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Chapter 12 Goal Setting
An Experiential Approach to Organization Development 7th edition
Chapter 12 Slide 1
Learning Objectives (part 1 of 2)
Recognize how goal setting can be used as

part of OD program. Apply major findings of research on goal setting to develop organizational and personal goals.
An Experiential Approach to Organization Development 7 th edition
Chapter 12 Slide 2
Learning Objectives (part 2 of 2)
Understand how management by objectives

(MBO) can be applied as management system.
Experience and practice goal-setting approaches.
Chapter 12 Slide 3
Big Hairy Audacious Goals

(part 1 of 2)
Employees at GE use stretch goals.

Other companies call these goals BHAG - big hairy audacious goals. These goals stimulate everyone to shoot for extreme achievement.
Chapter 12 Slide 4
Big Hairy Audacious Goals

(part 2 of 2)
Major goal that GE is striving for is Six Sigma.

Six Sigma is statistical term for 3.4 defects per million products. For GE to attain Six Sigma requires every employee to get on board.
Chapter 12 Slide 5
Goal-Setting Theory
Goal setting may be organization-wide,
department-wide, individual, or integration of the three. A goal is anything an individual is trying to accomplish and is the object of action.
Chapter 12 Slide 6
Major Findings Relevant to GoalSetting Theory (part 1 of 2)
Difficult goals produce better performance.

Specific hard goals better than do your best. People may abandon goals if too hard. Participation increases commitment to goals. Feedback about accomplishment improves performance.
An Experiential Approach to Organization Development 7 th edition Chapter 12 Slide 7
Major Findings Relevant to GoalSetting Theory (part 2 of 2)
Education and position in organization does

not predict success. Goal-setting in teams deserves special consideration. Support of management is critical.
Chapter 12 Slide 8
Our Changing World: Nissan and Renaults Goals (part 1 of 2)

Renault of France took over troubled Nissan.
Ghosn brought in to turn Nissan around. Ghosn had to maintain self-esteem of employees but bring change quickly. Ghosn first assessed Nissans problems.
Chapter 12 Slide 9
Our Changing World
(part 2 of 2)
He created cross-functional teams to study

manufacturing, purchasing, and engineering. Ghosn set ambitious and specific goals. Ghosn set example by observing Japanese culture and working long hours.
Chapter 12 Slide 10
Goal-Setting Model (part 1 of 3)

Difficult and specific goals are developed.
Commitment to goals achieved by:

Mutual trust in and by upper management. Support by management. Care given to competition between employees and teams.
Goal-Setting Model (part 2 of 3)

Overcome resistance to goals by providing:

Special training if required. Effective reward and incentive system. Participation by employees in setting goals.
Chapter 12 Slide 12
Goal-setting Model (part 3 of 3)

Period of performance when management
support and feedback is given. Employees may require additional resources. Managers and employees may need to develop action plans.
Managers provide timely and objective

feedback.
Figure 12.1 Goal Setting
Chapter 12 Slide 14
Management by Objectives (MBO) (part 1 of 2)

MBO is a specific technique for setting goals.
Aimed at integration of individual and organization goals. A system to help in planning, organizing, problem-solving, and motivating.
Chapter 12 Slide 15
Management by Objectives (MBO) (part 2 of 2)

MBO involves participation of subordinates and
their managers in setting and clarifying goals for subordinates.
Chapter 12 Slide 16
How MBO Works

Jointly identify common goals.
Define major areas of responsibility in terms of results expected. Use measurements as guides for operating and assessing contributions of members.
Chapter 12 Slide 17
Underlying Purposes of MBO

1.
Clarify organizations goals and plans at all

levels. Gain better motivation and participation from organizations members.
2.
Chapter 12 Slide 18
Phases of MBO
Top management team studies system.
Team sets up methods of measuring performance. Goal-setting sessions are held at all levels of organization.
Chapter 12 Slide 19
Steps in MBO Process (part 1 of 2)

1.
Subordinate proposes specific goals and

ways to measure them for designated time period. Subordinate and superior jointly develop mutually agreed upon goals.
2.
3.
Period of performance.
Steps in MBO Process (part 2 of 2)

4.
Feedback of results with comparison

between actual performance and goals. Previous step sets stage for recycling of goal-setting process.
5.
Chapter 12 Slide 21
Figure 12.2 Steps in the MBO Process
Chapter 12 Slide 22
OD in Practice: Boehringer Mannheim and MBO (part 1 of 4)

BM set up nontraditional MBO program.
Focused on having every key professional specify how much an employee will contribute to next years profits. Program was phased in over two years.
Chapter 12 Slide 23
OD in Practice
(part 2 of 4)
MBO began with a two-day training session.

