Using the concept

A program of management by objectives is most appropriate when there are problems with clarity, commitment, or standards. Clarity indicates how well employees understand the company's goals and policies and feel that things are organized and run smoothly, not confused. The extent to which this is a problem can be seen by asking: Do employees understand what is expected of them? Is there evidence of activity that is planned and organized? Is there a smooth flow of information?

Commitment indicates how strongly employees feel about achieving company goals. To what extent do they accept these goals, see them as realistic, get involved in setting them, and have their performance evaluated against them? Questions to ask include: Are there regular goal-setting and review meetings? Are goals meaningful and realistic? Is there a personal commitment to achieving company goals?

Standards indicates the emphasis that management puts on a high quality of performance. How much pressure exists to improve performance? Suitable questions would be: Is there evidence of pressure to improve performance? Do employees feel pride in doing a good job? Does management set tough, challenging goals?

If the answer to these types of questions is no, a program of management by objectives would seem needed. For such a program to work, its motivational assumption must be understood. MBO assumes that people will work toward objectives to which they are committed, which results from involving employees in the process.

Numerous studies have shown the importance of setting a goal. We all like to have something for which we strive. Performance is directly related to the goal. In order to work, goals must be SMART: Specific, Measurable, Achievable, Realistic, and Time-bound.

A goal that is specific gives something definite to shoot for. "Let's sell more wine" is not as effective as "Let's sell 20 bottles of wine this week". A goal must be measurable so employees can know if and when the goal is reached. We all like to keep score. If employees feel that goals are not achievable or realistic, they will not even try to meet them. It has been shown that challenging goals of a specific duration lead to better performance than easy ones. Even more important, however, is that a goal be set, rather than no goal at all or the vague "Do your best".

There are mixed opinions about whether individual or group goals should be set. It could be argued that group goals encourage cooperation and team spirit. Others feel individual goals better promote individual responsibility and make it easier to appraise individual performance. The key is the extent to which the task to be accomplished requires the cooperation of others. The more the job requires interdependence, the greater is the argument for group goals. Selling banquet space to businesses or increasing wine sales in the restaurant, for example, should be individualized. Getting the food for that banquet out of the kitchen within a certain amount of time should be a group effort.

Goals can be set in several different ways. Frederick W Taylor's scientific management approach used time and motion studies to determine how much should be done within a given period. This method of goal setting is appropriate for tasks that are repetitive and standardized, such as the number of potatoes that can be peeled in an hour. There is, however, the difficulty of employee resistance when new standards are set that are considerably higher than previous ones or there are frequent changes in what is expected.

Second, goals can be set based on the average past performance of employees. While this method is less scientific, most employees readily accept it as fair. Difficulties arise when past performance is below what management feels should be accomplished. Goals may be set that are easily accomplished with less than maximum effort.

Third, goals can be set jointly between supervisor and employee. A fair amount of research indicates that the importance of participative rather than assigned goals is that the former leads to the setting of higher goals and, in turn, to higher performance. In particular, some studies indicate participative goal setting has produced higher goals among minorities and the less educated. These results were counter to what researchers expected. In other situations, however, it was found that specific and challenging goals produced better results than vague, easy ones, whether they were assigned or came through joint participation.

External events often influence the setting of goals. A health inspection the following week determines what has to be done to pass muster. Competitive price cuts may dictate company objectives. The problem at this point may not be the goal so much, but rather how to reach it within a certain time limit.

Last, goals set by upper management will influence goals set at lower levels. If upper management wants a 10 per cent increase in sales for the next year, then the objectives of the various units or departments must be oriented to setting their own objectives to ensure that the 10 per cent increase is gained.

Typically, management in the hospitality industry has done a very poor job of communicating the goals that are important to the organization.

A national study of foodservice supervisors identified some good news and bad news about communication between manager and supervisor. 1 The good news was that formal communication, not the grapevine, was the major source of information for the supervisor. 29 per cent of foodservice supervisors (compared to 17 per cent of first-level supervisors from all industries) identified formal communication as their main source of information, while 17 per cent identified the grapevine as their major source (compared to 29 per cent of all supervisors). The bad news is that only 44 per cent of foodservice supervisors, compared to 55 per cent of all supervisors, got most of their information from their boss. Clearly, managers are missing an opportunity to take more control over the amount and type of information given their supervisors.

The manager or supervisor is the key link between the company and the employee. The objective of the company is to maximize productivity; the employee is increasingly seeking satisfaction from the job. How are these brought together? To increase productivity, the company must determine the key areas of results that should be emphasized; what employee behavior is necessary in those key areas; whether employee performance matches the behavioral objectives set; and how to communicate to employees the results of their efforts, following up with praise, coaching, or remedial actions.

