Nearly a decade ago, remodeler Dennis Allen was talking with one of his regular clients — a retired vice president at Gillette — about setting up an advisory board for his company. The client joked that Allen couldn't afford him as a consultant but did offer to give him a little pro bono advice. One of the things the two talked about — and one of the things that had been successful at Gillette — was a management by objective system.

Allen's Santa Barbara, Calif.–based company, Allen Associates, is set up uniquely, with a half dozen “associates” who Allen says basically operate as general contractors on their own, and another six “junior associates” who are essentially associates in training. The company uses this simple form to set goals and evaluate performance, and while the goals might be different at your company, the system should work for all types of employees in all positions. Here's part of a completed form from 2003, slightly edited, with the names changed to protect the innocent.

  • Allen Associates' management team includes two others besides Allen, and two of the three meet with each associate, often over lunch, at the end of each year to review the previous 12 months and to set goals for the following year. Allen says that management lets the associate set the goals, with a bit of guidance when needed. “We'll tone down people if they are being overly ambitious,” he says. And if the opposite is true? “We'll suggest that they take on a little more, too.”
  • The broad categories of objectives are not set in stone, but of the four to seven that each associate establishes, Allen likes to make sure that they include personal goals. “We like to keep an eye on what's important in their broader life,” he says.
  • The objective sheets are actually revisited twice: a somewhat informal “mid-year review” and then a more in-depth evaluation at the end of the year. Again, the management team lets the associates take the lead. “They evaluate themselves,” Allen says. “We're a sounding board; we suggest corrections.”
  • The five-level rating system was established by a consultant, though Allen and his management team added the pluses and minuses for a bit of flexibility. Once the performance review is complete, the associate and the management teams talk about goals for the following year. Notes are taken, and Allen fills out the form upon his return to the office and gives a copy to the associate right away, so any adjustments can be made as quickly as possible.