MBO as a Complement to Effective Leadership

Abstract

M ike Gantz knew he was in trouble. After only two years as vice-president of marketing and sales at Acme Products, his boss had just suggested he resign. Actually, Gantz had seen it coming. He had to admit he'd let Acme down by his inability to get things done the way he had in his previous job. But he still couldn't understand where he'd gone wrong. Prior to coming to Acme, Gantz had earned an excellent reputation as the best division sales manager in a large, diversified industrial firm. He credited much of his success to his highly participative management style. In implementing Management by Objectives (MBO), for example, he had actively involved his subordinates in goal setting and then granted them considerable latitude in meeting their goals. This approach had produced a highly motivated and productive team of subordinates. In fact, Gantz had been recruited to work the same magic at Acme Products, one of his former division's competitors. Unfortunately, the results of his considerable efforts had been very disappointing so far. After two years of his leadership, Acme had lost almost as much market share as top management had expected him to gain, customer dissatisfaction was at an all-time high, and turnover of salespeople had nearly tripled. As far as Acme Products was concerned, Gantz was a disaster and had to go! How could a manager with a proven record fail so badly? Could he have been the victim of the "Peter Principle" and found his level of incompetence? Maybe. But we believe that Mike Gantz's failure came about in large measure from his failure to diagnose the situation and adopt leader behaviors and MBO practices that were compatible with each other as well as appropriate to his new and different situation. Most of the managers reporting to him at Acme did not have the abilities or initiative of his previous subordinates. Nor did the new firm possess most of the well developed support systems to which Gantz had grown accustomed in his previous job. The new organization's culture was very different as well. While extensive participation and trust had been the norm at his previous firm, his new subordinates were used to being told exactly what to do and then having the boss follow up closely to make sure they were actually doing it right. Small wonder that Gantz's participative and permissive style frustrated his new subordinates and resulted in confusion rather than goal attainment. Gantz should have recognized the difference in the capabilities and expectations of his new subordinates and made himself available to be a supportive resource and coach, with more directive and decisive behavior. While the names have been changed to protect the guilty, the above scenario is all too real. It illustrates a very common problem: a failure to achieve a suitable match between leader behavior, MBO implementation, and the organizational situation. It is this very important match that we will consider in this article.