A strategic plan establishes ambitions such as profitable growth, stronger safety performance, improved schedule reliability, or expansion into new markets. However, those ambitions will remain broad statements unless managers and employees understand how their daily actions contribute to them.
Management by Objective advances production by translating strategy into agreed upon objectives, assigning accountability, reviewing progress regularly, and using results to guide improvement.
Identify Achievable Objectives: The initiation of a Strategic Plan should begin with clear objectives assigned throughout the organization. Leadership must first identify the priorities that matter most over the planning period, typically three to five years. (For example, a contracting company may seek to increase annual revenue without reducing margin, lower its recordable incident rate, improve on-time project completion, develop repeat business with key clients, or build capability in sustainable construction.)
A Hierarchy of Objectives: Once priorities are established, the company should develop a hierarchy of objectives.
- Corporate objectives come first and should be specific, measurable, and time bound. A strategic goal such as “improve project performance” may become a company objective to raise the percentage of projects delivered within the approved schedule, by a stated date.
- Departmental and project-level objectives then cascade from that target. Operations might focus on look-ahead planning and constraint removal; Procurement on timely material releases; Estimating on more accurate production assumptions; and Project Managers on early identification of schedule risks. The purpose is alignment, not simply the creation of more targets.
A Balanced Approach is especially useful in a construction environment.
- Financial objectives may include gross-margin protection, cash collection, change-order recovery, and reduction of rework costs.
- Client objectives may address satisfaction, repeat-contract opportunities, response time to issues, and closeout quality.
- Operational objectives may focus on schedule adherence, productivity, subcontractor coordination, equipment utilization, and quality inspections.
- People objectives can cover retention of key workers, leadership development, training completion, and succession planning.
This balanced approach can prevent a short-term financial result from being achieved at the expense of safety, quality, or client trust.
Creative Collaboration
- Objectives must be set collaboratively. In construction, the people closest to the work often understand the practical constraints that office-based leaders may not. Project executives, superintendents, foremen, and safety managers should contribute to defining the measures and the actions needed to achieve them.
- Participation improves the quality of objectives and increases commitment.
A Measured Start: Implementation should begin through a pilot program rather than an immediate companywide rollout. A suitable pilot might include one business unit or several projects of different sizes and delivery methods. The pilot tests whether objectives are understandable, whether data can be collected reliably, and whether review meetings lead to useful decisions. For example, it can reveal unintended consequences like a team measured on speed may rush work or defer quality checks.
Concrete, Measurable, Assignable Objectives
- Each objective needs an owner, a baseline, a target, a reporting frequency, and a clearly defined source of data.
- Monthly reviews are appropriate for strategic and departmental objectives.
- Project-level indicators may require weekly review. Meetings should emphasize root causes, and corrective actions rather than merely reciting numbers. When performance is off target, managers should ask what constraint exists, who owns the next action, and when progress will be checked again.
- Performance reviews and incentives should reinforce the Management by Objectives (MBO) process, but they must be designed carefully. Individual evaluations should recognize both results and the behaviors used to achieve them. (For example, a project manager who improves margin through disciplined change management and strong client communication should be rewarded; one who protects margin by cutting safety resources should not.)
- Team-based rewards are effective because construction outcomes depend on coordination among office staff, field crews, subcontractors, and suppliers. Transparent recognition of successful practices also helps spread learning from one project to another.
- Technology and reporting discipline are central to success. The company should use consistent metrics that draw from project controls, accounting, safety, quality, and human-resources systems.
Management by Objective – A Way of Life: Finally, leadership must treat MBO as a continuous management cycle rather than a paperwork exercise.
- Management should communicate the strategic plan repeatedly, remove barriers that teams cannot solve alone, and adjust objectives when market conditions or project realities change.
- Annual objectives should be reviewed at least quarterly, with lessons incorporated into the next planning cycle.
Installed correctly, MBO gives you a bridge between strategy and jobsite execution. It clarifies priorities, strengthens accountability, encourages collaboration, and enables the company to pursue growth while protecting the safety, quality, and profitability on which long-term success depends. (Next week we’ll discuss incentives.)
For more information on management by objective, read more at: MBO
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