1. Motivation I
Goal-Setting Theory and Management by
Objectives (MBO)
Chris Wan
Irina Antonescu

2. Goal Setting and Related Theories
Goal Setting Theory
Participation
in goal setting
MBO
Employee evaluation
 SMART Goals
 Ambitious goals 
higher performance
 Feedback and praise
improve intrinsic
motivation
 Participative decision
making
 Performance feedback
Hoshin Kanri
 Used to allign goals
from top to bottom
 Heavily influenced
and evolved from
MBOs
 Focus on quality
 Empowering workers
OKR
(Objectives and Key
Results)
 Simplified version of
MBO and Hoshin Kanri
 Focus on goals and not
employee performance
 Removes fear

3. Applying Management by Objectives (MBO)
Set
Step
specific,
moderately
1
difficult goals
Step
2
Secure employee
participation
Step
3
Provide support &
feedback
Useful for:
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Companies with managers in multiple locations
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Knowledge-based enterprises
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Self-leadership
Works best when:
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Monetary bonus formulas are abolished
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The individual’s performance is assessed during a 1:1 performance evaluation.
•
MBO is not used on its own as a direct bonus kicker but to qualify the employee for the bonus.

4. MBO Opportunities and Challenges
PROS
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Facilitates team communication
Reduces conflict
Clear setting of goals with input from the team
Develops a result-oriented philosophy
Facilitates objective appraisal
Raises employee morale
Facilitates effective planning & control
Acts as motivational force
Facilitates personal leadership
CONS
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Time-consuming
Reward-punishment approach
Develops conflicting objectives
Problems related to goal setting: Goals must be
mutually agreeable. That can all fall apart when
the goals are considered to be too rigid or
difficult to set.
Can fail if the executives do not clearly
communicate the company objectives to
management
Can fail if the management doesn’t delegate
properly or motivate accordingly

5. MBO and the Financial Crisis
•
System of misaligned incentives, short-termism and a lack of transparency instead of sustainable financial
development
•
Inability to implement adequate controls
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Compensation systems encourage the greatest amount of irresponsible risk taking
•
Obsession with achieving an MBO deadline that ends up costing the company a lot more than the
expected bonus, therefore creating a conflict of interest.
•
Inflexibility: once goals are set down, the superior may not like to modify
´MBO is about doing your job, and about how managers can manage the common goals
that a company has

6. Hoshin Kanri and OKRs
Hoshin Kanri
•
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More detailed version of an MBO
Improves on it by breaking down power-distance heirarchy and eliminating fear
OKRs
•
About contribution to company goals, not employee performance evaluations
Benefits
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Disciplines thinking
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Communicates accurately
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Establishes Indicators
•
Focuses effort (Keeps organisation on the same path)

7. Hoshin Kanri

8. Objectives and Key Results (OKR)
How Google sets goals: http://www.youtube.com/watch?v=mJB83EZtAjc

9. References
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Allison, Scott. (2012, February 28). OKRs – objectives and key results. Retrieved from http://teamly.com/771-okr-objectives-and-key-results
Bauer, Talya; Erdogan, Berrin. (2012). An Introduction to Organizational Behavior v.1.0. Retrieved from http://2012books.lardbucket.org/books/anintroduction-to-organizational-behavior-v1.0/s10-02-motivating-employees-through-g.html
Dynos, Lukasz. (2007). MBO in Makro (Metro Group): Company's Objective Identified With The One Of Its' Employees. BCC. Retrieved
from http://www.bcc.com.pl/en/academy-of-better-business/mbo-in-makro-metro-group-company-s-objective-identified-with-the-one-of-itsemployees.html
GoogleVentures. (2013, October 15). Startup Lab workshop: How Google sets goals: OKRs (Video File). Retrieved from
http://www.youtube.com/watch?v=mJB83EZtAjc
Hindle, Tim. (October 2009). Management by Objectives. The Economist. Retrieved from http://www.economist.com/node/14299761
Kaizen Consulting Group. Origins of Hoshin Kanri. Retrieved from http://www.kcg.com.sg/origins-hoshin-kanri.html
Klau, Rick. (May 2013). How Google sets goals: OKRs. Google Ventures. Retrieved from http://startuplab.googleventures.com/public-workshops-2013-0514
Liker, Jeff. (August 2013). What Management By Objectives Does Wrong & Hoshin Kanri Does Right. Gray. Retrieved
from http://www.gray.com/news/blog/2013/08/12/what-management-objectives-does-wrong-hoshin-kanri-does-right
Mougayar, William. (2000, October 2013). Don't Abolish MBOs. Startup Mangagement. Retrieved
from http://startupmanagement.org/2013/10/09/dont-abolish-mbos/
Pugh, Derek S. (1971) Organization Theory. Penguin Books
Raj, Ritu. (October 2012). Limitations of Management By Objectives. Management By Objectives. Retrieved from http://managementbyobjectives.com
Robbins, Stephen P.; Judge, Timothy A. (2013): Organizational Behavior. 15. ed., global ed. Boston: Pearson.
Schermerhorn, John R.; Hunt, James G; Osborn, Richard N. (2011) Organizational Behavior 10/E. Wiley.
SoccerFootball Fail. (2013, October 15). Soccer/Football Fail!: Beautiful own goal (nice shot!) (Video File). Retrieved from
http://www.youtube.com/watch?v=SWU_oZWtIdY
Steers, Richard M.; Black, Steward J. (1994) Organizational Behaviour 5ed. Prentice Hall
The W. Edwards Deming Institute. (2013). The Fourteen Points For The Transformation of Management. Retrieved from
https://www.deming.org/theman/theories/fourteenpoints
Zammit-Lucia, J. (2013, August 29). Misaligned incentives will lead us right back into another financial crisis. The Guardian. Retrieved from
http://www.theguardian.com/sustainable-business/financial-crisis-credit-agencies-incentives
Witcher, B.; Butterworth, R. (2000, September). Hoshin Kanri at Hewlett-Packard, Journal of General Management, Vol. 25 No. 4, 70-85. Retrieved from
http://www.cforc.org/images/uploads/tools-and-methods/Hoshin_Kanri_-_HP.pdf