Management by Objectives
Introduction
Management is considered to be an intricate and complex function. Its success is measured by the ability of managers to integrate and coordinate various approaches. Management by Objectives (MBO) is a term used in business studies to denote a target oriented approach by organizations in order to overcome business challenges and problems. An organization can succeed through the implementation of clear and precise goals. It also needs to implement a smart and prudent strategy in order to achieve targets. Decision making and critical thinking processes are enhanced through this approach. This research paper will seek to analyze and assess the basic concepts behind MBO. It will also study the advantages and disadvantages of the approach.
Background
Peter Drucker and George Odiorne provide valuable insight about the concept of Management by Objectives (MBO). They argue that business organizations must maintain competitive edge through a goal oriented approach. Drucker points out that managers fail to utilize company vision and mission statement for problem resolution and business challenges (Behn, 2003: Pg 587). Current work activities are needed to be completed in order to achieve high levels of excellence and performance. This approach can be disastrous since it results in work environment disruptions. Hewlett-Packard was the first organization to actively implement and apply the concepts of MBO. Each department worked in coordination with each other in order to enhance organizational performance (Behn, 2003: Pg 587).
Goal setting was considered to be the panacea for organizational problems. Extensive documentation was used to provide clear and precise instructions to the work force. Flowcharts were used in order to guide the work force towards accomplishing targets and aims. MBO seeks to implement a dynamic and proactive management philosophy. Its purpose is to equip managers with tools that enable to make accurate forecasts and predictions in the business environment. It focuses on individual achievement and success as an indicator of organizational excellence and performance. MBO utilizes performance based approach in order to ensure high levels of efficiency and effectiveness. New projects can be planned in a systematic and methodical manner. It can also be utilized as a method for obtaining information about the success of any business strategy.
Basic Principles
MBO seeks to decentralize the entire organizational process. It seeks to create agile, robust, and flexible management processes. Employees are empowered in order to participate in the decision making process. A consensus is usually developed through active participation in order to ensure practical implementation of new projects. Management conducts extensive reviews about organizational strengths, weaknesses, threats, and opportunities (Dinesh & Palmer, 1998: Pg 364). Assessment instruments are devised in order to improve expertise and competencies of employees. Management must also have contingency plans to respond to unforeseeable circumstances. MBO is a multidirectional and multifaceted strategy that seeks to optimize all business and management processes. Organizational goals must be synchronized and harmonized to achieve maximum success. Time management becomes a crucial and valuable element of the entire process. Employees are advised to set up priorities in order to manage time in a smart and prudent manner. Large tasks are divided into smaller tasks in order to ensure proficiency and reliability in the work process. MBO also utilizes the “SMART” approach towards business and management processes. Specific, measurable, achievable, realistic and time-related are the major principles (Dinesh & Palmer, 1998: Pg 365). MBO provides instructions to employees regarding the details of the work process. Employees are given high levels of autonomy and independence in accomplishing the organizational objectives. This creates high levels of interest and passion since employees have a personal stake in the development of the organization. They implement their own mini plans which are crucial for individual and organizational growth. Employees also learn that their individual growth is directly related to the organizational growth.
Advantages
Management by Objectives (MBO) seeks to create flexible, agile, and reliable business processes. This is accomplished by providing employees with high levels of autonomy and independence. The work force seeks to apply creative and innovative solutions in order to resolve bottlenecks. They also have an excellent understanding of job duties and tasks. MBO helps to stimulate the work force by increasing their organizational commitment and job satisfaction (Schermerhorn & Campling, 2004: Pg 45). Periodic assessments and appraisals help to integrate and coordinate the efforts initiated by the work force. Superior levels of communication and association are also witnessed between upper management and work force. MBO also creates intelligent and simple targets that are easy to attain by the work force. It helps to reduce or mitigate work force disruptions in a systematic and methodical manner. Organizations also witness an increase in productivity and output.
