Management by objectives - an effective tool for teamwork?

In recent years many companies have introduced self-regulatory teamwork requiring changes in leadership behaviour and systems as well. Consequently a renewed interest has arisen in management by objectives (MBO) as a means for leading self-regulating teams. But how do MBO systems work and how effective are they? The MBO system of a company in the construction supply industry was analysed. This company had implemented MBO at team level five years ago. In order to explore the mechanisms and effects of MBO at team level a model for group goal setting was tested. One hundred and seventy-six employees in twenty-six teams participated in the study, but only twenty-one groups having objective productivity data were included in the analyses at team level. Group goal commitment and group goals moderated by task interdependence are supposed to influence group processes as a mediating variable for group effectiveness. Results do not consistently support this model. Group goals and goal commitment predict group productivity and job satisfaction but group processes mediate only the relationship to job satisfaction. The moderating effect of task interdependence could not be supported. The consequences for developing a model for MBO at team level and implementing effective MBO systems are discussed.