International Encyclopedia of Public Policy and Administration - Vol. 3

By Jay M. Shafritz | Go to book overview
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OBJECTIVE SETTING. The process of establishing statements for people within an organization, either as individuals, as members of organizational units, or as members of the organization as a whole, that make it clear what ends they are expected to serve and what results they are expected to achieve.Objective setting by government first became an active topic in respect of the regulation of public enterprises, initially in the 1920s in Soviet economics with the advent of the Five-Year Plans and then in the 1930s in Western economics when Oscar Lange and Abba P. Lerner (building on the general equilibrium model of Wassily W. Leontief) attempted to show how socialist enterprises could be regulated to produce welfare results equivalent to those claimed for competitive market economies ( Kowalik 1990). This debate spawned the continuing theory and practice of utility regulation, which continues to focus mainly on economic objectives, generally of the type "to set price equal to marginal cost."The detailed exposition of objective setting as a major responsibility of managers within an organization dates back only to Peter Druckerin the 1950s. Earlier management writers tended to pay little explicit attention to objectives. Frederick Taylor ( 1911, reissued 1947) suggested that "the principal object of management should be to secure the maximum prosperity for the employer, coupled with the maximum prosperity of each employee," but this is more of a mission statement than a set of operation objectives-and it does little to help managers in nonprofit sectors. Although Chester Barnard ( 1938) wrote extensively on mission statements as embodiments of organizational purpose and argued strongly that it was the role of the executive to ensure that all members of an organization were indoctrinated with its general purposes, he did not explore how this knowledge could be cascaded down into objectives for units within the organization. In public administration, the work of Max Weber and Herbert Simon both characterized organizations as goal seeking, but Weber suggested that bureaucrats were more concerned with setting and following rules than objectives, and Simon focused on the desire of managers to use rules of thumb for programmed decisions and their use of judgement, intuition, and creativity for making unprogrammed decisions. Drucker( 1954, 1955) sharpened up the vague statements made by previous writers. He attacked the simplistic notion that the objective of business was to make profits and suggested instead that profit is simply the test of the validity of the business enterprise. Furthermore, it is not realistic to think of an organization as having a single objective; rather management always involves balancing the different possible objectives and deciding the priorities to be put on them. He suggested that the need for juggling these multiple objectives in complex departmentalized organizations required "Management by Objectives" (MBO). Drucker argued that objective in a business enterprise would enable management to explain, predict, and control activities to a much greater extent than was possible with unidimensional ideas like profit maximization.
They help an organization to model the central factors affecting its prosperity in a small number of general statements
They make easier the testing of these statements in the light of experience
They embody past lessons in such a way as to allow the prediction of future behavior
They allow the soundness of decisions to be examined while those decisions are still being made, rather than after the event
They force detailed planning, focused on what the business should aim at and how it might effectively achieve these aims
They, therefore, enable performance in the future to be improved through the analysis of past experience.
Right from the outset, MBO was seen as an approach that should attempt to cement the interests of individual staff to those of their team and the overall organization. Through setting objectives, and the subsequent feedback of information on performance, it was expected that management by self-control would be developed and would replace management by domination, leading to greater motivation and more efficient learning. These ideas were quickly incorporated into management textbooks and management practice. While MBO mushroomed at first in the private sector, in 1961 the U.S. Department of Defense introduced a planning, programming, and budgeting system (PPB) system, which incorporated objective setting as a major element. In 1965, PPB was imposed on all major agencies of U.S. federal government, and in early 1970s the Nixon administration imposed "presidential MBO" governmentwide. Thereafter, it rapidly spread to many state and local governments ( Poister and Streib 1995). By 1966, MBO had spread to the United Kingdom, with its adoption by the Greater London Council.However, a substantial body of criticism soon built up, from a number of different perspectives, on the grounds that this conception of objective-led management may
focus upon official and management objectives to the exclusion of the objectives of other stakeholders;
neglect implicit, latent, hidden, or informal objectives;

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