Tài liệu Management by objectives and the Balanced Scorecard: will Rome fall again? doc

[ 363 ]

Management Decision

36/6 [1998] 363–369

© MCB University Press

[ISSN 0025-1747]

Management by objectives and the Balanced

Scorecard: will Rome fall again?

David Dinesh

Arthur Andersen, Auckland, New Zealand

Elaine Palmer

MSIS Department, School of Business and Economics, University of Auckland,

New Zealand

Drucker introduced manage￾ment by objectives (MBO) in

the late 1950s. Kaplan and

Norton introduced the Bal￾anced Scorecard in the early

1990s. MBO and the Bal￾anced Scorecard are manage￾ment systems that align

tangible objectives with an

organisation’s vision. This

article compares and con￾trasts the two management

systems. The examination

concludes that the philosoph￾ical intents and practical

application of MBO and the

Balanced Scorecard stem

from similar precepts. The

examination of patterns of

MBO implementation also

illuminates possible problems

in the application of the

Balanced Scorecard. Imple￾mentation of MBO suffers

from two main problems.

Partial implementation:

taking a portion of a prescrip￾tion does not provide the

cure. Second, a patent disre￾gard for MBO’s core philoso￾phy that calls for goal congru￾ence through collaboration.

Our forecast is that partial

implementation will remain as

a problem for the Balanced

Scorecard. An increasing rate

of change in business encour￾ages this (because develop￾ment of organisation-wide

scorecards takes too long).

However, we think that cur￾rent management will use

more collaboration than was

the case with MBO, because

of the influence of total qual￾ity management (TQM, which

encourages collaboration).

Introduction

The adage that “there is no such thing as a

new idea” seems to be true with respect to

management concepts. Management by objec￾tives (MBO), which Drucker (1955) introduced

more than four decades ago, is a system of

management based on goal congruence as a

means of improving performance. The Bal￾anced Scorecard, which Kaplan and Norton

(1992) introduced almost 40 years later, is also

a management system based on goal congru￾ence as a means of improving performance.

This article takes the view that the Balanced

Scorecard is essentially similar to MBO, and

that differences can be explained by business

changes during the years separating their

inception. The main purpose of this article is

to extend knowledge about the Balanced

Scorecard, by examining problems that have

occurred as part of the earlier goal congru￾ence system (MBO).

The paper starts by describing MBO’s

philosophical intent as well as its implemen￾tation guidelines. This is repeated for the

Balanced Scorecard. A section describing the

practical application of MBO (which has been

largely unsuccessful) follows, and concludes

with an examination of reasons for its failure.

This is followed by a discussion about the

application of the Balanced Scorecard, focus￾ing on the likely recurrence of MBO￾evidenced problems. The paper finishes with

a summary of the key points and conclusions,

and extends the findings to a larger ongoing

debate about the value of performance mea￾surement systems in business.

Management by objectives

MBO was first introduced to businesses in the

1950s as a system called “management by

objectives and self-control” (Drucker, 1955).

Drucker (1955) states that the basis for this

system is that an organisation will be more

successful if:

…their efforts … all pull in the same direc￾tion, and their contributions … fit together

to produce a whole, without gaps, without

friction, without unnecessary duplication of

effort…

This focus on goal alignment as a way to

improve organisational performance was, at

the time, thought to provide the best path to

increased profitability (D’Aveni, 1995).

Drucker’s initial ideas about organisational

goal congruence were extended and put into

practice as a managerial performance system

used at General Mills, known as “manage￾ment by objectives” (McGregor, 1960). McGre￾gor’s practical use of this goal congruence

system was tied to his own development of a

managerial assumption about human behav￾iour which he called Theory Y.

McGregor (1960) argued that the traditional

managerial assumption, which he called

Theory X, assumes that:

…the average human being has an inherent

dislike of work and will avoid it if he can…

Therefore employees must be controlled,

intimidated, or coerced to produce.

Theory Y, on the other hand, assumes the

opposite about the nature of people:

…the average person finds work as natural

as play or rest…

Based on this theory, McGregor argued that

an employee, if directly involved in the goal

setting process, can be relied upon for self￾control. Therefore productivity can best be

improved by clarifying strategically aligned

goals (coupled with related rewards for

achievement). In other words, a system such

as MBO (which is based on goal congruency)

should improve employee productivity if used

collaboratively.

McGregor’s work on Theory Y, together

with the development of the MBO system,

codified a shift in managerial thinking that

took place during the 1950s (Bartol and Mar￾tin, 1991). Before this time, traditional west￾ern management practices were mostly cen￾tered on, and driven by, the rational goal

model (also known as the economic model)

(Quinn et al., 1996).

Grant et al. (1994) suggest that the rational

goal model places a strong emphasis on com￾mand and control, and utilises scientific

management concepts together with Tay￾lorism principles (Freedman, 1992) which are

based on one best way to do things. Thus the

rational goal model parallels McGregor’s