MBO in Municipal Government: Variations on a Traditional Management Tool

Abstract

Management By Objectives, or MBO, is a traditional management approach to directing the efforts of managers and the organizational units for which they are responsible. This technique has been used in government for more than 20 years, and substantial literature has accumulated affirming its utility. Yet, the history of MBO in the public sector has been uneven, and its role and importance in government are unclear. It is frequently criticized as being ineffective or counterproductive, and it often seems to be undervalued by the academic and professional public administration communities. In this article, we seek to clarify these issues at one level of government, focusing on how municipal managers use MBO and how they assess its impact. MBO is intended to motivate stronger performance on the part of managers and employees through goal setting, participative decision making, and objective feedback (Rodgers and Hunter, 1992). In its broadest construction, it is seen as a planning and control system which is designed to encourage self-control over an individual's work while assuring that managers' efforts are aligned with the organization's overall goals and priorities. According to Swiss (1991), the heart of a full-fledged MBO process is the negotiation between a higher level manager and a subordinate manager of a performance contract that has the following components: (1) major objectives to be accomplished by the subordinate manager within specified completion dates, (2) resource commitments to support these objectives, (3) action plans and milestones for accomplishing these objectives, (4) periodic meetings of the manager and subordinate to review progress and make midcourse corrections if necessary, and (5) an assessment at the end of the MBO cycle of the subordinate's performance, which should feed into both personnel appraisal processes and MBO planning for the next cycle. Swiss characterizes MBO as being particularly useful for providing direction and control over project oriented agencies where workloads shift and priorities tend to change frequently, as opposed to another major management approach, performance monitoring, which may be more appropriate for managing the continuing operations of organizations whose outputs are relatively stable. Evolution of Public Sector MBO MBO originated as a business management technique in the 1920s and was implemented on a widespread basis in the private sector during the 1950s and 1960s as it became popularized by the writings of Peter Drucker (1954 and 1964) and others. It was introduced in the federal government by the business-oriented Nixon administration in the early 1970s (Brady, 1973; Malek, 1974). MBO was instituted first in several large executive departments and then on a government-wide basis in the form of presidential MBO intended to help the White House gain control over the federal bureaucracy. However, this latter effort was quickly overtaken by the Watergate crisis, the ensuing demise of the Nixon administration, and the installation of Zero Base Budgeting by the Carter administration as the central tool for managing the federal government. Nonetheless, individual MBO systems have been retained or modified by a number of federal departments including Defense, Health & Human Services (Swiss, 1983; Brumback, 1993), and Commerce (Collamore, 1989). Experimentation with MBO at the federal level spawned considerable interest in the approach (DeWoolfson, 1975; Morrisey, 1976), and MBO systems quickly spread to state and local governments (Odiorne, 1976; Moore and Staton, 1981). For example, several cities including San Francisco, Dayton, Ohio, and Charlotte, North Carolina, have been profiled as using MBO as an integral component of sustained results-oriented management strategies (Epstein, 1984). Mali (1986) examined the use of MBO by the city of Phoenix, Arizona, initiated in the early 1970s, and found that it is closely integrated with several other strategies including organization development, productivity improvement, and employee involvement programs. …