Management by Objectives
Management by objectives (MBO) can also be referred as Management by Results or Goal Management, and is based on the assumption that involvement leads to commitment and if an employee participates in goal setting as well as setting standards for measurement of performance towards that goal, then the employee will be motivated to perform better and in a manner that directly contributes to the achievement of organizational objectives.
Advantages of Management by Objectives
1 . Since Management by objectives (MBO) is a result-oriented process and focuses on setting and controlling goals, if encourages managers to do detailed planning.
2. Both the manager and the subordinates know what is expected of them and hence there is no role ambiguity or confusion.
3. The managers are required to establish measurable targets and standards of performance and priorities for these targets. In addition, the responsibilities and authority of the personnel is clearly established.
4. It makes individuals more aware of the company goals. Most often the subordinates are concerned with their own objectives and the environment surrounding them. But with MBO, the subordinates feel proud of being involved in the organizational goals. This improves their morale and commitment.
5. Management by objectives (MBO) often highlights the area in which the employees need further training, leading to career development.
6. The system of periodic evaluation lets the subordinates know how well they are doing. Since MBO puts strong emphasis on quantifiable objectives,the measurement and appraisal can be more objective, specific and equitable.
7. It improves communication between management and subordinates.
Disadvantages of Management by Objectives
1. MBO can only succeed if it has the complete support of the top management.
2. Management by Objectives (MBO) may be resented by subordinates. They may be under pressure to get along with the management when setting goals and objectives and these goals may be set unrealistically high. This may lower their morale and they may become suspicious about the philosophy behind MBO.
They may seriously believe that MBO is just another of the management’s ploys to make the subordinates work harder and become more dedicated and involved. The emphasis in the MBO system is on quantifying the goals and objectives. It does not leave any ground for subjective goals. Some areas are difficult to quantify and even more difficult to evaluate.
3. There is considerable paperwork involved and it takes too much of the manager’s time. Too many meetings and too many reports add to the manager’s responsibility and burden. Some managers may resist the program because of this increased paperwork.
4. The emphasis is more on short-term goals. Since the goals are mostly quantitative in nature, it is difficult to do long-range planning because all the variables affecting the process of planning cannot be accurately forecast due to the constantly changing socio-economic and technological environment which affect the stability of goals.
5. Most managers may not be sufficiently skilled in interpersonal interaction such as coaching and counseling, which is extensively required.
6. The integration of MBO system with other systems such as forecasting and budgeting etc., is very poor. This makes the overall functioning of all systems mare difficult.
7. Group goal achievement is more difficult. When the goals of one deportment depend on the goals of another department, cohesion is more difficult to obtain. For example, the production department cannot produce a set quota if it is not sufficiently supplied with raw materials and personnel.
Suggestions for Improving the Effectiveness of MBO
1. It is important to secure top management support and commitment. Without this commitment, MBO con never really be a success. The top managers and their subordinates should all consider themselves as players of the some team. This means that the superiors must be willing to relinquish and shore the necessary authority with subordinates.
2. The objectives should be clearly formulated, should be realistic and achievable. For example, it is not realistic for the R&D department of on organization to set a goal of, say, 10 inventions per year. These goals should be set with the participation of the subordinates. They must be properly communicated, clearly understood and accepted by all. MBO works best when goals are accepted.
3. MBO should be on overall philosophy of management and the entire organization, rather than simply a divisional process or a performance appraisal technique. MBO is a major undertaking and should replace old systems rather than just being added to it. Felix M.Lopex has observed, when an organization is managed by objectives, it becomes performance oriented. It grows and it develops and it becomes socially useful.
4. The goals must be continuously reviewed and modified, as the changed conditions require. The review technique should be such that any deviations are caught early and corrected.
5. All personnel involved should be given formal training in understanding the basics as well as the contents of the programme. Such education should include as to how to set goals, the methods to achieve these goals, methods of reviews and evaluation of performance and provisions to include any feedback that may be given.
6. Management by Objectives (MBO) system is a major undertaking based upon sound organizational and psychological principles. Hence it should be totally accepted as a style of managing and should be totally synthesized with the organizational climate. All personnel involved must have a clear understanding of their role authority and their expectations. The system should be absorbed totally by all members of the organization.
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The use of management objectives was first widely advocated in the 1950s by the noted management theorist Peter Drucker. MBO (management by objectives) methods of performance appraisal are results-oriented seeks to measure employee performance be examining the extent to which predetermined work objectives have been met.
Usually the objectives are established jointly by the supervisor and subordinate. An example of an objective for a sales manager might be: Increase the gross monthly sales volume to $250,000 by 30 June. Once an objective is agreed, the employee is usually expected to self-audit; that is, to identify the skills needed to achieve the objective. Typically they do not rely on others to locate and specify their strengths and weaknesses. They are expected to monitor their own development and progress.
What is MBO?
Management by objectives (MBO) is a systematic and organized approach that allows management to focus on achievable goals and to attain the best possible results from available resources.
It aims to increase organizational performance by aligning goals and subordinate objectives throughout the organization. Ideally, employees get strong input to identify their objectives, time lines for completion, etc. MBO includes ongoing tracking and feedback in the process to reach objectives.
- Cascading of organizational goals and objectives
- Specific objectives for each member
- Participative decision making
- Explicit time period
- Performance evaluation and feedback
The objectives must be:
- Focused on a result, not an activity
- Related to time
MBO Strategy: Three Basics
- All individuals within an organization are assigned a special set of objectives that they try to reach during a normal operating period. These objectives are mutually set and agreed upon by individuals and their managers.
- Performance reviews are...