Everything you need to know about the merits, demerits, advantages, disadvantages, benefits and weaknesses of Management by Objectives (MBO).
Management by objectives lays emphasis on result-oriented and participative style is basically a simple approach to management. Successful managers all over the world, whether in industry, defence, government, or educational institutions have unconsciously practiced the essence of management by objectives.
Management by objectives is a system which makes the organisation function more effectively by bringing about more vitality and personal involvement of the people in the hierarchy.
Management by objectives provides for the maintenance and orderly growth of the organisation by means of a system of what is expected of everyone involved and measurement of what is actually achieved.
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Some of the merits of Management by Objectives are:-
1. Incentive for Subordinates 2. Improvement in Communication Network 3. Better Management of Resources and Activities 4. Encourages Innovations 5. Minimises Ambiguity 6. Self-Control 7. Clarity of Key Result Areas-KRAs
8. Easier to Implement Change 9. Realistic Goal Setting 10. Fostering a Sense of Commitment 11. Career Advancement of Employees 12. Nurturing Creativity 13. Streamlining the Organization 14. Improving Motivation and Morale 15. Bias-Free Appraisal 16. Inbuilt Concept of Self-Control.
Some of the demerits of Management by Objectives are:-
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1. Poor Planning of the Programme 2. Lack of Proper Training 3. No Follow-Up the Superior 4. To Introduce Inflexibility in the Organisation 5. More Pressure on Employees 6. Wastage of Time 7. Wastage of Valuable Resources
8. Incomplete Support of Top Management 9. Difficulty in Objective Setting 10. More Importance to Short-Term Objectives 11. Lack of Skilled Staff 12. Lack of Subordinates’ Participation 13. Lack of Conceptual Clarity 14. Goal Setting Constraints 15. Time Consuming Concept
16. Too Much Documentation Work 17. Instability of Environment 18. Poor Employee-Employee Relation 19. Goal Displacement 20. Structural Change 21. Attitudinal Handicap 22. Support Infrastructure 23. Empire Building Tendencies 24. Limited Applicability.
Advantages and Disadvantages of MBO
Merits and Demerits of Management by Objectives (MBO) – With Measures
Merits of MBO:
An organization can benefit in the following ways by introduction of MBO.
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Following are some of the advantages:
(a) Provides result oriented planning wherein goals can be easily verified and translated into actions. It contributes to improved productivity and better performance.
(b) It helps subordinates to get positive guidance from the superiors and superiors get willing cooperation from their subordinates.
(c) The possibility for the various department working at cross purposes is very less.
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(d) Contributes for effective management by providing lot of clarity in the objectives that is necessary to achieve them.
(e) Forces the management to plan the activities in a systematic way.
(f) Facilitates objective performance appraisal. As the goals themselves become the standards against which the actual performance is measured, MBO system itself acts as an effective performance appraisal tool.
(g) Contributes for the installation of a democratic and participative setup. The interaction that takes place between the superiors and subordinates is a good sign of human resource development in the organization.
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(h) Provides personal satisfaction to the subordinates and makes them more committed towards accomplishment of goals.
(i) Provides ample scope for flexibility and adaptability.
Demerits of MBO:
In spite of many advantages, MBO may not be considered as a panacea for all the evils of the organization.
It may not yield the desired results in some organizations due to the following reasons:
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1. Lack of top management involvement and support. For an MBO programme to succeed, it must have the complete support of top management.
2. Lack of understanding of the philosophy behind MBO. MBO programme in some organizations face the resistance of employees because it is imposed on them as ‘control device’ to curb their freedom.
3. Difficultly in setting realistic and meaningful objectives. Some jobs and areas of performance cannot be quantified and hence are not amenable for objective evaluation.
4. Increased time pressure. To use MBO programme, manager must learn to establish priorities and use the time effectively.
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5. Lack of relevant skills. Managers may not have the requisite skills for identifying objectives, communication and interpersonal interaction such as counseling and giving and receiving feedback.
6. Lack of individual motivation. The rewards and incentives for superior performance have to be specified clearly. Ambiguity or uncertainty regarding the outcome of the efforts is one of the reasons for the non-performance.
7. Poor integration with other systems. The objective setting and review phases must be performed in conjunction with other activities such as budgeting, forecasting and the like. Often managers are neither taught how to set the objectives nor familiarized with the various plans and policies of the organization. In such cases, each department ends up going its own way, and the results are counterproductive to the overall organization.
8. It creates frustration in a manager because when it is not implemented properly there is utter confusion and management is not able to adapt even to the old system.
9. It takes time and effort and involves too much paper work.
10. Its emphasis on measurable objectives can be used as a threat by overzealous managers.
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Making MBO More Effective:
MBO is not a simple process that can be easily implemented it requires a change in the culture and environment of an organization. In spite of its limitations, it is a very dynamic way of managing an organization.