Disadvantages
MBO can constraint the ability of organizations to restructure and revitalize their business processes. It can place undue importance to targets while neglecting strategic management and business principles. External and internal environmental variables might be neglected during strategy formulation and creation. The results could be catastrophic for the business organization in terms of disorder and chaos. The inability to analyze the external environment can cause a number of problems. Sluggish production, staff shortages, poor resource allocation, and ambitious goals might limit the productivity and output of the business organization (Davidson & Griffin, 2000: Pg 98). MBO also creates assessment instruments that utilize idealistic benchmarks for appraisal and evaluation. It fails to recognize the unique and diverse abilities of employees. It creates an image of a “perfect” employee that has a set of common attributes and traits. Business hurdles are not tackled in a smart and prudent manner. Technology assimilation, budgetary allocation, resource allocation, planning procedures, and business environment fluctuations are not conducted in an effective manner. Ad hoc planning and organization through the MBO approach can cause severe problems in the work process. Employees might be unwilling or unable to accomplish business objectives. They might seek to subvert the objectives of the organization due to resentment and frustration.
Success of MBO
MBO is a successful business methodology which can produce tangible and intangible benefits. However it is crucial to understand that it is not exclusive criteria for success and prosperity. It needs to be used by adopting a proactive and dynamic approach. It should be implemented in coordination with other tools and methods. Management should conduct an appraisal of the business environment. They should set up accurate and realistic goals. The focus should be on utilizing organizational strengths in overcoming weaknesses. Assessment instruments should be developed in order to monitor and audit the entire process. Employees must be given high levels of independence and autonomy in order to resolve business problems. MBO can be successful if it is applied in a systematic and methodical manner (Hersey & Blanchard, 1998: Pg 102). A consensus should be developed regarding business objectives and targets. Innovation and creativity should be promoted and practiced in the work environment. Organizations must have decentralized and agile management processes. Job tasks should be specific in order to remove ambiguities during the work process. The work environment should seek to develop high levels of collaboration and cooperation. This will produce superior business outcomes that can be utilized for organizational success and growth. MBO is successful if the independent components of organization are focusing on common goals. A multidirectional and multifaceted strategy will enable the organization to augment productivity and output. Management must utilize a proactive strategy in order to estimate and calculate fluctuations in the business environment.
Conclusion
Managers need to be effective and efficient in accomplishing organizational goals. They need to implement smart and prudent strategies that improve productivity and output. Management by Objectives (MBO) is an approach that utilizes performance and goals as the means to induce change inside organizations. It seeks to create decentralized, agile, and flexible business structures. The work force is empowered with independence and autonomy in order to carry out job duties. The organization is only concerned with specifying the job details. The work force is provided with the incentive to develop mini plans to accomplish goals. MBO stimulates the work force by increasing their organizational commitment and job satisfaction. It also creates a performance appraisal system which can be used to develop skills and competencies. Time management is an essential element of MBO. Job duties are performed in a timely and reliable manner. Difficult tasks are broken down into smaller ones in order to achieve efficiency and effectiveness. However MBO also has a number of disadvantages for organizational performance. The failure to properly plan and organize goals can lead to work process disruptions. Work team conflicts can erupt over the definition and description of roles and responsibilities. MBO might be implemented in an ad hoc manner that can cause disorder and chaos in the work environment. Management might also over emphasize the use of performance and goals as a means to induce change. A successful MBO strategy should be organized and planned. It should take into account the external and internal variables of the business environment. Successful plans will focus on restructuring business and management processes. Organizational strengths should be utilized in order to overcome weaknesses.
References
Behn, R.D. (2003), ‘Why measure performance? Different purposes require different measures’, Public Administration Review, 63:5, 586-606
Dinesh, D. & Palmer, E. 1998, ‘Management by objectives and the balanced scorecard: will Rome fall again?’, Management Decision, vol. 36, iss. 6, pp. 363-369.
Schermerhorn, J.R., Campling, J., Poole, D. & Wiesner, R. 2004, Management: An Asia-Pacific perspective ,John Wiley and Sons Australia, Milton, QLD
Davidson, P., & Griffin, R. W. (2000). Management: Australia in a global context. Milton, QLD: John Wiley & Sons Australia Ltd.
Hersey, P., & Blanchard, K. H. (1998). Management of organizational behaviour: utilizing human resources. (5th ed.), Englewood Cliffs: NJ. Prentice-Hal, Inc.