Blog Spotlight

The QTI Blog!

Welcome to our Blog,

The Significance of MBO - Managers By Objectives

The Significance of MBO - Managers By Objectives

​M.B.O. (Management By Objectives), is a style or a method of management, the Western World has been using to manage businesses for almost a century now. MBO in short, is described as a management system in which:

      • Specific performance objectives are jointly determined by both, the subordinate and the supervisor, 
      • Performance period is allotted for the completion of the objectives
      • Progress towards such objectives is reviewed periodically 
      • At the end of the performance period, output is evaluated 
      • At that time either corrective or rewarding action is taken

On an overall basis, M.B.O. has been proven to be a good system. However, depending upon a number of factors, three of which are of paramount significance, M.B.O. could be a weapon for the supervisor and disastrous for the subordinate.

These Factors Are:

1.)The degree of ethics with which the two main parties (supervisor and subordinate), enter into the negotiation process (Step 1 above)

2.) The demand and supply of labor

3.) The manager's style

The Process of M.B.O.

In order for Management By Objectives to work effectively, the steps outlined below should be followed. 

      • You begin with the organizational goals and overall strategy
      • Major objectives are allocated to the various departments
      • Departmental management sets the objectives that need to be accomplished by the specific department
      • Departmental manager sets the specific objectives/tasks that need to be carried out by the individual subordinates
      • Subordinates set objectives from their point of view
      • Manager and subordinate ethically negotiate to collaboratively finalize objectives
      • Manager and subordinate go their separate ways, performance period begins
      • Effective MBO utilization will have periodic checks of performance
      • Upon completion of the performance period, manager and subordinate meet to determine degree of compliance
      • Action is taken, usually corrective, depending upon the type and degree of variance from the agreed objectives

Theoretically, MBO sounds like a vital plan, an effective method, which basically involves planning, performing and feedback.However, it is our obligation to bring to you "the other side" of MBO.

Depending upon the three factors stated above, MBO could stand for Manipulation By Objectives. What drove us to this determination is the level of fairness and ethicacy that exists, during the negotiation process. Our argument is:

Since we begin with the organizational goals, it is reasonable to assume that management has a preconceived minimum standard of expectation from the subordinate, based on the fulfillment of the organizational goals, not on the capabilities of the subordinate

If the manager and supervisor disagree and can not reach an equitable level of expected performance, there is nothing in the MBO process that clarifies how to resolve the dispute. The subordinate simply has "the short end of the stick." Therefore, it is questionable how authentic and fair the negotiating process is. If indeed the two sides disagree, management could use its positional power to impose its objectives on the subordinate

This leads us to the next reasonable point, that management not only has the upper hand, but also it appears to be setting goals participative, when in fact goals are assigned arbitrarily and possibly even capriciously.

We strongly feel, management clearly understands that anything other than complete participation by the subordinates and honest involvement by management, will undermine the credibility and of course the effectiveness of an MBO program. When credibility in the system is lost, management usually suffers the greater loss, not the employees. That is why management should have done anything possible to gain the subordinates trust before entering the MBO process. Studies of numerous MBO programs confirm that its implementation has:

      • Increased employee performance
      • Improved overall organizational productivity
      • Increased management involvement
      • Enhanced management commitment
      • Decreased waste
      • Establishment of an effective controlling process
      • Increased employee punctuality
      • Decreased absenteeism
      • Possibly improved employee compensation

All benefits listed above are quantitative, benefiting mainly the company. Yes, there are some benefits that the subordinates enjoy from the implementation of an MBO program, but the lion's share of benefits is enjoyed by management. In addition, none of the above benefits, suggests that MBO enhances the quality, service or process of a product. This is why we look into MBO programs with certain skepticism. Any program intended to enhance output quantitatively but not qualitatively, is bound to have pitfalls and in the long run, it will fail. 


© QualityTrainingInstitute,Inc.

Rate this blog entry:
Chicago Booth Women's Network: Spring Summit 2016 ...
Development of the Sharing Economy

Comments 1

Guest - AnitaMestey on Thursday, 19 May 2016 22:55

Very good

Very good
Already Registered? Login Here
Sunday, 20 August 2017