, MBO had a few weaknesses that revealed later:
- Setting particular goals like production targets leads workers to meet those targets by any means necessary, including shortcuts that result in poor quality.
- Objectives often ignored employee subjectivity.
- The motivation part was often elusive since the company goals did not automatically align with the goals of its employees.
and W. E. Demming
described MBO's weaknesses. Drucker himself admitted later that MBO was "just another tool" that still didn't solve the problem of actually knowing your company's objectives.