Management by objectives

Cataloguing Reference

C198m   CAMPOS, Vicente Falconi

Management by objectives (Hoshin Kanri): what every member of senior management needs to know in order to overcome the challenges of the new millennium / Vicente Falconi Campos; translated by T. K. Gatehouse – Nova Lima: FALCONI Editora, 2015.

Translation: Gerenciamento pelas diretrizes (Hoshin Kanri): o que todo membro da alta administração precisa saber para vencer os desafios do novo milênio.

ISBN: 978-85-5556-014-9

1. Management – Quality control. 2. Management development. I. T. K. Gatehouse. II. Title.

CDU – 658.562

Cover: África São Paulo Publicidade Ltda.

Illustrations and artwork: Heloisa Godoy Rousseff

Electronic publishing: Jeferson Teixeira Soares

English translation: T. K. Gatehouse

Translation revision: Frederico Gama Gondim / John Garriock Firth

ePub Production: Cumbuca Studio

Copyrigth © 2015 by Vicente Falconi Campos

Commercial rights to this edition: FALCONI Editora

The traditional factors of production – land, labor and even money, because it is so mobile – no longer assure a particular nation competitive advantage. Rather, management has become the decisive factor of production. *

Peter F. Drucker

(*)

Managing for the Future - The 1990’s and Beyond.

