Is Management by Objectives Still Usable Today, Currently and Culturally Independently?

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Is Management by Objectives still usable today, currently and culturally independently?

A study on leadership and Management by Objectives in USA, China, Japan, France, Germany and Switzerland.

1. Introduction

1.1. Problem Statement

Today’s economy is marked by globalization and a fast pace. Companies are exposed to frequent market changes that require rapid, diversified and flexible processes. Their organizations have to respond with agility and the ability to learn in the face of a continuous pressure to adapt. If a company operates across borders, it must also inevitably deal with foreign cultures. This results in multicultural teams whose members must work together in a single organizational culture as effectively as possible in spite of their varying world views. The organizational culture is expressed largely through leadership style, and determines how people within the organization interact with each other. Management tools are usually applied at all levels of employee leadership in order to assess, steer and reward, where appropriate, employees’ individual performance level. The Management by Objectives model (MBO) started being propagated in the US in the late1950’s and has since become one of the most popular management tools worldwide. The following questions are significant in light of the social and economic changes of the past 50 years.

• Is a management tool that was conceived over 60 years ago still appropriate for the world today?

• Are management tools such as MBO usable universally, i.e. culturally independently?

As a management tool, MBO is subject to specific values, namely those that serve the West, particularly with American culture as a cornerstone. The model is based on goal orientation, individual self-determination and transactional leadership. Thanks to American management consultant and bestselling author Peter Drucker, this model, which he described in his 1954 published work “The Practice of Management,” has become one of the most widespread management models worldwide. Not all international cultures are founded on the same values and basic assumptions, or at least not with the same significance. Management concepts, expectations and behavior patterns vary from culture to culture at different levels of severity. Ignoring this diversity leads some organizations to the following errors:

• It is tacitly assumed that concepts and models that arose in a country like the US have universal and culture-independent validity (Hofstede, 2010, p.338)

• Cultural aspects are barely known and only methodologically considered when hiring and incorporating new employees, as well as in their incorporation, performance appraisal © Copyright – All rights reserved, intermedio, Yous & partner – November 2015 1

and career development, although these aspects are particularly relevant to the authority of HR managers and executives.

From these specifics, one can at least presume that Western leadership models cannot be applied outside Western cultures without hesitation. Should an adjustment of the model application be necessary according to a local culture, the question arises as to which criteria this adaptation should fit. Also exciting is the question of whether a transcultural process between a local culture and Western leadership models can take place, wherein a new management culture would arise as more than the sum of its components. In other words, the question is whether the adjustment of the model can take place in local conditions without conscious external intervention. Additional difficulties arise in cross-border employee management. Communication is made more difficult with distance, and managers must establish relationships with employees without a physical presence. To develop a personal relationship in this way so that the MBO process can unfold optimally is a task that is not to be underestimated. Managers therefore rightly ask the question of how they can fulfill their managerial responsibilities efficiently in virtual teams, and more specifically, of whether an intercultural use of MBO is effective under these circumstances. From these questions, the need to examine MBO as a universal management tool and to possibly devise a new approach arises, wherein on the one hand, the model is adapted to the needs of the modern economy, and on the other, it acknowledges the stumbling blocks of global diversity.

1.2. Objectives and Issues

MBO is used today as a management process in various organizations all over the world. The “ingredients” of MBO, namely staff objectives, communication, performance appraisals and incentives, are useful in many leadership styles, even when the management tool applied does not happen to be called MBO. This is why the questions asked in this master thesis are relevant to leadership in general. The goal of this thesis is to provide the target audience, as named in the preface, the answers to Questions A and B, as well as to bring concrete benefits to the fields of organization and management with the following questions:

• What drawbacks do a company face when intercultural differences are not considered in employee management?

• What adjustments in the application of MBO are appropriate in multicultural and virtual teams in terms of effectiveness?

• What measures are appropriate for assisting managers in addressing their cross border management responsibilities?

1.3. Conception and Procedure

1.3.1. Conception:

The answer to these questions presupposes the analysis of the triangle

MBO is used as an employee management tool. What needs to be examined is how sustainably and sharply a country’s culture influences its managers’ leadership style. From this connection, it is then possible to take different perspectives on the use of MBO. Parallel to this, I will build on the opinions of various authors and consultancies, and fall back on feedback from employees from studies in various countries. The analyzed feedback will, above all, give insight into the use and perception of MBO, and are valuable stimulators with regard to possible adaptations of the model. In another section, I will report on the experiences that were created within the framework of the international reorganization of a large and well-known financial market infrastructure. These practical experiences should provide, along with the research results, answers to and suggestions for the five questions asked.

1.3.2. Procedure

In the first section, the terms culture, management and MBO will be defined, and their correlations described. The carrying out of these correlations is integral to the sections that follow. The second section is an analysis of national cultures and their respective conceptions of leadership. These aspects will be researched with regard to the US, China, Japan, Germany and France. I will inevitably have to compare these cultures to that of Switzerland. This will be imperative, as people view foreign cultures primarily through the lens of their own, i.e. on the basis of their own values. At the same time, I will be comparing each culture’s image of humanity and value system to the spirit from which MBO arose. Where are the gaps that might lead to misunderstandings in communication and latent conflict? What disadvantages might arise for each organization? At the end of each cultural analysis, I will describe possible culture-specific adjustments to the use of MBO. The last section focuses on the project work as described in 1.3.1 in the framework of the international reorganization of the above-mentioned financial market infrastructure, and on my recommendations for the effective use of MBO in an international environment. […]. (End of introductory part).

Main topics researched: • Impact of culture in Organizations. Correlation between Culture, Communication and Leadership • MBO, from Peter Drucker’s concept to today’s practice • Employee’s motivation across different cultures • Cultural dimensions for assessment and comparison of cultures • Impact of Confucianism, Legalism and the Art of War on today’s leadership style of Chinese managers • Leadership and Management by Objectives in China, Taiwan, Singapur and Hongkong • Similar analysis of Culture, Values, Leadership and MBO for Japan, France, Germany, the USA and Switzerland

• Use case: • intercultural competency in a virtual, multicultural team. Online training on Leadership of virtual Teams and Intercultural Competency.

Conclusion: Recommendations for a modern and culturally appropriate use of MBO.

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