At the same time, the employee has several questions: What is really expected of me? How far am I expected to go? How good is good? How am I doing?

Recent studies have indicated that there is less than total agreement on what the content of an employee's job is. Interviews with manager-employee pairs discovered approximately 75 per cent agreement regarding the content of an employee's job. In other words, 25 per cent of the time the employee is spending time and effort on areas that are not important at all. Equally, 25 per cent of the job is important to the manager but not receiving the employee's attention. It seems that the best performance and highest degree of goal attainment exist when there is agreement between manager and employee as to the content of the employee's job. One way of working this out is by identifying areas of disagreement. This can be done through a manager's letter to the employee, outlining the job responsibilities of both. Employees cannot fully understand their own job until they understand their supervisor's.

William Martin has suggested 16 important results areas for high-quality food and beverage service, divided into procedural and convivial dimensions of service.  2 

The procedural dimension refers to the technical systems involved in getting products and services to customers. This dimension consists of seven facets:

The convivial dimension refers to the server's ability to relate to customers as people instead of just covers. It consists of nine aspects, according to Martin.

Management's responsibility is to determine the areas considered vital for the proper operation of the business and to communicate these areas to employees. Behavioral objectives must now be set to put these 16 points into operation. The company's responsibility is to let employees know what behavior is expected of them in order to meet the service goals.

The employee wants to know, "What is really expected of me?" and "How good is good?" How best to obtain employee commitment must be considered.

Generally, employees resist making commitments to goals for two reasons: they do not feel that they are capable of reaching a goal because they lack confidence, ability, or knowledge or because they see no personal benefit or gain in terms of money, promotion, recognition, or personal pride.

There are various ways to overcome these obstacles. The manager is responsible for communicating to employees just how their objectives and the operation's mesh. This means more than saying: "Work—or be fired". It means demonstrating that when the company wins, the employees win; when more customers are served, there is more work, better shifts, and bigger tips. It also means providing a supportive atmosphere. Support can be given in the form of training to give employees the skills and knowledge necessary to reach the company objectives. Support is also shown by involving employees in the setting of behavioral objectives to reach company goals.

Participation in setting objectives has been shown to be particularly effective in obtaining commitment from less educated and minority employees. This may be true because it gives employees a feeling of control over the process that they might not ordinarily have had in their lives. There are those who fear that allowing employees to participate will result in objectives that are far less than what management desires. There is evidence, in fact, that when employees are allowed to participate in the setting of objectives, the standards set are higher than they would have been if management alone set them.

American restaurant chain Steak and Ale officials recently concluded from a study of its operations that commitment is highest when:

Although employees may be able to assist in determining key areas of service such as Martin described, management probably will have to take prime responsibility for this. However, employees can be heavily involved in helping set objectives for those key areas. This involvement gets to the nub of what management by objectives is all about. Douglas McGregor, known for the concept of theory X and theory Y managers, emphasized that the aim of MBO should be to achieve management by integration and self-control. It should not be used as another method of directing and controlling employees; rather, it should be a strategy for managing people in a way that helps employees see how their objectives mesh with those of management, so that ultimately the employees take more responsibility for controlling their actions as they move toward achieving company goals.

As an example, let us consider one of the key areas mentioned above. Suggestive selling was identified as one of the convivial dimensions of service. Objectives could be set in one of two ways. The manager could come in one morning and announce to the servers: "I want you to concentrate on selling rather than on just taking orders. From this day on, I expect you all to sell 10 bottles of wine and 20 appetizers a week." Will servers get involved? It may be that some will see this as an opportunity to please the manager. Perhaps some who fear they will lose their jobs if they do not achieve these objectives will push wine and appetizers. It is unlikely, however, that all the servers will get involved. The objectives are the manager's, not the employees'. Employee acceptance of and commitment to these standards is liable to be low.

On the other hand, the manager could hold a staff meeting to announce the importance of suggestive selling, pointing out how selling more affects the servers. Ideas then could be solicited from the employees about how to measure who was actually putting this into practice. The manager's role is to ensure that the group comes up with objectives that are in fact measurable and acceptable to the company. One measurable way to identify suggestive selling would be to have at least one additional item, such as an appetizer, dessert, or after-dinner drink, sold with each entree ordered. By involving employees in setting objectives, the goals are more readily accepted because the employees have partial ownership over them. Because they are "our" goals, employees are more committed to achieving them. They do, however, take longer to set this way. Rather than announcing objectives to employees (a process that might take two minutes), it may take a half hour for servers to agree on objectives in one area alone. The commitment gained, however, compensates for the extra time spent.

