Management by Objectives Revisited: In View of Chain Effects among Objectives

Abstract

Management by Objectives (MBO) refers to a management control system advocated in 1954 by P. F. Drucker. MBO was introduced into Japan in the early 1960s. In the 40 years that have since elapsed, different studies have reported that over 60% of the listed corporations on the stock exchange markets in Japan have introduced MBO systems. Thus, the MBO system is, like budgeting, one of the most prevalent management control systems in Japan. Unlike other management control systems, MBO involves the application of a function that can break down the company-wide strategy and organization goal of a corporation to the level of individual workers. For the purposes of this paper, this function is called “chain effects among objectives”. Chain effects among objectives are essential for the management control system of a corporation. MBO will become more instrumental in implementing corporate strategy when it is organically combined and operated with other management control systems.This paper explores MBO's chain effects among objectives for Japanese corporations and focuses on identifying those factors that have an impact on the chain effects among objectives. The results have revealed that the concern and involvement of top management have a great impact on the chain effects among objectives, and that target workers' satisfaction with their MBO and chain effects among objectives are related in such a way that will bring about synergistic effects.