Management by objectives, simply referred to as MBO, is a strategic managerial framework popularized by business consultants in order to ensure the company operates in accordance to its needs and goals. The MBO model enables top management and individual employees to agree upon a clearly defined set of organizational objectives. This theory aims to increase the performance of the company by facilitating commitment and participation within the work force through perfectly aligned objectives. Despite numerous advantages of the management by objectives, there are various drawbacks associated with this model, which is why it is crucial to utilize MBO as a strategic tool instead of treating it like a cure-all.
Management by objectives can, indeed, be an integral part of the organization’s success due to various benefits this framework has. Firstly, setting common goals positively affects motivation among employees since their professional objectives become more clear and realistic. According to a recent study by Kampkotter (2017), measurable and challenging goals as a form of performance appraisal and evaluation lead to greater work effort and higher employee satisfaction rates. Secondly, MBO results in open communication between employees and supervisors, which affects job satisfaction as well (Islami, Mulolli, and Mustafa, 2018). Management by objectives serves as an exceptional instrument of ensuring employee loyalty because common goals bring a sense of purpose and importance to them (Shamsa et al., 2019). A great example of the MBO’s positive impact on the workers is the incorporation of performance appraisal at a number of government agencies described in the book by Milkovich and Wigdor (1991). The authors argue that the implementation of consistent objective performance appraisal frameworks improved the quality of work. Based on the aforementioned advantages of MBO, it would be rational to consider its incorporation at the company.
Although there are a variety of benefits related to MBO, it is crucial to acknowledge the limitations of the framework and generate possible solutions to the challenges resulting from MBO incorporation. Management by objectives focuses on targets, while often neglecting other important parts of the organization, including corporate culture and work ethos. As a result, employees ignore their professional duties by prioritizing the established goals and choosing to meet them by any means necessary (Wekesa and Makhamara, 2020). The strain MBO puts on employees in terms of time frames leads to them abusing short-cuts, which affects performance and work quality (Amponsah-Tawiah, Opata, and Tetteh, 2018). In addition, the lack of timely feedback and flexible timelines results in numerous organizational drawbacks (Rahman et al., 2020). As a performance appraisal tool, MBO can be ineffective due to the fact that employers tend to have an upward bias in their evaluation based on the research findings presented by Cappelli and Conyon (2018). The implementation of management by objectives has to be a step-by step process, which would allow employees to voice their concerns.
In conclusion, it is evident that although the implementation of the MBO model has a number of organizational and individual benefits for employees, the framework is not perfect and can lead to various drawbacks. On the one hand, management by objectives has a positive impact on employee satisfaction and commitment. On the other hand, workers often become pressured to achieve the goals of the company by sacrificing work quality and overall performance. In order to deal with the challenges regarding MBO, management has to generate strategic road maps in order to address emerging issues.
Milkovich, G. T. and Wigdor, A. K. (1991). Pay for performance : Evaluating performance appraisal and merit pay. Washington, D.C.: National Academies Press.
Kampkötter, P. (2017) ‘Performance appraisals and job satisfaction’, The International Journal of Human Resource Management, 28(5), 750-774.
Amponsah-Tawiah, K., Opata, J. L. and Tetteh, S.D. (2018) ‘Time management: presenteeism versus management-by-objectives’, International Journal of Law and Management, 60(6), pp. 1470-1484.
Cappelli, P., and Conyon, M. J. (2018) ‘What do performance appraisals do?’, ILR Review, 71(1), pp. 88–116.
Islami, X., Mulolli, E., and Mustafa, N. (2018) ‘Using management by objectives as a performance appraisal tool for employee satisfaction’, Future Business Journal, 4(1), pp. 94–108.
E. Shamsa, et al. (2019) ‘Goal-driven autonomy for efficient on-chip resource management: transforming objectives to goals,’ Design, Automation & Test in Europe Conference & Exhibition, pp. 1397-1402.
Rahman et al. (2020) ‘The Effect of management by objectives on performance appraisal and employee satisfaction in commercial banks’, European Journal of Business and Management, 12(20). Web.
Wekesa, P., and Makhamara, F. (2020) ‘Performance appraisal and employee performance at Kibabii University in Bungoma County, Kenya’, Journal of International Business, Innovation and Strategic Management, 4(2), pp.16 – 37. Web.