Employees may be reluctant to make suggestions or may lack, or feel they lack, the experience to add ideas. One tool to get discussions started is the hospitality clinic. Employees are given a form that identifies various aspects of the meal experience and asked to fill it out from the perspective of a customer the next time they eat out. The results of their experiences form the basis for discussion at the next staff meeting. By looking at other operations, they view the service with a critical eye and in a way that is not threatening to them. Instead of the manager's stressing the importance of not keeping customers waiting and saying that things must be improved, it is employees who identify how long they were kept waiting when they went out to dine, note how they felt as customers, and agree on the importance of these factors. A hospitality clinic form might look at the following:

Once set, the objectives become the performance standards against which employee performance will be evaluated. The next stage in setting up a system of MBO is to monitor the employees' performance. In selecting a method, several criteria should be kept in mind. First, the method should validate the selection techniques used. If employees themselves have been properly selected, then an effective appraisal method should show a significant percentage of employees meeting the performance objectives of the job. If this does not happen, it may indicate that we are not selecting the right kind of employees in the first place.

Another purpose of an appraisal method is to provide a rationale for making personnel decisions. In this regard, it is important that the method selected be legally defensible. W Terry Umbreit et al. suggest the method chosen should meet 10 tests.

A third requirement of an appraisal method is that it measure performance accurately. It should also provide a mechanism to help employees with feedback and development. Appraisal methods are also useful in suggesting the need for training programs. When a majority of employees are performing poorly on certain aspects of the job, the fault may not be with the employees but, rather, with inadequate training. Appraisal methods also are used to decide how rewards should be allocated.

A variety of methods are commonly used. Performance can be evaluated through direct indices or personal traits, against set objectives or behaviorally anchored rating scales (BARS).

Direct indices are objective and can be well documented. For example, hotel managers can be evaluated on such things as the ratio of payroll to room sales, or housekeepers on the number of rooms cleaned to the standards per day. They cannot, however, take into account how well employees deal with guests or subordinates (if that is an important part of the job).

In the personal trait method, characteristics are identified that are considered an important part of the job, such as creativity, dependability and initiative, and the employee evaluated on the extent to which he or she possesses them. A major problem here is the subjectivity involved. The extent to which an individual is creative is open to a great deal of interpretation and argument.

Behaviorally anchored rating scales are very compatible with, and arguably a necessary prerequisite for, a program of MBO. While management by objectives focuses on the end result, BARS stresses the means to reach the end. In the example given above of selling one additional item per entree sold, there are potentially several problems. An employee may adopt a "sell at any cost" attitude, pressuring customers to order certain items. The result may be a guest turned off by the heavy-handed sales approach. Second, an employee may not know how to sell additional items. The manager must be responsible for giving training and, where necessary, confidence to the employee to help him or her meet the objective. Last, an employee may fail to meet the objective through no fault of his or her own. Perhaps the customer just would not buy more, no matter how persuasive the employee is.

These problems can be addressed through a BARS program. In this appraisal method, the behavior necessary to reach the final objective is specified and the employee evaluated on the extent to which the behavior is displayed.

To implement this method requires identifying the dimensions of the job: the broad areas that describe what duties, skills, responsibilities, or activities are performed. For the server, suggestive selling may be one such dimension. Within that dimension, the behavior necessary for success is identified. At this point, the employees can be involved in determining behavioral objectives. What would employees be doing that would cause us to say: "They are really doing an excellent job of selling?" Success in selling probably comes from suggesting items to every customer (the more times we ask for the sale, the more sales will be made); displaying a knowledge of the items on the menu; and describing those items using language that paints a desirable picture. Given a few minutes and some encouragement, employees can come up with several types of behavior that would represent an excellent level of performance for this dimension. They could also identify behavior that would represent adequate and unacceptable levels of performance. These behavioral objectives, or anchors, become the standard against which employees will be measured. The key point is that the employees have been involved in setting the behavioral objectives.

The ratings scale is typically displayed on a single page with the word excellent at the top and unacceptable at the bottom. In between are a number of scale points, usually five, seven, or nine in number. Behavioral statements, or anchors, that represent the level of performance intended are developed at or between those scale points.

By observing an employee's behavior, the evaluator can give the employee a score reflecting how well the objective was met.

BARS are useful for several reasons. They focus on behavior, or what employees actually do in their jobs. They stress only those things over which the employee has control. Employees have no control over whether a customer buys dessert; they do have control over whether they ask the person to buy. Specifying behavior tells employees what to do in order to be given a rating of excellent; employees then can adjust their performance accordingly. If they do not perform as desired, managers can also be specific about what the employees did wrong. The BARS method permits employee participation in setting behavioral objectives, which makes employee commitment more likely than having management alone set standards. Because behavior is anchored to scale points, employees are given a quantitative rating. This makes it easy to make decisions about rewards such as merit raises.