Therefore, the following are the measures for making it more effective:
(i) The purpose of MBO should be clearly defined. The concept of MBO differs according to the purpose for which it is used.
(ii) Top management support is essential for successful implementation of MBO.
(iii) Proper training of concept, philosophy and need for MBO should be imparted. Training in interpersonal relations is also necessary.
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(iv) Active participation of subordinates in goal setting and commitment in executing the same is to be ensured.
(v) Feedback for self-control and self-direction is to be obtained and analyzed periodically.
(vi) Periodic review of goals and modification of the goals in the event of necessity is another step towards effective implementation of MBO.
Merits and Demerits of Management by Objectives (MBO)
Merits of Management by Objectives (MBO):
1. Management by objectives may become a powerful tool in gaining mutual commitment and high productivity for an organization.
2. MBO keeps company objectives/targets constantly in view.
3. It gives meaning and direction to people in an organization.
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4. It coordinates the efforts of various departments of an organization.
5. It provides motivation to people because they work on objectives decided with their consent.
6. It prevents flittering away of efforts and money.
7. It allows greater consistency in decision making.
8. It forces management to think ahead in respect of its short term and long-term goals.
9. It helps an enterprise to focus on the areas where it is vital that management should be effective and isolate the problems preventing progress towards company objectives.
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10. It assists managers in their own self development and leads to an analysis of training requirements if subordinates are to improve their performance in future years.
11. MBO leads to a better understanding between superiors and the subordinates.
Demerits of Management by Objectives (MBO):
O.P Kapoor and S.D. Narang are of this opinion that “although MBO has importance in the organisation of business but because of the following difficulties its implementation is difficult.
The difficulties are as follows:
(1) Poor Planning of the Programme:
One of the important weaknesses often seen in MBO is the poor planning of the programme prior to implementation. The implementers must know how to involve all levels of management and how to take support from them. If possible, they must be well-trained.
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(2) Lack of Proper Training:
The supervisors to whom the work is entrusted are not so well trained and they lack knowledge and experience. This creates difficulties in the implementation of the programme. Many are prone to sit down with the sub-ordinate, dictate the goals and targets with no input permitted from the subordinate, and then demand they be met in a specified time.
Whether they are realistic goals or not does not enter the picture. No consideration is given to any outside factors over which the sub-ordinate has no control or influence. In this type of environment, there can be no two-way communication because of the outer-imposed objective. This will destroy morale, initiative and good results faster than anything else in an enterprise.
(3) No Follow-Up the Superior:
No follow-up by the superior at the appropriate time is another hurdle in the successful implementation of MBO. The superior must meet and talk with the sub-ordinate at the appropriate time. The sub-ordinate should be prepared to tell to the bosses exactly what has been accomplished and how. If the superior delays the meeting, the sub-ordinate will think that this is just one of those management programmes which needs no proper attention. Job efforts will be relaxed since the superior does not appear to attach much importance to a review of results. This may affect the performance in a negative way.
(4) To Introduce Inflexibility in the Organisation:
MBO may tend to introduce inflexibility in the organisation. As the goals are set after every six months or one year, the superior may not like to modify them in between because of fear of resistance from the sub-ordinate. There may arise a need to revise the goals at lower levels to achieve the long-term objectives of the enterprise. The manager must handle such a situation properly. Some managers attach more emphasis and importance to goal setting. But they should remember that they are also to perform other functions of management like organising, directing and control.”
Making MBO Effective and Usable:
Howard R. Brown in this book “Social Responsibilities of the Businessmen” has written that -“In spite of various difficulties and short-comings in management by objectives, it is an efficient way of managing as it emphasizes in practice the setting of objectives as the logic of planning and control.
In order to achieve all the merits of managing by objectives, it is essential that is should start at the top of the organisation. The active participation of top management to this programme is essential for its implementation. If the top manager uses the objectives as an instrument for managing his sub-ordinates, this practice will be followed down in the organisation.”
Further, he has emphasised that goals should be set by participation with the sub-ordinate. There should be face to face communication between the superior and the subordinate for setting the goals, discussing the subordinate’s problems and for reviewing his performance. Thus, there must be effective two-way communication in the organisation.
Lastly, a greater degree of decentralisation of authority is required for the success of MBO. The sub-ordinates who have accepted the challenging assignments through discussion with the superior, must be given adequate authority to accomplish their goals. MBO will not work if the manager is not willing to delegate sufficient authority to the sub-ordinates as the sub-ordinates will not be willing to accept new assignments and they will resist the setting of clearly defined goals.
Merits and Demerits of Management by Objectives (MBO)
Merits:
1. MBO helps and increases employee motivation because it relates overall goals to the individual’s goals; and helps to increase an employee’s understanding of where the organization is and where it is heading.
