The difference between companies that achieve their strategic objectives and those that do not may well be accounted for by the CEO's level of commitment to Management By Objectives (MBO). This was the opinion of our panel of successful CEOs at a recent Mage Breakfast Seminar, and the research on MBO backs them up.

In a 1991 comprehensive review of thirty years of research on the impact of Management by Objectives, Robert Rodgers and John Hunter concluded that companies whose CEOs demonstrated high commitment to MBO showed, on average, a 56% gain in productivity. Companies with CEOs who showed low commitment only saw a 6% gain in productivity. They defined high commitment as "enthusiastic support for," and "participation in" the MBO program. This is hardly a new observation, but it does provide compelling hard data for encouraging the CEO's full involvement in the MBO process.

All too often when it comes to MBO, top managers and CEOs in particular, do not hold themselves to the same standards to which they hold staff. They may give vocal support to the company's MBO program, but they do not participate fully. They insist that staff writes personal objectives in support of the company's, but they do not write objectives for themselves. Some CEOs claim that the company's objectives are synonymous with their own, or that they personally do not have to spell them out because they "know" them, are driven to accomplish them, and do not need any additional motivation. In fairness, they do have a point. In most cases individuals who make it to the top spot are indeed driven and results oriented.

But they are missing a more important point, and a potential opportunity to significantly raise their company's productivity. As the person ultimately responsible for the success of the business, they are the top role model in the company.

And most employees watch carefully to see if they "walk the talk." Regardless of how enthusiastic their support for MBO may be, if they do not participate fully, their pronouncements ring hollow. If MBO is so effective, employees think, then why doesn't the boss do it too? Moreover, the CEO is not only the premiere company role model but also the head teacher. It is important that employees learn the care and diligence that go into setting effective goals from the "master" himself.

For the CEO or manager who wants to get the most from MBO we offer the following five suggestions:

1. CEOs and their direct reports must actively and publicly participate in the MBO program. We recommend that CEOs not only share their personal goals, but also explain to staff how they were derived from the company's strategic goals. Martin Reid, CEO of Ibis Technology, teaches staff about goal setting first hand by bringing them together to set his annual objectives.

2. Keep regular, periodic one-on-one meetings with subordinates to review their progress toward goal achievement. By making these meetings a prioritity, the CEO adds rigor to the MBO program and demonstrates the importance he places on MBO. This is true support for both the concept and its practice.

3. Be patient with subordinates who have difficulty setting their goals. Setting goals correctly takes time; in some cases, considerable time. By helping subordinates set the right goals, the CEO dramatically shows his commitment to MBO and to his individual managers. Don't forget, being patient does not mean you have to lower your standards.

4. "Hard wire" some successes into the program. Most employees set their own goals higher than their supervisor would. It is extremely tempting to accept unrealistic targets, but goals do not motivate if one can not reach them. Tell staff that while achieving their "superhuman" goals would be great, you will be very satisfied if they accomplish something that is a stretch but a more realistic one.

5. Participate fully in company-sponsored training on objective setting. Top management usually recognizes the value of bringing in outside experts to help staff with MBO but many times the CEO does little more than open the training sessions. Occasionally he stays for half the program and then leaves because he "has to get back to work." Here again he misses an important opportunity to show his commitment to MBO, share his values, evaluate the training content, and most important, spend some meaningful time with subordinates.

The CEO is critical to ensuring the success of your MBO program. That's an investment that pays off.

William Neumann, Ph.D.
Vice President, MAGE, LLC