U.S. Small Business Administration
PLANNING AND GOAL SETTING FOR SMALL BUSINESS
Management and Planning Series ____________________________________________________________
__________________ While we consider the contents of this publication to be of general merit, its sponsorship by the U.S. Small Business Administration does not necessarily constitute an endorsement of the views and opinions of the authors or the products and services of the companies with which they are affiliated. All of SBA's programs and services are extended to the public on a nondiscriminatory basis. ____________________________________________________________
__________________ TABLE OF CONTENTS INTRODUCTION 1 MANAGEMENT BY OBJECTIVES 1
PREPARING FOR THE MBO PROGRAM Understanding the Requirements of an MBO Program 1 Defining Your Business 2 Setting Goals 2 Devising a Work Plan 2 Reporting Progress 3 Evaluating Performance 4 INSTALLING THE MBO PROGRAM 6 THREATS TO AN MBO PROGRAM 6 SUMMARY 6
APPENDIX: INFORMATION RESOURCES 7 ____________________________________________________________
INTRODUCTION Many authorities on business management identify the five major functions of management as ! ! ! ! ! Planning. Organizing. Directing. Controlling. Coordinating.
The planning and controlling functions of management often receive less attention from the small business owner-manager than they should. One way to more effectively fulfill these two functions is through effective goal setting. The success of a business will depend on its long-range goals for sales, profits, competitive position, development of personnel and industrial relations. To accomplish these goals, the company will need to identify intermediate goals that it can work toward each year. ____________________________________________________________
__________________ MANAGEMENT BY OBJECTIVES Traditionally, people have worked according to descriptions that list the activities or functions of the job. The management by objectives (MBO) approach, on the other hand, stresses results. Let's look at two examples. ! Suppose a credit manager's job description states that he or she will supervise the credit operations of the company. This description simply lists the functions of the credit manager. Under the MBO approach, the owner-manager and the credit manager would identify five or six goals covering important aspects of the manager's work. For example, one goal might be to increase credit sales enough to support the 15 percent increase in sales expected by the sales department. The traditional job description for a personnel specialist may include conducting a recruiting program for the company. Under the MBO approach, the personnel specialist would identify five or six appropriate goals, one of which could be, Recruit ten new employees in specified categories by July 1.
With MBO, jobs are viewed in terms of achievements rather than simply functions. Activity alone is not enough; each activity must bring the worker closer to achieving his or her goals. ____________________________________________________________
PREPARING FOR THE MBO PROGRAM Understanding the Requirements of an MBO Program Management by objectives has been used by all kinds of organizations, but not every business has had the same degree of success. From examining MBO programs that have worked, it is clear that all met the following minimum requirements: ! ! ! Goals were expressed in specific and measurable terms. Each employee proposed 5 to 10 goals to cover those aspects of his or her job crucial to successful performance. A final written statement of each goal was prepared, including a statement of the goal, method of evaluating the goal, work steps needed to complete the goal and an estimated time needed to complete the steps. Progress was evaluated at regular intervals (at least quarterly) and compared with the original goals. Problems...
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