2. Managers are more likely to compete with themselves than with other managers. This kind of evaluation can reduce internal conflicts that often arise when managers compete with each other to obtain scarce resources.
3. MBO results in a ‘means ends’ chain. Management at succeeding lower levels in an organization established targets which are integrated with those at the next higher level. Thus, it can help insure that everyone’s activity is ultimately aimed toward organization’s goals.
4. MBO reduces role conflict and ambiguity. Role conflict exists when a person is faced with conflicting demands from two or more supervisors; and role ambiguity exists when a person is uncertain as to how he will be evaluated, or what he has to achieve. Since MBO aims at providing clear targets and their order or priority, it reduces both these situations.
5. MBO provides more objective appraisal criteria. The targets that emerge from the MBO process provide a sound set of criteria for evaluating the manager’s performance.
6. MBO forces and aids in planning. By forcing top management to establish a strategy and goals for the entire organization; and by requiring other managers to set their targets and plan how to reach them.
7. MBO identifies problems better and early. Frequent performance review sessions make this possible.
8. MBO identifies performance deficiencies and enables the management and the employees to set individualized self-improvement goals and thus proves effective in training and development of people.
9. MBO helps the individual manager to develop personal leadership, especially the skills of listening, planning, counselling, motivating and evaluating. This approach to managing instills a personal commitment to respond positively to the organization’s major concerns as well as to the development of human assets. Such a manager has a far greater chance to move ahead within the management hierarchy than the non-MBO type.
Demerits:
1. It takes a great deal of the manager’s time and energy form. An individual becomes so enmeshed in performing assigned functions that he often loses sight of the goal, the reason for performance.
It has been called “the activity trap” by Odiorne. It requires a great deal of investment of the top management’s time and effort before it arrives at realistic targets and reviews the performance.
2. MBO is not a panacea for all organizational ills. Those executives who have been involved very often find it difficult to apply MBO concepts to their own work habits. They find it hard to think about the results of work rather than the work itself.
They tend to overemphasize goals that are easy to quantify, sometimes forgetting that workers often behave almost like children at play — when the game no longer challenges, interest is soon lost.
3. In some areas, such as cutting costs or increasing sales, measuring performance is a straight forward and more or less objective matter. But in many other areas, such as subordinate development, appraising performance can be an acute problem.
4. Many times neither the managers know the rationale and value of MBO, nor are the subordinates clear about the goals. This unnecessarily becomes more exasperating.
5. There is sometimes a “tug of war” in which the subordinate tries to set the lowest targets possible and the supervisor the highest.
6. MBO can lead to unrealistic expectations about what can and cannot be reasonably accomplished. Supervisors and subordinates must have very good “reality checking” skills to use MBO appraisal methods. They will need these skills during the initial stage of objective setting, and for the purposes of self-auditing and self-monitoring.
Unfortunately, research studies have shown repeatedly that human beings tend to lack the skills needed to do their own “reality checking”. Nor are these skills easily conveyed by training. Reality itself is an intensely personal experience, prone to all forms of perceptual bias.
Merits and Demerits of Management by Objectives (MBO)
Merits of MBO:
The following are the merits and advantages of MBO:
1. MBO helps managers allocate organizational resources and plan activities effectively. Thus, MBO facilitates better management.
2. MBO identifies the key result areas where organizational efforts are needed.
3. The biggest advantage of MBO is that is encourages personal commitment to goals by employees. The MBO program gives employees the responsibility of setting their own objectives, gives them the opportunity of having their ideas included in the planning program, provides them a clear picture of their area of discretion or authority and facilitates assistance from superiors for accomplishing their goals.
4. MBO brings about personal satisfaction by allowing employees to participate in setting their objectives and by appraising their performance in a rational manner.
5. The MBO process stimulates organizational change, provides the framework and guidelines for planned change and helps managers overcome resistance to change (by employees). Thus, the MBO process helps top management initiate, plan, direct and control the direction and speed of change.
6. Since MBO forces management to clearly state objectives, it deals to the development of effective controls. Management control involves the measurement of results and taking corrective action to check deviations from plans. A clear set of verifiable goals helps managers determine what should be measured and what action should be taken correct deviations.
Some of other merits of MBO are listed below:
1. It helps managers coordinate goals and plans.
2. It helps managers clarify priorities and expectations.
3. It co-ordinates the efforts of various departments of an organization.
4. It allows greater consistency in decision-making.
5. It helps an enterprise focus on areas where effective management is crucial for the organization.
6. It improves communication between superiors and the subordinates and increases understanding between them.
Demerits of MBO:
The following are the major disadvantages and demerits of MBO:
1. It takes too much time and effort and involves too much paper work.
2. It necessitates training of managers.
3. It tends to fatter without strong, continual commitment from top management.
4. Its emphasis on measurable objectives can be used as a threat by overzealous managers.
5. It can lead to considerable frustration if one manager’s efforts to achieve goals are dependent on the achievement of goals of others within the organization. Group goal setting and flexibility are required to solve this type of problem.
