What is Management by Objective ?

 What is Management by Objective ?

Management by Objectives is a process whereby superior and subordinate managers of an Organisation jointly define its common goals, define each individual's major areas of responsibility in terms Of results expected of him and use these measures as guides for operating the unit and assessing the contribution of each of its members.

The process of setting objectives in the organization to give a sense of direction to the employees is called as Management by Objectives.

It refers to the process of setting goals for the employees so that they know what they are supposed to do at the workplace.

Management by Objectives defines roles and responsibilities for the employees and helps them chalk out their future course of action in the organization.

Management by objectives guides the employees to deliver their level best and achieve the targets within the stipulated time frame.

 Advantages of Management By Objectives MBO

There are many advantages of Management by Objectives. These are-

    Develops result-oriented philosophy: MBO is a result-oriented philosophy. It does not favor management by crisis. Managers are expected to develop specific individual and group goals, develop appropriate action plans, properly allocate resources and establish control standards. It provides opportunities and motivation to staff to develop and make positive contribution in achieving the goals of an Organisation.
    Formulation of dearer goals: Goal-setting is typically an annual feature. MBO produces goals that identify desired/expected results. Goals are made verifiable and measurable which encourage high level of performance. They highlight problem areas and are limited in number. The meeting is of minds between the superior and the subordinates. Participation encourages commitment. This facilitates rapid progress of an Organisation. In brief, formulation of realistic objectives is me benefit of M[BO.
    Facilitates objective appraisal: NIBO provides a basis for evaluating a person's performance since goals are jointly set by superior and subordinates. The individual is given adequate freedom to appraise his own activities. Individuals are trained to exercise discipline and self control. Management by self-control replaces management by domination in the MBO process. Appraisal becomes more objective and impartial.
    Raises employee morale: Participative decision-making and two-way communication encourage the subordinate to communicate freely and honestly. Participation, clearer goals and improved communication will go a long way in improving morale of employees.
    Facilitates effective planning: MBO programmes sharpen the planning process in an Organisation. It compels managers to think of planning by results. Developing action plans, providing resources for goal attainment and discussing and removing obstacles demand careful planning. In brief, MBO provides better management and better results.
    Acts as motivational force: MBO gives an individual or group, opportunity to use imagination and creativity to accomplish the mission. Managers devote time for planning results. Both appraiser and appraise are committed to the same objective. Since MBO aims at providing clear targets and their order of priority, employees are motivated.
    Facilitates effective control: Continuous monitoring is an essential feature of MBO. This is useful for achieving better results. Actual performance can be measured against the standards laid down for measurement of performance and deviations are corrected in time. A clear set of verifiable goals provides an outstanding guarantee for exercising better control.
    Facilitates personal leadership: MBO helps individual manager to develop personal leadership and skills useful for efficient management of activities of a business unit. Such a manager enjoys better chances to climb promotional ladder than a non-MBO type.

 Limitations of Management by Objectives (MBO)


There are several limitations to the assumptive base underlying the impact of managing by objectives, including:

1.   It over-emphasizes the setting of goals over the working of a plan as a driver of outcomes.

2.  It underemphasizes the importance of the environment or context in which the goals are set. That context includes everything from the availability and quality of resources, to relative buy-in by leadership and stake-holders. As an example of the influence of management buy-in as a contextual influencer, in a 1991 comprehensive review of thirty years of research on the impact of Management by Objectives, Robert Rodgers and John Hunter concluded that companies whose CEOs demonstrated high commitment to MBO showed, on average, a 56% gain in productivity. Companies with CEOs who showed low commitment only saw a 6% gain in productivity.

3.  Companies evaluated their employees by comparing them with the "ideal" employee. Trait appraisal only looks at what employees should be, not at what they should do.

When this approach is not properly set, agreed and managed by organizations, self-centered employees might be prone to distort results, falsely representing achievement of targets that were set in a short-term, narrow fashion. In this case, managing by objectives would be counterproductive.
The use of MBO must be carefully aligned with the culture of the organization. While MBO is not as fashionable as it was before, it still has its place in management today. The key difference is that rather than 'set' objectives from a cascade process, objectives are discussed and agreed upon. Employees are often involved in this process, which can be advantageous.

A saying around MBO – "What gets measured gets done", ‘Why measure performance? Different purposes require different measures’ – is perhaps the most famous aphorism of performance measurement; therefore, to avoid potential problems SMART and SMARTER objectives need to be agreed upon in the true sense rather than set.

 Disadvantages of Management by Objectives


There are many Disadvantages of Management by Objectives. These are-

(1). Low morale and high stress levels. If objectives are imposed on employees rather than agreed it can reduce morale and if targets are overambitious it can cause high levels of stress for employees.

(2). Increased bureaucracy. The process of determining and agreeing targets can be very bureaucratic and time consuming due to the number of meetings and discussions needed.

(3). Long term implications. In certain businesses, depending on its corporate culture, management by objectives can lead to short-termism which can lead to the long term detriment of the business. This is especially true in industries or businesses where salaries and benefits are determined the amount of sales made and how they compare to others. This can lead targets to become more focused on quantity rather than quality, appropriateness and ethics.

(4). Unsuitable or unrealistic targets. As circumstances change, targets can quickly become outdated or unrealistic. If the business does not evaluate and change its targets to reflect changes in circumstances, it would most likely reduce the flexibility of a business’s response. There is also no guarantee that targets set will be met which may lead to more time being spent in setting targets rather than achieving them.

In conclusion, despite the apparent advantages of management by objectives its use has declined and is rejected fiercely by many businesses. This is due to the constraint it puts on management thinking. It can cause managers to miss business opportunities due to them being too focused on their targets which are a major problem in business environments that change rapidly and where the business needs to respond quickly to changes. Management by objectives can also lead to a reduction in innovation or creativity in the business when responding to different situations. However, for large businesses that operate in stable markets, management by objectives is still considered to be suitable.

 Features/ Characteristics of the MBO process


Behind the principle of Management by Objectives (MBO) is for employees to have a clear understanding of the roles and responsibilities expected of them. Then they can understand how their activities relate to the achievement of the organization's goal. Also places importance on fulfilling the personal goals of each employee.

Some of the important features of MBO are:

    Motivation – Involving employees in the whole process of goal setting and increasing employee empowerment. This increases employee job satisfaction and commitment.
    Better communication and coordination – Frequent reviews and interactions between superiors and subordinates help to maintain harmonious relationships within the organization and also to solve many problems.
    Clarity of goals
    Subordinates tend to have a higher commitment to objectives they set for themselves than those imposed on them by another person.
    Managers can ensure that objectives of the subordinates are linked to the organization's objectives.