Drucker, in his 1956 book The Practice of Management established a single management principle he called “Management by Objective” that would lead to superior communication, and give full scope to individual strength and responsibility, teamwork, and a common vision:

Every manager, from the “big boss” down to the production foreman must understand the goals of the larger unit of which they are part and must propose their own goals alongside performance measures their management unit is held to and why they best advance the larger unit.

These goals, when mutually agreed and progress easily visible, form the foundation of self-motivation: “pushing decisions down to the lowest possible level”, “paying people for results”, and “managers should not be driven, but drive themselves.”

Breaking down this summary into its constituent four necessary requirement:

1. “Must understand the goals of the larger unit of which they are part”

1. Everything falls apart if the goals of the bigger goal is unclear or selected incorrectly.
2. This is so important and such a common cause of wasted effort and frustration, that this requirement is repeated and checked by having subordinate managers explain why their selected goals best advance the larger unit.
3. “In one company, I have found it practicable and effective to provide even a foreman with a detailed statement of not only his own objectives but those of the company and of the manufacturing department. Even though the company is so large as to make the distance between the individual foreman’s production and the company’s total output all but astronomical, the result has been a significant increase in production.”

2. “Must propose their own goals”

1. Higher management must, of course, first make their own goals clear and provide advice into this process and ultimately has veto power.

2. However, lower management has more time and is closer to the details. They are best suited to the intellectual load of defining what levers (inputs / leading measures) best impact the desired results (outputs / lagging measures).

3. Selecting your own goals, with advice, is a necessary condition for true understanding and self-controlled management units. It gives each manager the broadest possible scope and authority.

   (Bottom-up) management by self-control rather than by (top-down) domination is highly desirable. It is self-evident you want managers who exercise self-control — who are self-motivated.

3. “Performance measures their management unit is held to”

1. The individual must always know where they stand. “Each manager should have the information he needs to measure his own performance and should receive it soon enough to make any changes necessary for the desired results.”
   1. These measurements need not be rigidly quantitative; nor need they be exact.
   2. But they have to be clear, simple and rational.
   3. They have to be relevant and direct attention and efforts where they should go.
   4. They have to be reliable—at least to the point where their margin of error is acknowledged and understood.
   5. And they have to be, so to speak, self-announcing, understandable without complicated interpretation or philosophical discussion.
2. “Every manager should be held strictly accountable for the results of his performance. But what he does to reach results he — and only he — should control. And only if he has all the information regarding his operations can he fully be held accountable for results.”

4. “Why they best advance the larger unit”

1. This is actually a restatement of the first requirement. Business performance requires each job be directed toward the objectives of the whole business. For in the business enterprise managers are not automatically directed toward a common goal.
2. To ensure there is common direction of vision and effort. “It makes the common weal the aim of every manager.”