Making MBO Effective:
The following are the prerequisites for implementing the MBO programme and making it effective are discussed below:
1. The degree to which the MBO program is likely to succeed depends on the extent of top management support it receives. In order to keep the MBO program alive and fully functional, the top management must provide continual support to the subordinates.
2. In addition to setting realistic goals, managers must carry out regular performance reviews and provide feedback to subordinates. The success of an MBO program essentially depends on the participants knowing where they stand in relation to their objectives.
3. To be successful MBO programs; should ensure commitment and participation in the MBO process at all levels of the organization.
Merits and Demerits of Management by Objectives (MBO)
Merits of MBO:
Management by objectives calls for regulating the entire process of management in terms of meaningful, specific, and variable objectives at different levels of hierarchy. Management by objectives moulds planning, directing, and controlling in a number of ways. It stimulates meaningful action for better performance and higher accomplishment.
It is closely associated with the concepts of decentralisation because decentralisation cannot work without the support of management by objectives. Thus, management by objectives is being increasingly recognised not merely as a philosophy of management, but also as a system, which aims at synchronising the objectives of the individuals with the objectives of the organisation. When applied consciously and systematically, it helps to overcome many of the chronic problems of managing managers and professionals.
It helps in:
1. Improvement in productivity due to the fact that management team concentrates on the important task of reducing costs and harnessing opportunities rather than dissipating energies on less important matters.
2. A greater sense of identification by the management team with the objectives of the enterprise where in control are reckoned as tools of ‘self-controls’ rather than devices to be used against managers.
3. Improved communication and organisational structure, which helps in locating weak and problem areas.
4. Serving as a device for organisational control and integration.
5. Providing a realistic means of analysing training needs and opportunities for growth on the basis of measurement of performance against accepted standards.
6. Measuring the true contributions of managerial and professional personal.
7. Defining the common goals of people and organisations and measuring individual contribution to them.
8. Enhancing possibility of coordinated efforts and teamwork.
9. Providing solutions to the key problems and defining major areas of responsibility for each person in the organisation including joint or shared responsibilities.
10. Gearing the organisation for achieving the desired results.
11. By eliminating the needs for people to change their personalities, as well, for appraising people on the basis of their personality traits.
12. By providing a means to determine each manager’s span of control.
13. By offering an answer to the key question of salary administration.
14. By aiding and identifying potential for advancement and also finding out promotable people within the organisation.
Demerits of MBO:
The limitations which make the implementation of MBO difficult are discussed as follows:
One of the major weaknesses often seen in MBO is poor planning of the program prior to implementation. Implementation personnel must be well trained. They must know how to involve all levels of management and obtain their support.
There is generally lack of training and knowledge on the part of the supervisor in implementing the program. Many are prone to sit down with the subordinate, dictate their goals and targets with no input permitted from the subordinate, and then demand that they be met in a specific time.
Whether they are realistic goals or not does not enter the picture. No consideration is given to any outside factors or influence. In this type of environment, there can’t be two-way communication because of the outer imposed objectives. This stab at MBO will destroy morale initiative and good results faster than anything else in the enterprise. Therefore, there must be proper training and orientation of the personnel responsible for implementation of MBO program.
Lack of follow-up by the superior at the appropriate time is another hurdle in the successful implementation of MBO. In the practice, superiors have many things to do it is most easy to procrastinate. The superior must get along with the subordinates and they must be prepared to tell the boss exactly what has been accomplished and how.
If the superiors delays the meeting, the subordinate will think it is just one of those management program which just happens formally at the initial stage and has now gone down to the drain. This problem may also be due to instability of personnel in top position which becomes a barrier to the success of MBO.
People, who are not sure of their own positions, are likely to be committed and the concept of MBO goes out of the organisation with the departure of the concerned personnel. Consequently the job efforts of subordinates probably will be relaxed since the superior does not appear to attach much importance to a review of results. Needless to say, this may affect their performance in a negative way.
Management by objectives may tend to introduce inflexibility in the organisation. Since goals are set after every six months or one year, the superior may not like to modify them in between because of fear of resistance from the subordinates. They may be required to revise the goals at lower levels to achieve the long range objectives of the enterprise. The managers give more emphasis on goal setting. But they should remember that they are also to perform other functions of management like organising, directing, controlling, etc.
Making MBO Effective:
Despite various difficulties and shortcomings in management by objectives, it is an effective way of managing as it emphasises in practice the setting of objectives as the logic of planning and control. In order to achieve all the advantages of managing by objectives, it is essential that it should start at the top of the organisation. The active participation of top management in this program is essential for its implementation. If the top managers uses the objectives as an instrument for managing subordinates, this practice will also be followed constructively in the organisation.
