MANAGEMENT BY OBJECTIVES (MBO)
Management by Objectives (MBO) is a strategic approach to
enhance the performance of an organization. It is a process where
the goals of the organization are defined and conveyed by the
management to the members of the organization with the
intention to achieve each objective.
An important step in the MBO approach is the monitoring and
evaluation of the performance and progress of each employee
against the established objectives. Ideally, if the employees
themselves are involved in setting goals and deciding their course
of action, they are more likely to fulfil their obligations.
Steps in Management by Objectives Process
1. Define organization goals
Setting objectives is not only critical to the success of any
company, but it also serves a variety of purposes. It needs to
include several different types of managers in setting goals. The
objectives set by the supervisors are provisional, based on an
interpretation and evaluation of what the company can and
should achieve within a specified time.
2. Define employee objectives
Once the employees are briefed about the general objectives,
plan, and the strategies to follow, the managers can start working
with their subordinates on establishing their personal objectives.
This will be a one-on-one discussion where the subordinates will
let the managers know about their targets and which goals they
can accomplish within a specific time and with what resources.
They can then share some tentative thoughts about which goals
the organization or department can find feasible.
3. Continuous monitoring performance and progress
Though the management by objectives approach is necessary for
increasing the effectiveness of managers, it is equally essential
for monitoring the performance and progress of each employee in
the organization.
4. Performance evaluation
Within the MBO framework, the performance review is achieved
by the participation of the managers concerned.
5. Providing feedback
In the management by objectives approach, the most essential
step is the continuous feedback on the results and objectives, as
it enables the employees to track and make corrections to their
actions. The ongoing feedback is complemented by frequent
formal evaluation meetings in which superiors and subordinates
may discuss progress towards objectives, leading to more
feedback.
6. Performance appraisal
Performance reviews are a routine review of the success of
employees within MBO organizations.
Benefits of Management by Objectives
Management by objectives helps employees appreciate their
on-the-job roles and responsibilities.
The Key Result Areas (KRAs) planned are specific to each
employee, depending on their interest, educational
qualification, and specialization.
The MBO approach usually results in better teamwork and
communication.
It provides the employees with a clear understanding of
what is expected of them. The supervisors set goals for
every member of the team, and every employee is provided
with a list of unique tasks.
Every employee is assigned unique goals. Hence, each
employee feels indispensable to the organization and
eventually develops a sense of loyalty to the organization.
Managers help ensure that subordinates’ goals are related to
the objectives of the organization.
Limitations of Management by Objectives
Management by objectives often ignores the organization’s
existing ethos and working conditions.
More emphasis is given on goals and targets. The managers
put constant pressure on the employees to accomplish their
goals and forget about the use of MBO for involvement,
willingness to contribute, and growth of management.
The managers sometimes over-emphasize the target
setting, as compared to operational issues, as a generator of
success.
The MBO approach does not emphasize the significance of
the context wherein the goals are set. The context
encompasses everything from resource availability and
efficiency to relative buy-in from the leadership
and stakeholders.
Finally, there is a tendency for many managers to see
management by objectives as a total system that can handle
all management issues once installed. The overdependence
may impose problems on the MBO system that it is not
prepared to tackle, and that frustrates any potentially
positive effects on the issues it is supposed to deal with.