Truman Talley Books/Dutton

New York, 1992

Summary

1. Managerial arts and martial arts

2. The meaning of management by objectives

2.1 The concept of management by objectives

2.2 The concept of strategic planning

2.3 The management method

2.4 The relationship between management by objectives and routine management

2.5 The management by objectives system

2.6 The philosophy of management by objectives

3 Introduction to planning

3.1 The concept of goals

3.2 The concept of a problem

3.3 The concept of an objective

3.4 The planning method

3.5 Methods of deploying objectives

3.5.1 How to establish an objective

3.5.2 Characteristics of objective measures

3.5.3 Deployment methods

3.5.3.1 Method A

3.5.3.2 Method B

3.6 Deploying objectives and organizational structure

3.6.1 Types of organizational structure

3.6.2 The deployment process

3.7 Management by objectives and QCCs

3.8 Factors for good planning

3.8.1 Personal knowledge

3.8.2 Associate´s enthusiasm

3.8.3 Senior management time

3.8.4 Intuition and obstacle analysis

3.8.5 Problem solving ability

3.8.6 Negotiating ability

3.8.7 Making management concrete

3.9 Contingency plans

4. Stage 1The practice of white belt techniques

4.1 Step 1 – Preparation of management by objectives

4.2 Step 2 – How to establish the first annual goal

4.3 Step 3 – How to establish the president’s first objective

4.4 Step 4 – How to conduct the first objective deployment

4.4.1 How to establish goals at lower levels of the organization

4.4.2 How to establish objectives at lower levels of the organization

4.4.3 How to establish action plans

4.4.4 How to establish control indicators and verification indicators

4.5 Step 5 – How to execute measures

4.6 Step 6 – How to check if goals are achieved

4.6.1 Why check if goals are achieved?

4.6.2 How to identify departures from the goal

4.6.3 How to address anomalies

4.6.4 How to document the check process

4.6.5 How to conduct monitoring meetings

4.7 Step 7 – How to conduct objective diagnosis

4.7.1 Concept of diagnosis

4.7.2 Objectives and consequences of the president’s diagnosis

4.7.3 Organization of management by objectives diagnosis

4.7.3.1 Annual program of diagnosis

4.7.3.2 Choosing an issue

4.7.3.3 Making an agenda

4.7.3.4 Preparatory diagnosis report

4.7.3.5 Diagnosis meeting

4.7.3.6 Diagnosis record

4.7.3.7 Diagnosis management

4.7.4 Observations on diagnosis (5, 10, 24)

4.7.5 Recommendations for diagnosticians

4.7.6 Recommendations for those undergoing diagnosis

4.8 Step 8 – How to conduct reflection

4.9 Step 9 – How to incorporate management by objectives results into daily work routine management

4.10 Step 10 – How to standardize the management by objectives system

4.11 Final recommendations to the TQM coordinator

5. Stage 2 The practice of brown belt techniques

5.1 Brown belt introduction

5.1.1 Prerequisites for brown belt practice

5.1.2 How to advance in belt color

5.2 Management by objectives flowchart

5.3 Step 1 – How to establish the company’s annual goals

5.4 Step 2 – How to establish president’s objectives project

5.5 Step 3 – How to deploy objectives

5.5.1 Establishment of goals for each branch

5.5.2 Deploying branch goals

5.5.2.1 Pareto analysis method or flag method

5.5.2.2 Tree diagram method

5.5.4 Establishment of priority execution items

5.5.5 Adjustment (Catch Ball)

5.5.6 Establishment of action plan

5.5.7 Objective organization

5.5.8 Confirmation of organization’s annual objectives

5.6 Step 4 – How to execute objectives

5.6.1 Conduct ongoing reflection

5.6.2 Count on the cooperation of everyone

5.6.3 Plan in order to respond quickly to external changes

5.7 Step 5 – How to monitor management by objectives

5.8 Step 6 – How to conduct diagnosis

5.9 Step 7 – How to conduct reflection

5.10 Step 8 – Final recommendations to the TQM coordinator

6. Stage 3 The practice of black belt techniques

6.1 Characteristics of the advanced stage of management by objectives

6.2 Management by objectives through interfunctional management

6.2.1 Characteristics of interfunctional management

6.2.2 Organization of interfunctional management

6.2.3 Responsibilities of interfunctional organization teams

6.2.3.1 Interfunctional committee

6.2.3.2 Workgroup

6.2.3.3 Support unit

6.2.3.4 Line department

6.2.4 Operation of interfunctional management

6.2.4.1 How to conduct planning

6.2.4.2 How to conduct execution and checking

6.3 Management by objectives throughout the business

6.4 Management by objectives through project management

6.4.1 Project management organization

6.4.2 Implementation of project management

Appendix A

A.1 The meaning of method

A.2 Where to establish goals

A.3 The method of achieving goals

A.4 The PDCA method and management system

Appendix B

B.1 Profit guarantee system

B.2 Establishment of goals

B.3 Cost management activities

Appendix C

Appendix D

References

Index

Preface to the english edition

In the early 2000s, the CEO of one of Brazil’s largest infrastructure companies asked me to meet with him in his office. He had a serious problem on his hands. No matter what he said or did, he could not get his employees to do what he wanted them to do. He spoke about the inspirational goals he had written and shared at every companywide meeting. So then I asked if he had told his employees exactly what actions and results he expected from them. He shook his head and said no. That is precisely what management by objectives is all about.

There was a time when leaders believed that setting goals was the key to organizational productivity and individual performance. If you wanted your company to succeed, you simply set goals and hoped your employees would achieve them. That was then. Today, setting goals is like steering a rowboat with one oar. It’s not enough to move your business forward.

Without a proven system for defining, cascading and measuring goals, companies are doomed to spin in circles. We all need a second oar. The Management by Objectives (MBO) process is that second oar – a common language that unites all employees behind clear expectations.

At The Kraft Heinz Company, our MBO program is the link between goals and results, between performance and recognition, between ownership and meritocracy.

Professor Falconi’s system taught us to define our expectations, so that all employees could understand what is relevant and what is not. Using specific examples, he explained how to cascade goals and expectations throughout our organization, ensuring total alignment and integration. Most importantly, he helped us strengthen the employee appraisal process with consistent and measurable Key Performance Indicators (KPIs).

As a student of Professor Falconi, I am convinced that his program is the best way for results-driven organizations to win in today’s competitive business environment. Through MBO Methodology, leaders will acquire the discipline to drive results, the courage to inspire ownership and the knowledge to improve decision-making at every level of the organization.

Since 2013, the Management by Objectives program has united our Company, defined the language of our organization and set all of our employees on a clear and singular path toward achieving our vision, To Be The Best Food Company, Growing A Better World.

Bernardo Hees

Chief Executive Officer

The Kraft Heinz Company

Author’s preface

I am a great admirer of the work of Professor Peter Drucker, and I have included as an epigraph to this work a quotation of his, to emphasize the need for all of us to improve our managerial ability. This must start with the senior management of organizations, and then extend to everyone. The more I look into these issues, the more I am convinced that managerial ability is at the heart of human survival. We are living in exciting times. There are companies which have made wholesale changes, adapting confidently to circumstances previously unthinkable; state schools which have gone from a state of inertia and decline to set new performance records, despite the contempt in which they are held by some of our politicians; hospitals which struggle bravely on, despite the lack of resources; smallholders who have managed to double their revenue in the space of a year, etc. Professor Drucker’s observations have never seemed so apt.

The final years of this millennium have shown that human knowledge - especially managerial knowledge – is by far the most important resource for the competitiveness of organizations. Mineral and energy resources, land, sun and water do not necessarily guarantee the wealth of nations. Japan is a good example of a country which has obtained vast wealth despite a lack of natural resources.

The era in which companies could be managed merely by men of good sense seems to have come to an end. Management is becoming increasingly scientific, rather than political. The survival of organizations will only be guaranteed by achieving the goals set by the market, using method and expertise. If senior management fails to comprehend this, it is only a question of time until the company disappears.

This book is the fruit of many years’ work. It was like trying to decipher a hieroglyph, about which even its authors remain confused. We took various courses in hoshin kanri, we observed our Japanese friends in various companies, and we practiced, practiced and then practiced some more. We consulted the entire bibliography that currently exists on the subject. With the help of friends, we obtained unpublished reports and studies. We discussed our text with various skilled friends from around the world. I am quite open about my objective: I wanted to write the world’s best book on the subject.(2) But you can be the judge of that.

In writing this book, I had one other serious problem. It had to be simple enough for everyone to understand and apply.

At the same time, it had to be profound enough to provide readers with the stepping-stones to success. In this sense, I was inspired by a film about the life of an extraordinary individual: Bruce Lee, a man for whom there were no limits. Management by objectives should also be like this: a search, without limits, for new results. As in martial arts, it is necessary to acquire the requisite skills over time. So, with the help of Heloisa, I decided to present management by objectives as if it were a discipline in martial arts.

I was also heavily influenced by the book The Machine That Changed the World, (45) which highlights the difference in total quality management in Japan compared to western countries. The authors suggest that western companies were slow to implement these methods,