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In the literature on management science there are few concepts as frequently mentioned and, simultaneously, as widely misunderstood as management by objectives (MBO). Most who come upon the phrase for the first time invariably say, " Is there any other way to manage?" Yes, there is. Even the "inventor" of the term `management by objectives' is misidentified more often than not. Most persons give credit to Peter Drucker. Others, George S. Odiorne, who authored a text with that title in 1965. But the term was- coined first by Alfred P. Sloan in the early 1950's. Drucker's contribution was to place the term in a central position and add flesh to its bones by emphasizing the results of managerial actions rather than the supervision of activities. Thus, he introduced the present conceptualization of MBO to the world. His vehicle: the 1954 classic The Practice of Management.
First, it is important to remember that MBO is a philosophy. It is not a step-bystep prescription for running any business. Secondly, MBO encompasses the idea that a business has many objectives and all businesses do not have the same objectives. There is only one common to all - "the customer is king." That is, the core purpose of a business is to satisfy the customer. Third, MBO shifts the focus of management thought to productivity -- output - away from work efforts -- inputs. The key question then becomes: "What is the objective toward which we are working?" Expressed differently, Drucker saw management that concentrated on processes -- rather than goals - as inadequate to meet today's challenges from foreign and domestic competition. Process-oriented management, dating back to Adam Smith's 1776 volume The Wealth of Nations and extending beyond Frederick W. Taylor to the Hawthorne studies in this century, was adequate for that 150-year span. Old-time managers were expected to learn the ins and outs of a business and to keep people busy. MBO shifts the focus to goals, to the purpose of the activity, rather than the activity itself. The operative question shifts from "What am I supposed to do?" to "What...