What is the effectiveness of MBO?

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One of the major reasons for the failure of MBO in many organizations is that those in charge fail to recognize the potential character of the implement process. The fault is not in the system but in its use. As with any technique, there is a right and a wrong way to implement MBO programmes. The following suggestions would help in making use of MBO programmes properly.

Organizational commitment

The most effective way to implement MBO is to allow the top-level managers to explain, coordinate and guide the programme. Without top management support and commitment, MBO cannot be implemented properly. MBO presents a challenging task to managers. They must feel that the programme is important and will bring in results. The shift from planning for work to planing for accomplishment of specific goals is not easy. As rightly pointed out by Hampton, “More often than not, probably, MBO is tried and sooner or later allowed to slip into disuse. Initial enthusiasm and good faith wane as difficulties develop”. Joint goal-setting, participation in planning and decision-making processes, objective performance appraisal sessions pose several problems to managers who are wedded to old ways of thinking and action. These problems should not be allowed to kill MBO without ever being openly confronted. Managers must believe that MBO would work and must accept it as a way of thinking. As Knootz pointed out, it is essential that “an effective programme of managing by objective must be woven into an entire pattern and style of managing. It cannot work as a separate technique standing alone”. MBO should not be used as a decorative piece. If it does not have the active support, involvement and commitment of top managers, it should not be installed at all.

Training

MBO is not a superfluous ritual which can be finished off as quickly as possible. It calls for precise, concrete thinking. Managers should be given adequate training in MBO philosophy and procedures before the system is installed. They must be in a position to integrate the technique with the basic company philosophy. Under an authoritarian, threatening, mistrustful climate, MBO proves to be a fruitless exercise. “A plant must have the right soil and climate if it is to thrive”. Similarly MBO demands a healthy atmosphere where its philosophy is understood and the techniques are properly applied. Drawing the curtain between fuzzy wishes and specific objectives, arranging practice sessions where performance objectives are evaluated, measuring performance and checking deviations – all these activities do not come by easily. The subordinates as well as the superiors must be taught how to set realistic goals and familiarized with the results for which they are to be held responsible.

Adequate time and resources

A well-conceived MBO programme cannot be installed overnight. It may take three to five years of operation before the MBO programme is yielding fruitful results. Implementing an MBO programme is quite often time consuming and managers must have the necessary time and resources to utilise it. They must allocate adequate time and resources to educate each person in the organization in the nature and philosophy of the system. It is no use looking to MBO for instant solutions.

Take care of the necessary mechanics

One reason why MBO programmes fail is that they are not integrated or institutionalized into the real planning and control activities. Setting goals is only part of the story, goals must be supported by control activities also. It is important to assign authority and responsibility for initiating and overseeing the MBO programme. The persons who administer the programme must be endowed with sufficient power not only to punish but also reward people promptly.

It is always better to clarify responsibility and authority relationships so that everyone in the organization understands what is expected in the MBO system. A guideline manual of procedures may be adopted so as to ensure clarity and facilitate the goal-setting and performance appraisal activities.

Timely feedback

Monitor MBO as it is put to use. This process reveals opportunities for feedback, counselling and encouragement to subordinates at other than regular performance appraisal sessions. In many cases, as Koontz pointed out, the superior simply sits back and forgets that periodic review, counsel and control are mandatory to the programme's success. The subordinate, lacking in such direction, often, turns in a mediocre performance. Congratulations and encouragement from superiors who back up their words with pay raises and promotions would motivate subordinates to peak performance. Again, while comparing the actual progress of MBO with the planned progress, the manager should avoid the tendency to be overly critical with those subordinates who are lower in ability, lack confidence or are less motivated.

Politics

Be sensitive to the politics of implementing MBO, MBO redistributes power and not all managers welcome this. If MBO is seen as a significant change, it will generate hostile reaction in the form of jokes, infighting and overt conflict. MBO can also alter the status of an organization, can influence decisions, can affect budgets and can promote creation of coalitions to fight with it. MBO, as Odiorne pointed out, has failed in many organizations because managers quite often ignored these political considerations in the process of implementation.

