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Key Concepts
The core concept of MBO is planning, which means that an organization and its members are
not merely reacting to events and problems but are instead being proactive. MBO requires
that employees set measurable personal goals based upon the organizational goals. For
example, a goal for a civil engineer may be to complete the infrastructure of a housing division
within the next twelve months. The personal goal aligns with the organizational goal of
completing the subdivision.
MBO is a supervised and managed activity so that all of the individual goals can be
coordinated to work towards the overall organizational goal. You can think of an individual,
personal goal as one piece of a puzzle that must fit together with all of the other pieces to
form the complete puzzle: the organizational goal. Goals are set down in writing annually and
are continually monitored by managers to check progress. Rewards are based upon goal
achievement.
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 help
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.
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Need for Management by Objectives (MBO)
The essence of MBO is participative goal setting, choosing the course of actions and decision
making. An important part of the MBO is the measurement and the comparison of the
employee’s actual performance with the standards set.
The MBO should be defined that Management By Objectives is a management system in
which specific performance goal are jointly determined by employees and their managers,
progress toward accomplishing those goals is periodically reviewed and rewards are allocated
on the basis of this progress.
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The MBO Process sets a benchmark for every employee. The superiors set targets for
each of the team members. Each employee is given a list of specific tasks.
In the light of the above definitions of MBO, the following features of it can be identified;
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Benefits of Management by Objectives
It provides a means to identify and plan for achievement of goals. If you don't know what
your goals are, you will not be able to achieve them. Planning permits proactive behavior and
a disciplined approach to goal achievement. It also allows you to prepare for contingencies
and roadblocks that may hinder the plan. Goals are measurable so that they can be assessed
and adjusted easily. Organizations can also gain more efficiency, save resources, and increase
organizational morale if goals are properly set, managed, and achieved.
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6. Improving Productivity: Management by Objectives helps in improving productivity as the
management team concentrates on the important task of reducing costs.
7. Motivating the Subordinates: It stimulates the subordinates’ motivation.
8. Personal Satisfaction: It provides greater opportunity to managers for personal
satisfaction on account of participation in objective setting and rational performance
appraisal.
9. Locating Weak and Problem Areas: It helps in locating weak and problem areas because
of improved communication and organization structure.
Disadvantages/ limitations
However, MBO is not without disadvantages. Application of MBO takes concerted effort. You
cannot rely upon a thoughtless, mechanical approach, and you should note that some tasks
are so simple that setting goals makes little sense and becomes more of silly, annual ritual.
For example, if your job is snapping two pieces of a product together on an assembly line,
setting individual goals for your work isn't really necessary.
Rodney Brim, a CEO and critic of the MBO technique, has identified four other weaknesses.
There is often a focus on mere goal setting rather than developing a plan that can be
implemented. The organization often fails to take into account environmental factors that
hinder goal achievement, such as lack of resources or management support. Organizations
may also fail to monitor for changes, which may require modification of goals or even make
them irrelevant. Finally, there is the issue of plain human neglect - failing to follow through
on the goal.
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3. The danger of inflexibility also causes a serious problem since managers may strive for
goals that have been made obsolete by revised corporate objectives, changed premises,
or modified policies.
4. MBO cannot be implemented effectively on account of difficulty in setting verifiable
objectives.
5. The open atmosphere for appropriate objective-setting is absent because of differences in
the status of subordinates.
6. Managers may not get time to do even their normal work as MBO involves much
paperwork and holding of many meetings.
7. There is a tendency on the part of the managers to emphasize short-term objectives and
to become more precise in objective setting and accomplishment
8. MBO is a philosophy of managing an organization in a new way. However, many managers
fail to understand and appreciate this new approach.
9. MBO represents the danger of inflexibility in the organization, particularly when the
objectives need to be altered. In a dynamic environment, a particular objective may not
be valid forever.
10. It sometimes ignores the prevailing culture and working conditions of the organization.
11. More emphasis is being laid on targets and objectives. It just expects the employees to
achieve their targets and meet the objectives of the organization without bothering much
about the existing circumstances at the workplace. Employees are just expected to
perform and meet the deadlines. The MBO Process sometimes do treat individuals as mere
machines.
12. The MBO process increases comparisons between individuals at the workplace. Employees
tend to depend on nasty politics and other unproductive tasks to outshine their fellow
workers. Employees do only what their superiors ask them to do. Their work lacks
innovation, creativity and sometimes also becomes monotonous.
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