On the other hand, this method is time-consuming and costly to develop. For this reason, relatively few companies have developed it as their employee appraisal system. By offering measurable and observable behavioral objectives, however, BARS makes it easier for managers to implement the last part of the MBO process: providing employee feedback.

It is very important for employees to know how they are performing in the eyes of the manager. Psychologists talk of feedback in three ways: praise, punishment, and extinction, which means no feedback. The employee is not told how management views performance. Extinction, in fact, can be more punishing to the employee than punishment.

Many managers view the appraisal session with as much trepidation as the employee. It is viewed as a win-or-lose situation. Either the employee has performed well, in which case the appraisal becomes an enjoyable, winning experience for both, or performance has been sub-par, in which case the session results in a losing one for the employee. Many find it difficult and uncomfortable to criticize others, particularly if the subordinate is older or has more experience than the manager.

There are several useful steps the manager can take to plan for the appraisal session. The first thing is to confront one's fears about the interview, by asking oneself: "How do I really feel about evaluating this person? Why do I feel this way? What is the worst possible thing that could occur as a result of this interview? What is the best possible outcome that could occur? How likely is it that something negative, or something positive, will occur?" Thus, the manager is likely to find that if an employee is not performing well or is difficult to work with, facing the situation would not make it worse and, indeed, is likely to improve it.

It has been found that allowing employees to evaluate themselves prior to the appraisal interview with the manager provides a basis for discussion of any differences in the ratings. Employees are also exposed to the appraisal method used and may have a better idea of the difficulties involved in evaluating performance. In some cases, managers may be surprised how perceptive employees are regarding their own shortcomings. It is also a good idea to give the employee the manager's basic evaluation one to three days prior to the appraisal interview. This allows the employee to get over the initial defensiveness that comes from a negative appraisal and approach the interview more objectively.

Some people feel a formal, annual appraisal interview is of questionable value. Some research is available to show that in annual interviews, praise has no effect while criticism brings on defensive reactions that in some cases result in decreased performance in the future. For this reason, it is suggested that coaching be a day-to-day activity, not once a year. Employees accept suggestions for improved performance if they are given in a dispersed form rather than concentrated in an annual appraisal. Each person has a certain tolerance level for criticism. Once this level has been reached, the person will reject additional criticism out of hand. In addition, managers tend to stock up on criticisms of employees in order to have enough to discuss in a formal appraisal session. This, of course, negates the whole purpose of appraisal: giving feedback to the employee sufficiently soon after the performance that the employee can see a link between performance and reinforcement.

The actual interview can take one of three formats. In the tell and sell interview, the objective is to communicate the manager's evaluation of the employee and persuade the employee to improve. Behind this is the assumption that employees want to know their weaknesses and a person can choose to improve. The manager acts as judge and, in conducting the interview, also must call upon such skills as salesmanship and patience. The employee is expected to suppress defensive behavior and attempt to cover any feelings of hostility. This approach is most likely to work when the employee respects the manager and feels the manager is, in fact, qualified to pass judgment on his or her performance.

There are certain risks involved. The manager may lose the loyalty of the employee. A greater potential problem is that employees will not grow. If the manager is always the one to evaluate performance, the employee need never take any responsibility for doing a good job. The manager, after all, will be the judge of that.

A second approach is the tell and listen interview. In this situation, the task is to communicate the evaluation while giving the employee an opportunity to react to it. The feeling inherent in this method is that people will change if defensive feelings are removed. The manager still takes the role of judge but spends time listening to the employee and attempting to summarize the employee's reactions. Given a chance to express any defensive feelings, the employee is likely to feel accepted, reducing the employee's resistance to change. In this type of interview, however, the need for change may not be developed.

In the problem-solving interview, the approach is not to focus on past employee behavior but rather to stimulate growth and development within the employee. Improved performance stems from an open discussion of job problems. In the role of helper, the manager uses exploratory questions to identify new ideas from the employee on how performance can be improved. This does not mean that performance is not evaluated. It does mean, however, that the focus is not on how the employee has failed, but rather on how the employee can succeed.

While the potential for change is great and both manager and employee learn as views are exchanged, the interview is unsuccessful if the employee is unable or unwilling to bring forward ideas. This is where the manager must coax ideas from the employee. Additionally, the discussion may not go the way the manager thought. The employee may identify changes the employer is unwilling or unable to consider.