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Chapter 12 Goal Setting

An Experiential Approach to Organization Development 7th edition

Chapter 12 Slide 1

Learning Objectives (part 1 of 2)

Recognize how goal setting can be used as


part of OD program. Apply major findings of research on goal setting to develop organizational and personal goals.

An Experiential Approach to Organization Development 7 th edition

Chapter 12 Slide 2

Learning Objectives (part 2 of 2)

Understand how management by objectives


(MBO) can be applied as management system.

Experience and practice goal-setting approaches.

An Experiential Approach to Organization Development 7 th edition

Chapter 12 Slide 3

Big Hairy Audacious Goals


(part 1 of 2)

Employees at GE use stretch goals.


Other companies call these goals BHAG - big hairy audacious goals. These goals stimulate everyone to shoot for extreme achievement.

An Experiential Approach to Organization Development 7 th edition

Chapter 12 Slide 4

Big Hairy Audacious Goals


(part 2 of 2)

Major goal that GE is striving for is Six Sigma.


Six Sigma is statistical term for 3.4 defects per million products. For GE to attain Six Sigma requires every employee to get on board.

An Experiential Approach to Organization Development 7 th edition

Chapter 12 Slide 5

Goal-Setting Theory
Goal setting may be organization-wide,
department-wide, individual, or integration of the three. A goal is anything an individual is trying to accomplish and is the object of action.

An Experiential Approach to Organization Development 7 th edition

Chapter 12 Slide 6

Major Findings Relevant to GoalSetting Theory (part 1 of 2)

Difficult goals produce better performance.


Specific hard goals better than do your best. People may abandon goals if too hard. Participation increases commitment to goals. Feedback about accomplishment improves performance.
An Experiential Approach to Organization Development 7 th edition Chapter 12 Slide 7

Major Findings Relevant to GoalSetting Theory (part 2 of 2)

Education and position in organization does


not predict success. Goal-setting in teams deserves special consideration. Support of management is critical.

An Experiential Approach to Organization Development 7 th edition

Chapter 12 Slide 8

Our Changing World: Nissan and Renaults Goals (part 1 of 2)


Renault of France took over troubled Nissan.
Ghosn brought in to turn Nissan around. Ghosn had to maintain self-esteem of employees but bring change quickly. Ghosn first assessed Nissans problems.

An Experiential Approach to Organization Development 7 th edition

Chapter 12 Slide 9

Our Changing World

(part 2 of 2)

He created cross-functional teams to study


manufacturing, purchasing, and engineering. Ghosn set ambitious and specific goals. Ghosn set example by observing Japanese culture and working long hours.

An Experiential Approach to Organization Development 7 th edition

Chapter 12 Slide 10

Goal-Setting Model (part 1 of 3)


Difficult and specific goals are developed.
Commitment to goals achieved by:

Mutual trust in and by upper management. Support by management. Care given to competition between employees and teams.
An Experiential Approach to Organization Development 7 th edition Chapter 12 Slide 11

Goal-Setting Model (part 2 of 3)


Overcome resistance to goals by providing:

Special training if required. Effective reward and incentive system. Participation by employees in setting goals.

An Experiential Approach to Organization Development 7 th edition

Chapter 12 Slide 12

Goal-setting Model (part 3 of 3)


Period of performance when management
support and feedback is given. Employees may require additional resources. Managers and employees may need to develop action plans.

Managers provide timely and objective


feedback.
An Experiential Approach to Organization Development 7 th edition Chapter 12 Slide 13

Figure 12.1 Goal Setting

An Experiential Approach to Organization Development 7 th edition

Chapter 12 Slide 14

Management by Objectives (MBO) (part 1 of 2)


MBO is a specific technique for setting goals.
Aimed at integration of individual and organization goals. A system to help in planning, organizing, problem-solving, and motivating.

An Experiential Approach to Organization Development 7 th edition

Chapter 12 Slide 15

Management by Objectives (MBO) (part 2 of 2)


MBO involves participation of subordinates and
their managers in setting and clarifying goals for subordinates.

An Experiential Approach to Organization Development 7 th edition

Chapter 12 Slide 16

How MBO Works


Jointly identify common goals.
Define major areas of responsibility in terms of results expected. Use measurements as guides for operating and assessing contributions of members.

