Management by Objectives Motivating employees seems to be a challenge for managers – Discuss the advantages and disadvantages of the MBO program and provide at least one example to support your discussion. Goal-Setting Theories have evolved since the 50s and have an impressive documented literature. The Goal-Setting Theory addresses the issues that goal specificity, challenge, and feedback have on performance (Robbins, 2009, p185). Setting goals and motivating employees are always an important issue for a manager, however in certain cases it is difficult to make it operational.A more systematic way to utilize goal setting is with the management by objectives program (MBO), which introduced the system of SMART method of goals that are specific, measurable, achievable, realistic and tangible. MBO itself was first outlined by Peter Drucker in 1954 in his book “The Practice of Management”, in which he highlighted the principles of MBO: cascading of organizational goals and objectives, specific objectives for each member, participative decision making, explicit time period, performance evaluation and feedback.

The concept by Peter Drucker can be found here: The 5 step MBO process (Drucker, 1954, The Practice of Management) As further detailed by Robbins (Robbins, 2009, p187-188) the organization’s overall objectives are translated into specific objectives for each succeeding level (divisional, departmental, individual) in the organization (Cascading of objectives (Robbins, 2009, Organizational Behavior, p188).Because all levels participate in setting their own goals this program can work both from the “top down” and also from the “bottom up”, which at the end results in a hierarchy of goals and objectives among the different levels. Indeed, Management by Objectives can be a very efficient tool for management inefficiency when objectives are known, however as Drucker later in the 90s highlighted in an interview, in reality 90% of the time objectives are not known. MBO systems differ greatly. Some are used for the organization as a whole; others are prepared for only sub-units.Methods and approaches used by managers can vary also significantly, for instance “in the US the emphasis appears to be more on human needs and motivation and increasing subordinates’ participation in setting objectives while in the UK, MBO is used mainly for corporate strategy and planning” (Martin Hahn, 2007:1). Effective use of MBO depends on every manager having very clearly defined objectives.

These objectives must also be part of the contribution to other objectives of the company.The important thing is to ensure that the individual’s objectives are related to the common goal of the organization. Although the method Management by Objectives was largely used in the 60s and 70s, it needs to be highlighted that it is not the only method and like any process or tool it also has its advantages and disadvantages which are worth to be considered before used. Advantages • Employees are involved in setting of objectives, thus their involvement improves communication and morale • Collective contribution toward goals, motivation for team-work All levels have clear idea on their goals and on the work that needs to be done to achieve these objectives, thus proposals on improvements can come from all levels • Goals are clearly specified and measurable, thus they seem more approachable as well • Commitment toward achieving unit or company objectives • Continuous feedback on performance and monitoring • Feedback and monitoring can serve as a good base for staff appraisal Disadvantages • The introduction of the process needs time • Planning and development of clear objectives for all levels can be lengthy Too much paperwork • Difficulties of measuring certain activities/actions • The achievement of certain goals may be at the expense of others • Too ambitious objectives can lead to worker’s frustration • Measuring objectives can sometimes be difficult for second line workers • Some employees/managers do not want to be held responsible for goals forced upon them, it may lead to frustration as well • Goals might be short-term and misleading in case they are not clearly explained • In case there is a lack of involvement or commitment the process can lose its importanceManagement by objectives in the public sector MOB was first emphasized in the public sector during the Nixon administration and focused on the coordination of individual work plans with organizational goals, and these with the budget (Vasu, 1998 Organisational behavior and public management, p290). As an example I could refer to the Texas state government, who initiated the management by objectives program in 1978 and ten years later analyzed the results (Lee, 1989, An Analysis of the Implementation and Effectiveness of Management by Objectives (MBO) in Texas State Government).As it was already mentioned beforehand this method has also its advantages and disadvantages, but let’s see which they were in this specific case.

On the whole the analysis highlighted that there was a common agreement that the main elements of the MBO program are practiced at managerial levels. Managers pointed out that their units and divisions became goal and result oriented, the work objectives were clearly defined and were put in writing. There were sufficient checkpoints established and opportunities to meet with the superiors to review or fine-tune work goals and that short term objectives were established.Despite the positive feedback, there were weaknesses as well, namely that the approved annual job objectives were not the basis for the development of the annual budget.

Managers highlighted also that the action plan created was not used to identify the time needed for the achieving the different objectives. In addition, long term objectives (longer than 1 year) have not been established. Finally managers realized that monitoring objectives requires an excessive amount of extra time and paperwork. The analysis touched upon communication issues as well.It revealed that communication towards direct superior is good, while 50% indicated that downward or upward communication is not satisfactory. Besides, access to information beyond their direct work situation appeared to be a problem.

A high percentage of employees indicated that they got more information from informal channels than they preferred, however the information they needed was not always available or even arrived late. All in all, managers felt that productivity became higher and also the quality of work is high.On one hand high satisfaction was expressed in participation in decision-making, but on the other hand employees were less content with chances for advancement and promotion. Evaluation The aim of MOB is to coordinate the decisions of all the different levels of a company. Such an approach is essential to ensure that all workers are heading in the same direction. For reviewing performance or the set objectives a regular appraisal system can be used, where managers and workers meet and discuss whether the set objectives were met.

As an end result it also implies the setting of new targets. Although in certain organizations (e. g. knowledge based enterprises) or for certain objectives it can work effectively, MBO has been discarded in many organizations because it can limit management thinking. Once certain targets are set, managers may only focus on these areas of their job and may neglect other business opportunities which may come up later on, thus resulting in opportunity loss. Given the increasing speed of change targets can quickly become out of date, which limits the value of the system.