The concept of 'Management by Objectives' was given by Peter Drucker in 1954. It is the process in which the manager and the employee agree upon a set of specific objectives and jointly develop the plan for reaching them.
The objective must to be clear and achievable within the given time period. Actual performance of the employee is constantly measured with the set objectives, so that they can be guided when necessary.
Ideally, when employee themselves are involved with the goal setting and choosing the course of action to be followed by them, they are more likely to follow their responsibilities.
MBO Process
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Define Organization goal
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Define employee objectives
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Continuous monitoring of performance and progress
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Performance evaluation and review
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Provide feedback
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Performance Appraisals
Advantages of MBO
- Employee self-involvement in goal setting and empowerment provides job satisfaction and commitment. They work without any senior's involvement in completion of objectives. It acts as a self-motivation.
- Frequent meeting between the employees and managers helps in building up harmonious relationship. There will be better co-ordination between lower levels to the top level. Since all are inclined to the common goal of company's profitability.
- All the employees present in the organization are clear about their goals and responsibility.
- Managers are involved during goal setting so it help employees in their personal development and be self- disciplined.
- Subordinates have a higher commitment to objectives that they set themselves than those imposed on them by their managers.
- Managers can ensure that objectives of the subordinates are linked to the organization's objectives.
Disadvantages of MBO
- Company evaluates their employees by comparing them with 'ideal' employee. Hence they expect more from them.
- It over emphasizes on setting the goal then on actual works.
- IT under emphasizes the environment in which the goal is set. Like availability on resource, quality of employees, work culture, etc.
- Objectives by value make the process rigid and employees are unable to think out of the box since they are always concerned about their target.
- Subordinates have a higher commitment to objectives that they set themselves than those imposed on them by their managers.
- Managers can ensure that objectives of the subordinates are linked to the organization's objectives.
(source: management programmes)
