Last Updated Mar 18, 2010 9:05 AM EDT
The problem with MBO is that the details -- how you get results -- matter, not only to the bottom line but the corporate culture.
Consider the case of Walt Pavlo. A senior manager at MCI in the late 1990s, he was told to solve the problem of bad debt; his bosses didn't want to sweat the details, either. Pavlo says his assignment was impossible because he was being asked to clean up a problem caused by a sales team that earned commissions even when their clients defaulted. That meant the sales people did no due diligence and had no vested interests in signing profitable, honest customers. But Pavlo wasn't rewarded for identifying structural problems; he was rewarded for hitting his targets.
As he relates in his memoir, Stolen Without a Gun, Pavlo and his colleagues were left with an insoluble problem. At first, they came up with the idea of promissory notes -- these could be recorded as assets even if they were never recovered. But then they decided that, since customers were constantly defrauding the company, they might as well do so, too. Now a frequent speaker on white collar crime, Pavlo pled guilty to wire fraud and money laundering and entered federal prison in 2001, serving two years. He takes full responsibility for his bad decisions, but at the heart of a hideous experience, he says, were managers who simply passed the buck.
"My boss was a genuinely nice person," Pavlo told me. "But he was under pressure, too. He never asked how we made his problems go away; he was just grateful when we did. It would have been a relief, frankly, if he had asked some hard questions -- but he never did."
Pavlo's bosses weren't willing or able to make the structural changes required to fix their problem, so they saddled someone else with it, Pavlo says. I've seen the same conflict play out in software sales, in my own companies and in businesses that I've advised. The poor Sales VP is given a target but he can't reach it because the tech team hasn't delivered a product that works and answers customer needs. Getting all those teams to play nice together is one of the jobs of a CEO, not a mere detail to be delegated.
This isn't an argument for micro-management. It's an argument for strong corporate values. What company cultures do, when they work, is tell everyone how to solve the problem: to what standard, applying what values. It makes everyone realize that some ways of solving the problem won't pass and others will, when quality counts more than speed, and whether customers' satisfaction comes before customer numbers.
In my experience, MBO is just management weakness masquerading as delegation. How many times, I wonder, is it just a cover for the boss who can't -- or won't -- solve a problem?