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3 Management by Objectives - how KPIs help to drive meaningful decision making?

25 Jul, 2017 12:42

Dear CIPD Communizy,

I am really interested in the upcoming work within the field of evidence based management practices. Since over the last 7 years I am working in bigger international companies in people and organizational development. From my point of view I this perspective on management is really missing.

Within my phd thesis I am focusing on management decision based on objectives and KPIs, which are quite often tracked in bigger corporate organization. The theory behind the established KPI systems is based on the goal setting theory from Locke & Latham (1990) and should be clearly linked to objectives/targets within the company.

Within my first study I conducted qualitative interviews with managers and also employees. What I identified are 2 big issues:
1. The big companies or corporations are using this theory by establishing management by objectives (MbO) processes and really comprehensive KPI systems. But they are not following the well proven goal-setting theory and you can find a lot of mutations within the companies/corporations (e.g. setting targets instead of mutual agreement of targets, don't communicate targets and their origin, don't take into account the level of expertise of employees, never reachable goals....)
2. There is a big amount of KPIs which are tracked but never used to drive decision out of that.

Based on this findings I am planning to work on a test of MbO Knowledge / Readiness within an organization. I woud like not only to test the knowledge of MbO, but also to identify the elements which management is really using to make a decision and which role KPIs are playing.

I was wondering if you heared of any already developed MbO test within the evidence based management community? Or any other test which are familiar with the MbO topic?

Your help and advice would be highly appreciated.

Best Regards,
Annika Waldherr

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Jonny | 0 Posts

CIPD Staff

27 Jul, 2017 08:48

Hi Annika,
This is interesting work - thanks for sharing. As it happens, we've done a review on goal setting (alongside one on appraisals) available at www.cipd.co.uk/coulddobetter . I don't know of any established measures on objective readiness but if you haven't seen it already, Patterson et al's systematic review might give you a lead: www.ncbi.nlm.nih.gov/.../21050585

I'm really interested in what evidence you've found on participative goal setting, though. In our review, we settled on this:
"Traditionally, participative goal setting, or self-set goals, are associated with improved performance over assigned goals (Patterson et al 2010). … A judicious meta-analysis by Harkins and Lowe (2000), however, questions this assumption. It finds that experimenter-set goals are actually more potent than self-set goals, and the potential for evaluation by the experimenter is more potent than the potential for evaluation by the self..." More detail in the review.

Good luck with your work.
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Annika | 0 Posts

27 Aug, 2017 17:50

In reply to Jonny:
Dear Jonny,

thanks a lot for your great research hints on the goal setting arena.

Regarding participative goal setting I have not so much finding, as the company which I did my research in, you raly find participative goals. For sure they call the process "Target agreement", but it is more like a clear target setting and planning through a central department and the single departments are doing a break-down for the set goals. Especially in bigger corporations this is quite often the normal way of using the target setting.

But in my literature research I found an interesting point on "tell-and-sell-goals", as a clear target setting done by your manager could have a really high performance outcome, if the target is explained and sold to you. If you accepted and commited on this goal, the effect on performance could be high. As the most important factor for performance is the goal commitment. But in my research I found that the selling and communication part on the set goals, will be skipped due to time efficiancy and therefor you see that the commitment is not really strong.

What are your thoughts on that?

Best, Annika
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Paul Matthews | 0 Posts

1 Sep, 2017 11:17

In reply to Annika:
Hi Annika,

This sounds like really interesting work! I don't have the theoretical background of either yourself or Jonny, but your comments certainly ring true based on my experience.

One of the biggest pitfalls is that the 'comprehensive KPI systems' you mention often align to either the performance of the business or the activities of individuals, but rarely both (and in the worst cases neither!). Without this bridge it is very difficult to set participative goals aligned to improving business performance that people also buy into at an individual level (the 'tell-and-sell' element you mention).

It is common to hear employees, even at management level, stating that the KPIs represent things that they have no direct control over or impact on. Consequently they will not embrace objectives based on these KPIs and will revert back to self-set goals. This leads to exactly the situation you mention where large numbers of KPIs are tracked but are not used in decision making. Even worse, this may lead to a 'distrust' or 'resentment' of these types of quantitative performance metrics.

It is only one element of ensuring 'goal commitment' (you mention time constraints and communication for example) but good KPIs that link the things individuals actually control to the targeted business performance will really help. No amount of communication will work if the employee fundamentally believes that the thing you are measuring does not represent 'their world'.

Best of luck,
Paul.
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