The first time the term management by objectives (MBO) was widely used was in Peter Drucker's book The Practice of Management in 1954. Since then, many companies have attempted to implement such a concept. There have been proponents and critics of the idea that such a program can improve operations.
Management by objectives can be defined as a managerial process in which managers and employees join in pursuit of specific, mutually agreed on goals of limited duration, through a plan of action that is monitored in appraisal sessions following mutually determined standards of performance. 1
The process
It is clear that there are several steps involved in this process. First, at each level within the organization, manager and subordinate agree on company and personal objectives for the subordinate for a specified period of time, usually a year. These objectives should be specific, defined in measurable terms, linked to the goals of the company, reviewed periodically, quantifiable, and changeable as conditions warrant. Experts are divided on whether weights should be assigned to the various objectives; doing this can provide a valuable guide to how an employee should spend his or her time.
Next, the subordinate prepares a plan of action, which the manager may review. At the end of the set time period, both manager and subordinate review the progress made toward achieving the objectives. This is the formal appraisal session, though periodic reviews during the year are desirable. The cycle is then repeated.
Does it work?
A review of the literature indicates support, though not conclusive proof, for the effectiveness of MBO. It appears from past efforts that the less sophisticated the research approach, the more likely the study is to show MBO is effective. It seems to be more effective in the short term (less than two years) than over a longer period, although most experts agree it takes two to five years to implement it fully in an organization. It must be noted, however, that the longest study available was only over a three-year period. Neither is it clear to what extent a lack of long-term results came from reduced commitment once the initial excitement of the program wore off. MBO also seems to be more effective in the private sector than the public sector and in organizations removed from direct contact with the customer. Yet, while there are studies of its effectiveness in hospital settings, there are no studies of its results in the hospitality industry.
There does seem to be general agreement that setting goals improves performance. It may be, then, that the failure to prove MBO successful comes from poor implementation of the concept rather than from the concept itself. Properly implemented, it can reduce the ambiguity employees may feel toward what is expected of them, promote communication between superior and subordinate, and focus efforts toward the goals considered important in the company.
On the negative side, MBO can attempt to over-quantify job objectives and ignore other important aspects that may be difficult to measure objectively, such as discretion and judgment. By emphasizing results over behavior, it can lead employees to meet individual objectives through behavior that may be negative. A waiter, for example, may seek to meet the objective of wine sales by using high-pressure sales techniques that offend customers. There is also the chance that employees may ignore areas for which objectives have not been set.
- 1310 reads
