Views: 7

Management by Objectives 

Management by Objectives (MBO) is a management philosophy and process that aims to align organizational goals with individual and team objectives. It was popularized by Peter Drucker in the 1950s and has since been widely adopted by organizations.

MBO insists that a manager be very clear about his objectives before he starts a task. If a manager is not sure about his destination, he is unlikely to arrive, and in all probability he may not even know whether he is on the right road or not, or if he has arrived or not.

 MBO is a system in which specific performance objectives are set by subordinates and their supervisors collaboratively.

MBO aims to increase Organisational performance by aligning goals and subordinate objectives throughout the organisation. It managers focus on the result, not the activity. They delegate tasks by “negotiating a contract of goals” with their subordinates without dictating a detailed roadmap for implementation. Management by Objectives (MBO) is about setting yourself objectives and then breaking these down into more specific goals or key results. 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. The performance objectives are set by both subordinates and their supervisors, employees are more self-motivated to achieve the goals as they are given a stake rather than an instruction.

Key elements of Management by Objectives include:

1. Goal Setting: MBO begins with the establishment of clear, specific, and measurable goals for the organization as a whole. These goals are then cascaded down to individual departments and employees, ensuring alignment between individual objectives and the overall organizational objectives.

2. Participative Goal Setting: MBO emphasizes involving employees in the goal-setting process. Managers and employees collaborate to define objectives that are challenging, yet attainable, and that motivate and inspire employees to perform at their best. This participative approach fosters employee engagement, commitment, and accountability.

3. SMART Objectives: Objectives set in the MBO process are typically defined using the SMART criteria. SMART stands for Specific, Measurable, Achievable, Relevant, and Time-bound. This ensures that objectives are clear, quantifiable, realistic, relevant to the organizational goals, and have specific deadlines.

4. Performance Evaluation and Feedback: MBO involves regular performance evaluations to assess progress toward objectives. Managers and employees meet to review performance, discuss achievements, identify areas for improvement, and provide feedback. This feedback loop helps employees stay on track, make necessary adjustments, and receive recognition for their accomplishments.

5. Self-Control and Accountability: MBO promotes self-control and self-management by empowering employees to take ownership of their objectives. Employees are accountable for their performance and are responsible for actively managing their progress toward their goals. This fosters a sense of responsibility and autonomy.

6. Performance Appraisal and Rewards: MBO often includes performance appraisal systems that assess employee performance against the established objectives. Rewards, such as bonuses, promotions, or recognition, may be linked to the achievement of objectives. This helps reinforce the importance of goal attainment and provides incentives for high performance.

    Characteristics of Management by Objectives

   Management by Objectives has following characteristics.

   1. MBO emphasizes participation in setting goals that are tangible, verifiable and measurable.
   2. MBO focuses attention on what must be accomplished (goals) rather than how it is to be accomplished (methods).
   3. MBO, by concentrating on key result areas translates the abstract philosophy of management into concrete phraseology. The technique can be put to general use (non-specialist technique).

   Further, it is ‘a dynamic system which seeks to integrate the company’s need to achieve its profit and sales growth with the manager’s need to clarify and achieve its profit and sales growth with the manager’s need to contribute and develop himself.

   4. MBO is a systematic and rational technique that allows management to attain maximum results from available resources by focusing on achievable goals. It allows the subordinate with plenty of room to make creative decisions by himself.
      

      Elements of MBO

      1. Specific goal set by top management based on mission of the company.
      2. Participative decision making allows sub-ordinates considerable latitude in carrying out their activities and make subsequent decisions.
      3. Explicit time period for performance is important to ensure that plans are being implemented as expected and goal will ultimately be met.
      4. Performance feedback allows managers to meet with each of their subordinates to conduct performance reviews and provide feedback.

      
      

Advantages of Management by Objectives:

1. Alignment: MBO ensures that individual and team objectives are aligned with organizational goals, promoting a sense of purpose and direction throughout the organization.

2. Clarity: Clearly defined objectives help employees understand what is expected of them and how their work contributes to the overall success of the organization.

3. Motivation: Participating in goal setting and having a clear path for achievement can motivate employees, fostering a sense of ownership, commitment, and job satisfaction.

4. Performance Focus: MBO emphasizes measurable objectives and performance evaluation, providing a framework for continuous improvement and identifying areas for development.

5. Communication and Collaboration: The MBO process encourages regular communication and feedback between managers and employees, fostering open dialogue and collaboration.

Disadvantages and Challenges of Management by Objectives:

1. Overemphasis on Goals: A rigid focus on achieving specific objectives may lead to neglecting other important aspects, such as creativity, teamwork, or customer satisfaction.

2. Unrealistic Goals: Setting overly ambitious or unrealistic objectives can demotivate employees and create a culture of constant pressure and stress.

3. Time and Resource Intensive: Implementing MBO requires time and effort to establish and monitor objectives, which can be challenging for organizations with limited resources or fast-paced environments.

4. Lack of Flexibility: MBO may struggle to adapt to rapidly changing circumstances or dynamic markets, as objectives may become obsolete or require frequent adjustments.

5. Potential for Goal Displacement: In some cases, employees may prioritize meeting their objectives over the broader organizational goals, leading to suboptimal decision-making and siloed behaviors.

Overall, Management by Objectives can be an effective approach to aligning organizational goals with individual and team objectives, fostering employee engagement and performance. However, it requires careful implementation, flexibility, and a balance between goal attainment and other important aspects of organizational success.