value insights

Management by Objectives and Performance- Valutrics

Each member of the enterprise contributes something different, but all
must contribute toward a common goal. Their efforts must all pull in the same direc-
tion, and their contributions must fit together to produce a whole—without gaps,
without friction, without unnecessary duplication of effort.
Performance requires that each job be directed toward the objectives of the whole or-
ganization. In particular, each manager’s job must be focused on the success of the whole.
The performance that is expected of the manager must be directed toward the perform-
ance goals of the business. His results are measured by the contribution they make to the
success of the enterprise. The manager must know and understand what the business goals
demand of him in terms of performance, and his superior must know what contribution to
demand and expect. If these requirements are not met managers are misdirected and their
efforts are wasted.
Management by objectives requires major effort and special instruments. For in a
business enterprise managers are not automatically directed toward a common goal. On
the contrary, organization, by its very nature, contains four powerful factors of misdirec-
tion: the specialized work of most managers; the hierarchical structure of management;
the differences in vision and work and the resultant insulation of various levels of man-
agement; and finally, the compensation structure of the management group. To overcome
these obstacles requires more than good intentions, sermons, and exhortations. It requires
policy and structure. It requires that management by objectives be purposefully organized
and be made the living law of the entire management group.
An old story tells of three stonecutters who were asked what they were doing. The first
replied, “I am making a living.” The second kept on hammering while he said, “I am do-
ing the best job of stonecutting in the entire country.” The third one looked up with a vi-
sionary gleam in his eyes and said, “I am building a cathedral.”
The third man is, of course, the true manager. The first man knows what he wants to
get out of the work and manages to do so. He is likely to give a “fair day’s work for a fair
day’s pay.” But he is not a manager and will never be one. It is the second man who is a
problem. Workmanship is essential: in fact, an organization demoralizes if it does not
demand of its members the highest workmanship they are capable of. But there is always
a danger that the true workman, the true professional, will believe that he is accomplish-
ing something when in effect he is just polishing stones or collecting footnotes. Work-
manship must be encouraged in the business enterprise. But it must always be related to
the needs of the whole.

The majority of managers and of career professionals in any business enterprise are,
like the second man, concerned with specialized work. True, the number of functional
managers should always be kept at a minimum, and there should be the largest possible
number of “general” managers who manage an integrated business and are directly re-
sponsible for its performance and results. Even with the utmost application of this princi-
ple the great bulk of managers will work in functional jobs, however.
A man’s habits as a manager, his vision and his values, are usually formed while he
does functional and specialized work. It is essential that the functional specialist develop
high standards of workmanship, that he strive to be “the best stonecutter in the country.”
For work without high standards is dishonest; it corrupts the man himself and those
around him. Emphasis on, and drive for, workmanship produces innovations and ad-
vances in every area of management. That managers strive to do “professional personnel
management,” to run “the most up-to-date plant,” to do “truly scientific market research,”
to “put in the most modern accounting system,” or to do “perfect engineering” must be
But this striving for professional workmanship in functional and specialized work is
also a danger. It tends to divert a man’s vision and efforts from the goals of the business.
The functional work becomes an end in itself. In far too many instances the functional
manager no longer measures his performance by its contribution to the enterprise but only
by his own professional criteria of workmanship. He tends to appraise his subordinates by
their craftsmanship and to reward and to promote them accordingly. He resents demands
made on him for the sake of business performance as interference with “good engineer-
ing,” “smooth production,” or “hard-hitting selling.” The functional manager’s legitimate
desire for workmanship becomes, unless counterbalanced, a centrifugal force which tears
the enterprise apart and converts it into a loose confederation of functional empires, each
concerned only with its own craft, each jealously guarding its own “secrets,” each bent on
enlarging its own domain rather than on building the business.
The new technology will need both the drive for excellence in workmanship and the consistent direction of managers at all levels toward the common goal.

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