Structural Approach To Organization

MANAGEMENT BY OBJECTIVES:
(MBO) is a process of defining objectives within an organization so that management and

employees agree to the objectives and understand what they are in the organization.
Structural approach to organization-wide participative goal setting that aims to

serve as a basis for
(A) greater efficiency through systematic procedures,
(B) greater employee motivation and commitment through participation in the
planning process, and
(B) planning for results instead of planning just for work. In MBO practice,
specific objectives are determined jointly by managers and their
subordinates, progress toward agreed-upon objectives is periodically
reviewed, end results are evaluated, and rewards are allocated on the basis
of the progress.
MBO is a collaborative process whereby the Leader and team members can jointly determine
objectives for each team members. MBO begins when the Team Leader explains the goals for
his group. The team members take the goals and propose objective for his / her particular job. In
case of any modification of individual’s objectives, it is accomplished through negotiation since
the Team Leader has resources to help the team member commit to the achievement of the
objective. Thus, a set of verifiable objectives for each team member are jointly determined,
prioritized and formalised.
EXAMPLE:
A company that is seeking to get people to work more collaboratively
than individually gives its people objectives that they cannot achieve
alone. There is no explicit requirement to work together, but the people
soon find that they only way to succeed is to collaborate.
Features and Advantages

Unique features and advantage of the MBO process
The basic principle behind Management by Objectives (MBO) is for employees to have a
clear understanding of the roles and responsibilities expected of them. They can then
understand how their activities relate to the achievement of the organization. MBO also
places importance on fulfilling the personal goals of each employee.
Some of the important features and advantages of MBO are:
1. Motivation – Involving employees in the whole process of goal setting and

increasing employee empowerment. This increases employee job satisfaction and
commitment.
2. Better communication and Coordination – Frequent reviews and interactions
between superiors and subordinates helps to maintain harmonious relationships
within the organization and also to solve many problems.
3. Clarity of goals
4. Subordinates tend to have a higher commitment to objectives they set for
themselves than those imposed on them by another person.
5. Managers can ensure that objectives of the subordinates are linked to the
organization's objectives.
Domains and levels

Objectives can be set in all domains of activities (production, marketing, services, sales,
R&D, human resources, finance, information systems etc.).
Some objectives are collective, for a whole department or the whole company, others can
be individualized.
Practice
Objectives need quantifying and monitoring. Reliable management information systems
are needed to establish relevant objectives and monitor their "reach ratio" in an objective
way. Pay incentives (bonuses) are often linked to results in reaching the objectives
Limitations
There are several limitations to the assumptive base underlying the impact of managing
by objectives, including:
1. It over-emphasizes the setting of goals over the working of a plan as a driver of

outcomes.
2. It underemphasizes the importance of the environment or context in which the goals

are set. That context includes everything from the availability and quality of resources, to
relative buy-in by leadership and stake-holders. As an example of the influence of
management buy-in as a contextual influencer, in a 1991 comprehensive review of thirty
years of research on the impact of Management by Objectives, Robert Rodgers and John
Hunter concluded that companies whose CEOs demonstrated high commitment to MBO
showed, on average, a 56% gain in productivity. Companies with CEOs who showed low
commitment only saw a 6% gain in productivity.
3. Companies evaluated their employees by comparing them with the "ideal" employee.
Trait appraisal only looks at what employees should be, not at what they should do.
When this approach is not properly set, agreed and managed by organizations, self-
centered employees might be prone to distort results, falsely representing achievement of
targets that were set in a short-term, narrow fashion. In this case, managing by objectives
would be counterproductive.
The use of MBO must be carefully aligned with the culture of the organization. While
MBO is not as fashionable as it was before the 'empowerment' fad, it still has its place in
management today. The key difference is that rather than 'set' objectives from a cascade
process, objectives are discussed and agreed upon. Employees are often involved in this
process, which can be advantageous.
A saying around MBO -- "What gets measured gets done", ‘Why measure performance?
Different purposes require different measures’ -- is perhaps the most famous aphorism of
performance measurement; therefore, to avoid potential problems SMART and
SMARTER objectives need to be agreed upon in the true sense rather than set.

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MANAGEMENT BY OBJECTIVES:

(MBO) is a process of defining objectives within an organization so that management and

Structural approach to organization-wide participative goal setting that aims to

Features and Advantages

Some of the important features and advantages of MBO are:

1. Motivation – Involving employees in the whole process of goal setting and

Domains and levels

1. It over-emphasizes the setting of goals over the working of a plan as a driver of

2. It underemphasizes the importance of the environment or context in which the goals

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