It is essential that goals should be set in participation with the subordinate. There should be face- to-face communication between the superior and the subordinates for setting the goals, discussing the subordinates’ problem, and for reviewing the performance. Thus, there must be effective two way communication in the organisation.
Moreover, a greater degree of decentralisation of authority is required for the success of the MBO. The subordinates, who have accepted the challenging assignment along with the superior, must be given the adequate authority to accomplish their goals. MBO will not work if the manager is not willing to delegate sufficient authority to the subordinates as the subordinate will not be willing to accept new assignments and they will resist the setting of specific goals.
Management by objectives is an approach to management planning and evolution in which specific targets for a certain period of time are established for and by each manager. Their objectives are made to interconnect with the overall goals of the organisations. These established goals then become benchmarks for managerial and organisational measurement.
It is a systems approach to managing and directing the organisation and determines where they want to take up the organisation. It is a process of encouraging the personnel to contribute their maximum for achieving the overall goal of the organisation. MBO is an evaluation mechanism and is also known as appraisal by result.
Merits and Demerits of Management by Objectives (MBO)
Merits of MBO:
The following are the merits of the MBO.
Alternately we can say the MBO is important because of the following reasons:
(1) Incentive for Subordinates:
Every employee wishes to gain prominence in the organisation. If this wish of the employees is fulfilled, they feel encouraged, undoubtedly such employees work better. Under the MBO this wish of the employees is sought to be fulfilled by making them partners in the important task of setting objectives for the organisation.
Not only this but they are also given complete freedom in the choice of their technique of work and taking other decisions. Therefore, it can be said that MBO does encourage the subordinates. It certainly has a positive effect on the results in the organisation.
(2) Improvement in Communication Network:
A good communication is always the first need of an organisation. Under the MBO right from the setting of the objectives down to the accomplishment of the job there are regular meetings between the officers and the subordinates. This helps in the establishment of a high standard of communication network. In other words, there is complete freedom in the exchange of ideas.
(3) Better Management of Resources and Activities:
Under the MBO, apart from the setting of the objectives in an effective manner, sufficient resources are also made available for their accomplishment. The available resources are distributed in a manner as to help the completion of all the activities in time. An effort is made to ensure that no job remains incomplete for want of resources, and at the same time no resource should remain unutilised.
(4) Encourages Innovations:
Under the MBO, more emphasis is laid upon the results in order to achieve the objectives laid down rather than the methods to achieve those objectives. The subordinates are allowed complete freedom in the choice of methods of work performance. In order to show better results the subordinates try to find out new work methods. In this way research is (innovation) encouraged. This benefits both the employees and the employers.
(5) Minimises Ambiguity:
Since all the people working in the organisation has a participation in setting the objectives, all of them know their rights and responsibilities. Everybody knows who is the boss and who is the subordinate. Hence, under the MBO there is more clarity about the rights, responsibilities and mutual relationship.
(6) Self-Control:
Under the MBO, there is no imposed control. Rather self-control the order of the day. There should be no hesitation in accepting the fact that the self-control is far better than the imposed control. The all important question is how the MBO is in a position to bring about this change. Under the MBO, emphasis is laid upon the subordinates’ participation. This participation gives rise to the feeling of attachment. This leads to the automatic self-control.
Thus when the employees are on their job, there is no need of any external control. In fact, the employees willingly impose a sort of self-control on themselves. This gives good results to the organisation and the employees get job satisfaction.
(7) Clarity of Key Result Areas-KRAs:
Under the MBO, key result areas are determined. Key result areas are those activities which require more attention. By doing so the managerial action gets a definite direction. It becomes clear as to how the success of certain activities / jobs can ensure the success of the enterprise.
(8) Easier to Implement Change:
Every organisation gets affected by various internal and external factors. It is necessary to establish coordination among these factors. To achieve this coordination many changes have to be introduced in the organisation. For example- when new methods of production are discovered, they have to be introduced in the organisation. Often it has been observed that the employees wish to continue working with their old work methods. They oppose any change in the method of their work.
However, the important thing is to introduce the change and at the same time avoid the workers’ opposition. By introducing the MBO, the implementation of change becomes easy. Its chief reason is the freedom allowed to the employees, they themselves continue finding new work methods. By doing so they become dynamic and innovative. They feel glad in introducing changes rather than opposing them.
Demerits of MBO:
Management by objectives has many advantages, but it has some limitations / problems / weaknesses. Their study is equally important.
The chief limitations/problems/weaknesses of the MBO are below:
(1) More Pressure on Employees:
Under the MBO, pressure is exerted on all the levels of the organisation for the attainment of the objectives. By doing so the employees do not feel themselves free. They remain under pressure all the time. This pressure affects their work-efficiency.