Career development
The Pros and Cons of Management by Objectives

By Indeed Editorial Team

Published April 13, 2021

One of the first steps to completing a goal is clearly defining it and planning out how to achieve it. Management by objectives, or "MBO," is a type of management style that applies this principle to an organization by emphasizing the need to define and track goals. This type of management empowers employees at all levels of the organization to help the company succeed. In this article, we discuss what management by objectives is, the pros and cons of management by objectives and some tips to help implement this style of management.

What is management by objectives?

Management by objectives is a style of management that prioritizes setting, tracking and achieving goals for every employee to complete company-wide goals. This type of management emphasizes planning and personal responsibility for employees.

It also encourages collaboration between managers and employees, and it focuses on working ahead towards a common objective, rather than simply reacting to events as they occur. When done well, MBO allows managers to clearly communicate what they expect from employees, and employees feel involved in the process of setting their own goals.

Read more: Management by Objectives (MBO)

Advantages of management by objectives

Management by objectives has numerous advantages that can improve the company's performance and employee satisfaction. Some of these advantages include:

Planning

To set goals, management must plan for the future and determine the overall objectives for their business. By doing so under management by objectives, managers communicate to employees what type of goals to set to support the company's growth.

Employee involvement

This style of management encourages employees to set their own goals in collaboration with their immediate supervisor. Because employees have some involvement with the goal-setting process, they are more motivated to achieve the objectives they set together with management.

Measurable goals

The goals in MBO are typically measurable, such as achieving a certain percentage improvement in customer satisfaction or increasing production by a certain amount. This means that employees and managers can easily determine when they complete a goal.

Stronger criteria for employee evaluations

Employees know what management expects of them under this management style, and when supervisors evaluate their employees, they use the agreed-upon goals to explain where an employee has succeeded and where they need to dedicate more time in the future.

Improved communication

Managers and employees work together to set and manage goals, so they spend more time meeting and communicating on the progress of these goals. This offers more opportunities for employees to communicate concerns or questions with supervisors.

Career development

When employees understand where they should focus their efforts under MBO, they also learn about any areas in which they might need further education or mentoring. Managers may also learn about supervisory skills they need to develop, such as goal-setting or accepting feedback from the people they supervise. This allows employees to improve their current skills or learn new ones.

Improved company performance

Companies perform better when management provides clear direction. Employees know how to use their time effectively, and they understand how their daily work affects the company. MBO offers many tools to help managers and employees alike improve the overall functioning of a company.

Defined roles

Once employees have worked together with management to set goals, they know what management expects of them. Employees and managers use these objectives to better understand what their role includes and focus on the important aspects of their positions.

Regular feedback

Managers meet with their employees regularly under this style of management, which gives managers many of opportunities to provide feedback to their employees. This allows employees to learn where they can improve or where they are doing well early, rather than learning months later that they could have been working on a particular skill more to improve how they performed their daily tasks.

Increased rapport

Using MBO, supervisors and employees work together to build goals, which helps to build rapport between different levels of the organization.

Employee empowerment

When employees know what they need to, they don't need to ask their managers for direction or advice. A clear direction empowers employees to complete their work and make decisions without needing managerial input.

Read more: Management by Objectives: Definition, Benefits and Examples

Disadvantages of management by objectives

Like any other management style, management by objectives has some limitations to be mindful of, including:

Time and paperwork

Management by objectives requires extra time, meetings and paperwork. This may lead to supervisors having less time to complete their work and more time devoted to meeting with employees and their managers simply to check in on the progress of everyone's goals. To save time, plan out the meeting structures in advance so you streamline the process.

