Management by Objectives

Management by Objectives

Q1. 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 seen on diagram 1.

Diagram 1 – 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 (as shown in diagram 2, Robbins, 2009, 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.

Diagram 2 – Cascading of objectives (Robbins, 2009, Organizational Behavior, p188)
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...

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