Management by Objectives and Self-Control

Definition

Management by objectives (MBO) requires every manager to think through and be held accountable for a clear, written objective derived from the goals of the whole business — not from the boss's personality or passing moods. Paired with measurements the manager sees directly (not only the superior), it enables management by self-control instead of management by domination.

In the Book

Chapter 8 opens with the parable of three stonecutters — "I am making a living," "I am doing the best job of stonecutting in the county," "I am building a cathedral" — to argue that only the third mindset, contribution to the whole, makes someone a manager. Drucker diagnoses "misdirection": subordinates read meaning into a boss's offhand mannerisms and casual remarks (the "burden figure" story) because there is no shared, explicit statement of what the job actually requires, and he explicitly rejects fixing this through changing managers' behavior or "human relations talk." His fix is structural — objectives that spell out a manager's own performance, contribution to other units, and expected contribution from other units, all derived from enterprise goals. The chapter's second move is "self-control through measurements": he contrasts General Electric, where traveling auditors' reports go to the audited manager, with an unnamed chemical company where reports go only to the president who then confronts managers — nicknamed "the president's Gestapo" by its own staff — to show that the same measurement, routed differently, produces trust or fear.

Why It Matters

This separates two things usually bundled together — having a goal, and who gets to police performance against it. Self-control (the person doing the work sees the measurement first and can correct their own course) produces stronger motivation than control imposed from outside, in any setting where the measured party has more real-time information about the work than any supervisor could. It also names a specific failure mode — misdirection through ambiguous informal signals — that recurs anywhere hierarchy substitutes for explicit shared objectives.