Strong focus on short-term goals

Achieving long-term goals requires first establishing and meeting a series of short-term goals. Sometimes, organizations focus so much on short-term goals when they use MBO that they lose the direction of long-term goals. Employees want to meet their goals to receive a positive review, so they may not pay attention to larger goals for the company. It's helpful to take the time to break down larger goals into smaller, achievable goals and make sure everyone's goals align with the company's larger ones.

Managerial skills

Management by objectives relies on each manager's skills, so if any manager has gaps in their skill set, this style of management may not provide all of its potential benefits. Training each manager in mentorship skills and providing ongoing assessments ensures they can offer constructive feedback.

Required acceptance at all levels of the organization

To succeed, MBO requires support from all levels of the organization, especially management at the highest levels of the company. If top management does not set appropriate goals and communicate the importance of management by objectives, employees at lower levels may have no incentive to follow this new style of management. Employees may also need to understand that this new type of management benefits and empowers them to accept and fully support it.

It's advisable to explain the benefits of MBO to every employee and give them a chance to ask questions. This way, you can learn about any concerns employees might have and show them how this new style can help them improve.

Limited types of goals

Some goals are not quantifiable, such as research and development goals. This limits how effective MBO is for certain organizations or departments. Utilizing management by objectives may require some creativity, particularly in departments where results are difficult to quantify.

For example, research and development employees could set a goal of brainstorming for a certain number of hours each week or using a certain amount of their day to test ways to improve current products.

Possible inflexibility

Sometimes, when management becomes too focused on a goal, they do not make changes when they become necessary. For example, a company that sets goals to reduce overhead by a certain amount may not realize they could expand into a new customer base by marketing on a new social media platform because their marketing department is so focused on lowering costs.

Even when the company realizes a change of direction could benefit its performance, some managers or employees could be resistant to the change because they are so focused on their current goals. A third party, such as a business consultant, may offer a different perspective and help the company refocus as needed.

Read more: 6 Benefits of Flexibility in Business

Long initial time investment

MBO takes a considerable amount of time in its early stages. If you hire someone familiar with MBO, your company might reduce some of this setup time and start the new management process a little sooner.

Power imbalance

Supervisors and employees work together to set goals, but sometimes employees do not communicate openly with supervisors because the supervisor has more power in the company's structure.

They may not feel comfortable or safe expressing an honest opinion about the goals a supervisor suggests, which might lead to unrealistic goals for the employee. Build a strong rapport between employees and management and setting up anonymous feedback options can ensure that employees have a chance to tell management about their concerns or objections if they don't feel comfortable doing so in person.

Pressure

Employees may feel too much pressure to complete their goals, especially if the goals are beyond the employee's capabilities. If employees know their performance review relies on meeting these goals, they might experience unnecessary stress to achieve them.

To avoid this, set achievable goals with employees to help them succeed. If you see an employee who has any difficulty with their goals, schedule time for extra coaching or reassess their goals to ensure they're reasonable.

Too much focus on meeting a limited number of goals

When employees focus on a narrow set of goals, they may not complete work that isn't related to those goals. For example, a sales employee who needs to meet a quota focuses their attention on reaching new customers rather than building rapport with current customers. It's helpful to set goals that cover all important aspects of an employee's position so they can meet their goals while also performing the important parts of their job.

Unrealistic goals

If managers or employees do not have the proper training in setting realistic goals, they may set a goal that is unachievable. MBO requires realistic goals to succeed, so ensure that employees have a way to communicate any concerns they might have about their goals. It's also good to check in with everyone regularly to be sure they're making enough progress towards their goals.

Related: How To Set Realistic Goals

Tips for improving management by objectives

Some additional tips for ensuring your company succeeds when it uses management by objectives include:

Ensuring employees at all levels accept their goals
Thinking of management by objectives as a philosophy rather than a rigid set of rules
Keeping goals up to date by assessing them at regular intervals
Understanding that goals may need to change based on external or internal factors