An Experiential Approach to Organization Development 7 th edition

Chapter 12 Slide 17

Underlying Purposes of MBO


1.

Clarify organizations goals and plans at all


levels. Gain better motivation and participation from organizations members.

2.

An Experiential Approach to Organization Development 7 th edition

Chapter 12 Slide 18

Phases of MBO
Top management team studies system.
Team sets up methods of measuring performance. Goal-setting sessions are held at all levels of organization.

An Experiential Approach to Organization Development 7 th edition

Chapter 12 Slide 19

Steps in MBO Process (part 1 of 2)


1.

Subordinate proposes specific goals and


ways to measure them for designated time period. Subordinate and superior jointly develop mutually agreed upon goals.

2.

3.

Period of performance.
An Experiential Approach to Organization Development 7 th edition Chapter 12 Slide 20

Steps in MBO Process (part 2 of 2)


4.

Feedback of results with comparison


between actual performance and goals. Previous step sets stage for recycling of goal-setting process.

5.

An Experiential Approach to Organization Development 7 th edition

Chapter 12 Slide 21

Figure 12.2 Steps in the MBO Process

An Experiential Approach to Organization Development 7 th edition

Chapter 12 Slide 22

OD in Practice: Boehringer Mannheim and MBO (part 1 of 4)


BM set up nontraditional MBO program.
Focused on having every key professional specify how much an employee will contribute to next years profits. Program was phased in over two years.

An Experiential Approach to Organization Development 7 th edition

Chapter 12 Slide 23

OD in Practice

(part 2 of 4)

MBO began with a two-day training session.


Conducted by external consultant. Attended by management including CEO.

Employees formulate objectives for years budget.

Supervisor reviews performance at quarterly


intervals.
An Experiential Approach to Organization Development 7 th edition Chapter 12 Slide 24

OD in Practice

(part 3 of 4)

BMs program calculates dollar value of


objectives. BM uses stretch objectives with cash bonus. Emphasis on results, teamwork, growth in entrepreneurs, and greater contribution.

An Experiential Approach to Organization Development 7 th edition

Chapter 12 Slide 25

OD in Practice

(part 4 of 4)

BM traces their success with MBO to:


Implementing MBO the right way. Tying MBO to company strategy. Establishing financial perspective to MBO.

An Experiential Approach to Organization Development 7 th edition

Chapter 12 Slide 26

Criticisms of MBO (part 1 of 2)


Implementing MBO is expensive and timeconsuming. Traditionally limited to managerial and professional employees where costs can be justified.

Joint goal-setting among unequals difficult and


may not be possible.
An Experiential Approach to Organization Development 7 th edition Chapter 12 Slide 27

Criticisms of MBO (part 2 of 2)


MBO may be too quantitative.
Areas that cannot be quantified may be ignored. MBO may be implemented as top dictating to bottom. Some OD practitioners question if MBO is OD intervention.
An Experiential Approach to Organization Development 7 th edition Chapter 12 Slide 28

Results of MBO
Difficult to measure success of MBO.
Trend of findings is generally favorable.

An Experiential Approach to Organization Development 7 th edition

Chapter 12 Slide 29

Key Words and Concepts

Goal - what individual is trying to accomplish


and object of action. Goal setting - specifies desired outcomes toward which individuals, teams, and organization should work.

An Experiential Approach to Organization Development 7 th edition

Chapter 12 Slide 30

Management by objectives (MBO) - system of management set up to help in planning, organizing, problem solving, and motivating.

Six sigma - a statistical term for 3.4 defects

per million products.

An Experiential Approach to Organization Development 7 th edition

Chapter 12 Slide 31

Stretch goals - encouraging employee teams to try for huge gains in productivity and quality even though it is unclear how they will get there.

An Experiential Approach to Organization Development 7 th edition

Chapter 12 Slide 32

Preparations for Next Chapter

Read Chapter 13.


Complete Step 1 of OD Skills Simulation 13.1. Complete Step 1 of OD Skills Simulation 13.2.

Read and analyze Case: Wengart Aircraft.


An Experiential Approach to Organization Development 7 th edition Chapter 12 Slide 33