(2) Wastage of Time:
Under the MBO, there are regular periodic meetings and exchange of reports. The managers have to spend a lot of time in attending the meetings and preparing the reports. Some of the major activities get neglected and there is some sort of hindrance in the attainment of the objectives. Hence, it can be said that the introduction of the MBO results in the wastage of time.
(3) Wastage of Valuable Resources:
The basic concept of the MBO is that involvement leads to commitment. At the first stage it is absolutely right and it yields profit. However, sometimes the employees start giving more importance to their commitment. In such a situation they get impatient to complete their job. Their impatience leads to the wastage of resources.
(4) Incomplete Support of Top Management:
In an organisation rights flow from the top to the bottom. It means that the top management has the maximum rights. The top managers impose their decisions on the subordinates. They enjoy doing so. On the other hand, under the MBO the involvement of the subordinates increases. Their involvement limits the rights of the top management which is not liked by them. Therefore, the implementation of the MBO gets hindered.
(5) Difficulty in Objective Setting:
The MBO is successful only when the supervisors and the subordinates set the objectives of the organisation keeping in mind each other’s limitations. Generally, it has been observed that the senior officers themselves set the objectives and the subordinates are invited only as a matter of formality.
They are not allowed sufficient times to give their suggestions. Even if they give their suggestions, they are ignored. In this way, the process of setting the objectives gets hindered. The result is that their attainment becomes difficult.
(6) More Importance to Short-Term Objectives:
To take an enterprise to the climax of success, it is important that the long-term objectives and the short-term objectives should be given equal importance. However, under the MBO, it is generally observed that more attention is paid to the short-term objectives as compared to the long-term objectives.
Therefore, the managers remain more worried about the short-term objectives. They want to be successful at any cost in the shortest possible time. Such thinking on the part of the managers proves harmful in the long run.
(7) Lack of Skilled Staff:
The implementation of the MBO is not a simple process. It requires the managers to be proficient psychological specialist. They have to understand the feelings of the subordinates during the period of problems from time to time. They have to remove the problems of the subordinates. But generally it has been observed that the managers are not competent to handle such situations. Consequently, the MBO does get the expected or desired results.
(8) Lack of Subordinates’ Participation:
The success of the MBO depends on the proper involvement of the subordinates. Often it has been noticed that the subordinates do not take any interest in involving with their boss. They are habitual of enjoying the readymade things but under the involvement has to be made to achieve success. Therefore, the MBO can be implemented only in the organisations where the workers do not happen to be shirkers.
Merits and Demerits of Management by Objectives (MBO)
Merits of MBO:
1. MBO helps and increases employee motivation because it relates overall goals to the individual’s goals; and helps to increase an employee’s understanding of where the organization is and where it is heading.
2. Managers are more likely to compete with themselves than with other managers. This kind of evaluation can reduce internal conflicts that often arise when managers compete with each other to obtain scarce resources.
3. MBO results in a ‘means ends’ chain. Management at succeeding lower levels in an organization established targets which are integrated with those at the next higher level. Thus, it can help insure that everyone’s activity is ultimately aimed toward organization’s goals.
4. MBO reduces role conflict and ambiguity. Role conflict exists when a person is faced with conflicting demands from two or more supervisors; and role ambiguity exists when a person is uncertain as to how he will be evaluated, or what he has to achieve. Since MBO aims at providing clear targets and their order or priority, it reduces both these situations.
5. MBO provides more objective appraisal criteria. The targets that emerge from the MBO process provide a sound set of criteria for evaluating the manager’s performance.
6. MBO forces and aids in planning. By forcing top management to establish a strategy and goals for the entire organization; and by requiring other managers to set their targets and plan how to reach them.
7. MBO identifies problems better and early. Frequent performance review sessions make this possible.
8. MBO identifies performance deficiencies and enables the management and the employees to set individualized self-improvement goals and thus proves effective in training and development of people.
9. MBO helps the individual manager to develop personal leadership, especially the skills of listening, planning, counselling, motivating and evaluating. This approach to managing instills a personal commitment to respond positively to the organization’s major concerns as well as to the development of human assets.
Such a manager has a far greater chance to move ahead within the management hierarchy than the non-MBO type.
Demerits of MBO:
1. It takes a great deal of the manager’s time and energy form. An individual becomes so enmeshed in performing assigned functions that he often loses sight of the goal, the reason for performance. It has been called “the activity trap” by Odiorne. It requires a great deal of investment of the top management’s time and effort before it arrives at realistic targets and reviews the performance.
2. MBO is not a panacea for all organizational ills. Those executives who have been involved very often find it difficult to apply MBO concepts to their own work habits. They find it hard to think about the results of work rather than the work itself. They tend to overemphasize goals that are easy to quantify, sometimes forgetting that workers often behave almost like children at play—when the game no longer challenges, interest is soon lost.
3. In some areas, such as cutting costs or increasing sales, measuring performance is a straight forward and more or less objective matter. But in many other areas, such as subordinate development, appraising performance can be an acute problem.
