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Management by Objective is the system which specifies the performance goals that are identified by the manager and an individual. The paper will focus on the application of this style at the Paul Revere Life Insurance Company. The aim of this essay is to assess the drivers that necessitated an introduction of a new performance management system to a company, the steps and rationale of the system, implementation steps that were utilized and its results.
In 1968, the Paul Revere Life Insurance Company needed a new system that would be easy to understand, fairly simple for administrators, and which could be under the control of a central staff group. The family-style informal form of management had been in place till then. In 1970, a core training of the senior management to improve management performance by the American Management Association program through individual development also targeted to win its support of the newly introduced MBO-based management style.
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The rationale of the system is that it had more objective appraisals of management performance. Under the direction of the new president of the company who strongly supported the MBO, the educational effort and day-to-day transition into the new management continued. Confirming that the MBO system was working in the mid-1974 to mid-1975, a corporate philosophy based on the MBO management style was developed, and it worked, at the same time efforts were continually spent on educating the people in the company on the concepts and procedures of the system (Lea, 1977).
The implementation steps involved the training effort where the managers and supervisors discussed the MBO concepts and their applications. This was done in small groups of 10-15 participants to encourage exchange of ideas and opinions. The company’s organization management worked together with the middle management to spread enthusiasm and bring out the utility at that level. The implementation process involves the proper assessment methods through the new MBO system, which will enable the employees who earn positive reviews to know what they have done, and those, who get a negative feedback, to what fall short in their performance. The MBO system will help in reviewing the employees’ performance over time at the Paul Revere (Performance Management and Appraisal, n.d.).
Some of the results that followed the introduction of the MBO system included a reduction in the total number of home-office employees, a six year record-sales realized with each year better than the previous one. Since the company emphasized on the role of individual development as a key to the improved performance, there were more promotions from within the company. The corporate effectiveness also increased in terms of companywide work measurement standards. Lastly, the cases of absenteeism decreased, while morale improved considerably (Lea, 1977).
The MBO new system introduction requires a good vision, effort and time to not only conceive the idea, but also to introduce and ensure that it is implemented. As can be seen at the Paul Revere Life Insurance Company, there was a struggle to convince the senior management that MBO can actually work, and once they accepted it the results were impressive, such as a six-record sales years.
