Objective Setting and MBO-SMART Objectives

Defining the performance objectives can be very useful as it defines the performance expectations. Objectives which are written down and are verifiable can be far more useful if they are SMART in nature which means Specific, Measurable, Achievable, Realistic and Time Bound. Many organizations set goals and objectives through a formal process known as Management by Objectives (MBO) which is an organized and a systematic approach of defining organizational goals and realizing them within the available resources. The main aim of this approach is to improve organizational performance by aligning the organizational goals with the individual objectives at all levels and attaining those goals within a prescribed time frame. The system involves continuous monitoring and feedback for improving the quality of outcome.

The chief proponent of MBO system was Peter F Drucker in 1954 in his book entitled ‘The Practice of management’. GE was the first organization to adopt the MBO method for defining goals. The major focus of this approach is on inviting participation from all the managers in the goal setting process and strategic planning and implementing a range of performance systems which help an organization to remain on the right path. On the whole, it may be regarded that objective setting process is an important part of performance management process as it defines and manages expectations by establishing an understanding on the part of the role holder about what has to be achieved and at the same time acts as a point of reference during the period of performance review.

Objectives can be broadly classified under the following heads:

  1. Work Objectives: These are the key result areas in a role profile of an employee which not only explains what has to be done but also why a job has to be done. For example, respond proactively to the customer complaints and queries for maximizing customer satisfaction. Effective work objectives clearly define an activity in terms of the results or standards which are to be accomplished. For example, Tata Steel for transforming itself into a growth organization aligns the key result areas with the corporate strategy at all levels in its performance management module. The organization rewards and provides career growth opportunities to those employees who perform well in their jobs. In this way the organization manages the performance of its employees by focusing on work objectives or the KRA’s.

  2. Targets: These are the results which can be measured in quantifiable terms like output, income, cost reduction, service delivered, etc.

  3. Tasks/Projects: These are the objectives which carry a deadline and should be fulfilled within a specified time frame or can be completed in phases.

  4. Behavioral Parameters: Behavioral parameters are normally set out within the competency frameworks, identified as desirable and undesirable behaviors which may be useful in the process of performance planning and reviewing. For example, Infosys emphasizes on recruiting only those candidates who display a high degree of learnability and at the same time possess special competencies like analytical skills, communication skills and problem solving skills.

  5. Values: The objective may be to drive all the efforts of the employees and the management team for up holding the core values of the company. In FedEx, the organization espouses the value of maximizing employee satisfaction for promoting customer satisfaction.

  6. Performance Improvement: This objective aims at realization of an improved performance by directing all the attention towards achieving better results. This objective is highlighted in the performance improvement plans of the employees which describe what steps or measures can be jointly adopted by the managers and the employee for an optimal performance. South West Airlines aims at improving the performance of its employees by providing them appropriate training for handling the requirements of the job challenges, compensating them favorably and keeping them motivated for winning their loyalty.

  7. Developmental Objectives: These objectives are highlighted in the personal development plans and include the diverse areas of development for an employee which can help in the enhancement of skills and knowledge levels of an employee. In GE, training and development is a continuous process for developing the competencies of the employees and invests in both in-house training programmes and development programmes. Besides this, the company also sponsors its employees for MBA course in reputed universities.

Prerequisites for a good objective

  • A good objective should be precise and well defined.
  • Should be consistent with the values of an organization.
  • Must fulfill the measurability criterion in quantifiable terms.
  • Should be challenging for encouraging better performance and attainment of superior standards.
  • Should be achievable and must be within the purview of an individual’s capability.
  • Should be mutually agreed by the manager and the employee concerned.
  • Must be time bound and emphasize on team based results.


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