4. Many times neither the managers know the rationale and value of MBO, nor are the subordinates clear about the goals. This unnecessarily becomes more exasperating.
5. There is sometimes a “tug of war” in which the subordinate tries to set the lowest targets possible and the supervisor the highest.
6. MBO can lead to unrealistic expectations about what can and cannot be reasonably accomplished. Supervisors and subordinates must have very good “reality checking” skills to use MBO appraisal methods. They will need these skills during the initial stage of objective setting, and for the purposes of self-auditing and self-monitoring.
Unfortunately, research studies have shown repeatedly that human beings tend to lack the skills needed to do their own “reality checking”. Nor are these skills easily conveyed by training. Reality itself is an intensely personal experience, prone to all forms of perceptual bias.
Merits and Demerits of MBO – With Suggestions
Merits of MBO:
1. Realistic Goal Setting:
Objectives set under MBO are stated to be realistic due to the active involvement of employees charged with the implementation of the said goals. Besides goal set at various hierarchical level are inter linked. These goals are set after deep examination of ground realities. Any error in the goals set are corrected at review meeting. The realistic goals challenge the employees immensely.
2. Fostering a Sense of Commitment:
Employee participation in goal setting exercise inspires a sense of commitment and involvement on the part of employees. It urges them to put their heart and soul into effective translation of objectives into reality.
If the goals/objectives were determined by top management without involving employees, they may develop a sense of alienation. They may not take any care and concern for the goal accomplishment. Hence, MBO is a potent tool to secure the willing commitment of employees.
3. Improving Communication between Superior and Subordinates:
Joint goal setting by superior and subordinates eases the free flow of communication between the two groups. Subordinates accountable for accomplishment express likely constraints and challenges to the superior who, in turn, brings about a conducive work environment for smooth accomplishment of goals by providing resources and infrastructure.
Review meetings create avenue for superior to deliberate on the constraints experienced by the subordinates. Final evaluation meetings provide a platform to reward the performers and to inspire the under performers for better performance in the future. Thus, MBO concept provides a right ambience in all three phases’ viz., goal setting, periodic review and final evaluation for both superiors and subordinates to communicate to each other their views, perception and perspectives.
4. Career Advancement of Employees:
MBO provides window for employees to peep into their inner strength. Periodic review meetings and final evaluation meeting enable employees across the middle and lower levels to know their strength and weakness. Accordingly, they take corrective action to address their inadequacies and to make endeavours to brush up and enhance their strength. This would undoubtedly help them to climb their career ladder slowly and steadily.
5. Nurturing Creativity:
Linking the performance evaluation to goal accomplishment impels them to think creatively and innovatively. Employees under MBO environment are free to try novel methods to reach die goals set for them. The reward given for positive performance causes the employees to constantly think out the path untrodden to reach the destination.
6. Streamlining the Organization:
Organization structure is overhauled thoroughly from top to bottom. MBO exposes weak areas in the organization; removes overlapping of functions, pinpoints the task areas, builds roles and structures around the task areas, facilitates decentralization and eases free flow of communication in all directions. All these cumulatively refine and reform the entire organization.
7. Improving Motivation and Morale:
Participative goal setting, freedom to discuss and deliberate on the issues hindering the attainment of goals, rewarding the top performers, opportunity to correct performance, deficit on the part of under achievers, self-direction and self-control of subordinates etc, serve as effective motivator and morale booster in his goal driven environment.
8. Bias-Free Appraisal:
Superiors and subordinates jointly sit and appraise the performance. No external agency is involved in appraisal activity. Superior has to objectively assess performance in terms of targets fixed bilaterally. Assessment in terms of measurable goals does not allow narrow considerations of casteism, minorities, religiosity, regionalism, ethnicity, racism, sexism, ageism and provincialism. Hence, MBO concept is credited with having inbuilt objective appraisal methodology.
9. Inbuilt Concept of Self-Control:
Subordinates themselves engage in goal setting, performance review and final evaluation. This mechanism provides room for self-evaluation and self-control. When the goal is not reached, they themselves find out speed breakers and performance impediments. They take corrective measures to keep themselves aligned to the goals. This obviates the need for close and tight supervision.
Demerits of MBO:
1. Lack of Conceptual Clarity:
Managers and subordinates concerned are not sufficiently educated about MBO concept before the concept is put in place in the organization. When the philosophy is put into action without doing the spade work of educating all those concerned, it fails to yield the desired result.
2. Goal Setting Constraints:
This concept is found flawed in that it neglects the qualitative goals and long term goals. Sometimes the goals set are set at an unrealistic level. The need to frequently alter the goals in the environment of constant change poses further problem to goal setters. At times, inflexibility stems from blind adherence to the goals without considering the real dynamics in the environment.