Conducted by external consultant. Attended by management including CEO.
Employees formulate objectives for years budget.
Supervisor reviews performance at quarterly

intervals.
OD in Practice
(part 3 of 4)
BMs program calculates dollar value of

objectives. BM uses stretch objectives with cash bonus. Emphasis on results, teamwork, growth in entrepreneurs, and greater contribution.
Chapter 12 Slide 25
OD in Practice
(part 4 of 4)
BM traces their success with MBO to:

Implementing MBO the right way. Tying MBO to company strategy. Establishing financial perspective to MBO.
Chapter 12 Slide 26
Criticisms of MBO (part 1 of 2)

Implementing MBO is expensive and timeconsuming. Traditionally limited to managerial and professional employees where costs can be justified.
Joint goal-setting among unequals difficult and

may not be possible.
Criticisms of MBO (part 2 of 2)

MBO may be too quantitative.
Areas that cannot be quantified may be ignored. MBO may be implemented as top dictating to bottom. Some OD practitioners question if MBO is OD intervention.
Results of MBO
Difficult to measure success of MBO.
Trend of findings is generally favorable.
Chapter 12 Slide 29
Key Words and Concepts
Goal - what individual is trying to accomplish

and object of action. Goal setting - specifies desired outcomes toward which individuals, teams, and organization should work.
Chapter 12 Slide 30
Management by objectives (MBO) - system of management set up to help in planning, organizing, problem solving, and motivating.
Six sigma - a statistical term for 3.4 defects
per million products.
Chapter 12 Slide 31
Stretch goals - encouraging employee teams to try for huge gains in productivity and quality even though it is unclear how they will get there.
Chapter 12 Slide 32
Preparations for Next Chapter
Read Chapter 13.

Complete Step 1 of OD Skills Simulation 13.1. Complete Step 1 of OD Skills Simulation 13.2.
Read and analyze Case: Wengart Aircraft.


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Chapter 12 Goal Setting

An Experiential Approach to Organization Development 7th edition

Learning Objectives (part 1 of 2)

Recognize how goal setting can be used as

An Experiential Approach to Organization Development 7 th edition

Learning Objectives (part 2 of 2)

Understand how management by objectives

Experience and practice goal-setting approaches.

An Experiential Approach to Organization Development 7 th edition

Big Hairy Audacious Goals

Employees at GE use stretch goals.

An Experiential Approach to Organization Development 7 th edition

Big Hairy Audacious Goals

Major goal that GE is striving for is Six Sigma.

An Experiential Approach to Organization Development 7 th edition

An Experiential Approach to Organization Development 7 th edition

Major Findings Relevant to GoalSetting Theory (part 1 of 2)

Difficult goals produce better performance.

Major Findings Relevant to GoalSetting Theory (part 2 of 2)

Education and position in organization does

An Experiential Approach to Organization Development 7 th edition

Our Changing World: Nissan and Renaults Goals (part 1 of 2)

An Experiential Approach to Organization Development 7 th edition

Our Changing World

He created cross-functional teams to study

An Experiential Approach to Organization Development 7 th edition

Goal-Setting Model (part 1 of 3)

Goal-Setting Model (part 2 of 3)

An Experiential Approach to Organization Development 7 th edition

Goal-setting Model (part 3 of 3)

Managers provide timely and objective

Figure 12.1 Goal Setting

An Experiential Approach to Organization Development 7 th edition

Management by Objectives (MBO) (part 1 of 2)

An Experiential Approach to Organization Development 7 th edition

Management by Objectives (MBO) (part 2 of 2)

An Experiential Approach to Organization Development 7 th edition

How MBO Works

An Experiential Approach to Organization Development 7 th edition

Underlying Purposes of MBO

Clarify organizations goals and plans at all

An Experiential Approach to Organization Development 7 th edition

An Experiential Approach to Organization Development 7 th edition

Steps in MBO Process (part 1 of 2)

Subordinate proposes specific goals and

Steps in MBO Process (part 2 of 2)

Feedback of results with comparison

An Experiential Approach to Organization Development 7 th edition

Figure 12.2 Steps in the MBO Process

An Experiential Approach to Organization Development 7 th edition

OD in Practice: Boehringer Mannheim and MBO (part 1 of 4)

An Experiential Approach to Organization Development 7 th edition

MBO began with a two-day training session.

Conducted by external consultant. Attended by management including CEO.

Employees formulate objectives for years budget.

Supervisor reviews performance at quarterly

BMs program calculates dollar value of

An Experiential Approach to Organization Development 7 th edition

BM traces their success with MBO to:

An Experiential Approach to Organization Development 7 th edition

Criticisms of MBO (part 1 of 2)

Joint goal-setting among unequals difficult and