2.Objectives have hierarchy in that objectives which have wider scope and are relevant for the whole organisation are known as enterprise objectives. These objectives are split into unit level or departmental objectives. Thus, objectives at all levels in the organisation are interrelated and form a network.
3.Short-term and Long-term Objectives: Short-term objectives are those which are sought to be achieved by the organisation in the immediate future, while long-term objectives are those which are aimed to be achieved over a longer period, say five to ten years or even more. However, both are not mutually exclusive and are interrelated.
4.Objectives sometimes may be in conflict with each other as the goals of the various departments at times may clash. Each department considers that its goals are more important. For example, the production goal of low unit cost achievable through mass production may be in conflict with the sales goal of offering high quality goods. Such conflicts have to be resolved amicably.
Process of MBO
Having understood the basic characteristics of the objectives, let us examine the process of MBO. As a process, management by objectives begins at the top of the organisation with the establishment of specific organizational objectives. Subsequently, objectives at various levels down the hierarchy are decided by mutual discussions and consultations by both superiors and subordinates.
The process of MBO includes the following steps:
ӹӹestablishment of goals for the whole organisation,
ӹӹpreparation by subordinates, of specific goals within the framework provided by the superior,
ӹӹjoint discussion of an agreement upon the goals by the superior and subordinate,
ӹӹjoint review of progress at regular intervals in the light of the predetermined goals, and
ӹӹcorrective measures, if necessary, as revealed by the review.
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In the whole process, setting of goals for the subordinate positions is the crucial step. Unlike in the traditional system where goals are decided for the subordinates by the superiors, in the MBO system, goals are set on the basis of consensus reached in the discussions between superiors and subordinates. They are set in a democratic way. Superiors act as facilitators and create a favourable climate where subordinates freely express their opinions, viewpoints and perceptions about what they believe could be achieved. The process ensures meeting of minds between superiors and subordinates. As a result, there is ample possibility for the subordinates to feel that they are working for their own goals and not for somebody else’s. Consequently, they strive to achieve the goals. As they participate in the goal setting exercise actively, they in turn get motivated to achieve them. Once they achieve the goals, that contributes for the satisfaction of their ego needs. Thus, MBO serves as a motivational technique.
Advantages of MBO
An organization can benefit in the following ways by implementing
MBO.
ӹӹAccomplishes consistency in objectives as each department’s objectives are consistent with the organizational objectives, the possibility for the various departments working at cross purposes is very less.
ӹӹContributes for effective management by providing lot of clarity in the objectives and the organisation that is necessary to achieve them;
ӹӹForces the management to plan the activities in a systematic way.
ӹӹFacilitates 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.
ӹӹContributes for the installation of a democratic and participative setup essential for the success of an organisation in a complex business environment of today. The interaction that takes place between the superiors and subordinates is a good sign of human resource development in the organisation.
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Reasons why MBO Fail
Inspite of many advantages, MBO may not be considered as a panacea for all the evils of the organisation. The success of the program depends on several factors. If the program fails, it is largely due to the following reasons:
ӹӹLack of top management involvement and support. For an MBO program to succeed, it must have the complete support of top management.
ӹӹLack of understanding of the philosophy behind MBO. MBO program in some organizations meet the resistance of employees because it is imposed on them as ‘control device’ to curb their freedom.
ӹӹDifficultly in setting realistic and meaningful objectives. Some jobs and areas of performance cannot be quantified and hence are not amenable for objective evaluation.
ӹӹIncreased time pressure. To use MBO program, managers must learn to establish priorities and use the time effectively.
ӹӹLack of relevant skills. Managers may not have the requisite skills for identifying objectives, communication and interpersonal interaction such as counseling and receiving feedback.
ӹӹLack 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.
ӹӹPoor integration with other systems. 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 organisation. In such cases, each department ends up going its own way, and the results are counterproductive to the overall organisaiton.
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Review Questions
1.Explain the characteristics of objectives and how well defined objectives influence business success.
2.Distinguish between short term and long term objectives.
3.Explain the process of Management by Objectives. Also bring out the relative merits and demerits of MBO.
4.Explain how you go about in installing the MBO program in a fast growing medium size organisation.
5.Do you subscribe to the view that MBO is a Pan-Asia for organisational ills?
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