3. Time Consuming Concept:
The operationalization of MBO philosophy is attacked on the ground of too much of time consumption of the process involved therein. The consultation of subordinates, quantification of variables, periodic review, review of goals in terms of ground reality, final evaluation, education of employees concerned etc., consume a great deal of time. Moreover, the need to conduct review meetings, consume a lot of productive time of managers.
4. Too Much Documentation Work:
The implementation of the concept is said to entail a lot of paperwork. The preparation of training manual, newsletter, instruction manual, feedback reports, minutes making, review report etc., escalate paperwork. This reduces the effectiveness of MBO.
5. Too Much Pressure on Employees:
MBO concept is supposed to be founded on a reward-punishment psychology. Employees perceive the concept to be a ploy to exploit the workers by having them involuntarily take up excessive workload. Periodic review and final review create complexity among the employees. The underperforming ones are identified, discriminated and penalized. They are put to mental stress by making them undergo remedial training. This may cause psychological scar on the under performers.
6. Instability of Environment:
When the company encounters rapid change due to volatility of environmental variables, this concept is said to be inapplicable or incompatible. The need to revise the goals at frequent intervals and the necessity to modify action plan accordingly leaves the employees concerned demoralized.
7. Poor Employee-Employee Relation:
Poor superior-subordinate relation prevailing in the organization does not allow the concept of MBO to take root. Mutual distrust arising from poor relationship between manager and subordinate strikes at the root of MBO.
8. Goal Displacement:
When the employee focuses too much on operational goals of their team or department, overall goal may not be attained.
9. Structural Change:
Implementation of MBO philosophy calls for drastic structural change. It is incompatible with conservative organizations or family-run business, where employee participation is perceived to be anathema, to practice MBO concept.
10. Attitudinal Handicap:
The success of MBO concept hinges on the involvement and commitment of top management. To put in simple term the positive attitude of managers to the concept is indispensable. If the manager considers it below their dignity to sit with subordinates, this concept would become a flop. Similarly, employees who are used to being directed may not feel confident and comfortable in goal setting exercise and hence, subordinates should be enlightened on the nitty-gritty of MBO concept, before putting it in place.
11. Support Infrastructure:
Subordinates should be provided with prior training and guidelines powers and supplied with infrastructure to empower them to set goals. In the absence of these facilities, it may come a cropper.
12. Empire Building Tendencies:
This concept makes the employees too much focused on his department. They do not care for other departments. As a result, employees of that department feel they are superior to others. This attitude militates against cooperative spirit and spirit of espirit de corps.
13. Limited Applicability:
This concept is mostly applied at shop floor level or at assembly level.
Suggestions to Make MBO Workable:
1. Education about MBO Concept:
All the employees concerned should be theoretically educated about the concept, methodology and objectives intended to be achieved thoroughly, before the installation of the programme.
2. Attitudinal Shift:
Top management should commit itself to the implementation of the concept in true letter and spirit. They should be first convinced of the utility of the philosophy. They should understand that this concept does not intend in any way to usurp the power vested with them but to increase their power manifold by empowering the subordinates charged with turning goals into reality by making them as partners in goal setting exercise. Unless this attitude is ingrained in them, MBO concept may be a fiasco.
3. Preparatory Training:
Being a new concept, it needs to be fully understood by the managers and subordinates. Members should be involved in mock goal setting exercise. Trainers should correct them when they set unrealistic goals. Managers should be trained in goal setting as well as appraisal exercise. Besides, both the groups should be imparted sensitivity training for improving sensitivity to self and to others, and transactional analysis for improving interpersonal relationship. They should be educated about group dynamics.
4. Infrastructure:
MBO programme is reported to take three to five years to yield results. Top management should decentralize its authority; allow adequate time for the employees to acclimatize to MBO environment and allocate adequate financial resources for the implementation of the concept. The responsibility and accountability in this regard needs to be clearly spelt out. It should provide an instruction manual concerning the concept to address the doubts emerging to the employees in the course of its implementation.
5. Feedback:
Superiors across the level have to tightly monitor the programme and provide correct advice to the subordinates in the review meetings to improve their performance. Besides they should inspire them to engage with the concept with a higher commitment. In short, there should be free flow of two way communication prevailing in actual practice.
6. Integration:
MBO programme cannot succeed in isolation. It should be integrated with planning, power distribution, reward system and control system. For example, it should be integrated with the planning process in such a way that the short term goals set under MBO regime do not hurt the long term plans. Managers should be prepared to share powers with the subordinates in goal setting exercise.
They should spell out authority, responsibility and accountability of all concerned with the concept. Similarly, all those involved in the concept should be suitably rewarded for their sincere engagement. Superiors should provide an honest feedback in control aspect of MBO. They should neither, over criticize nor, over laud them. They should inspire the subordinates to get them deeply engaged with the concept.