The Importance of the Management by Objective in Business Organizations

Define Management by Objectives (MBO)

Management by objectives (MBO) is a strategic management model that aims to improve the performance of an organization by clearly defining objectives that are agreed to by both management and employees. According to the theory, having a say in goal setting and action plans encourages participation and commitment among employees, as well as aligning objectives across the organization. ( By Adam Hayes )

Evaluate how Management by Objective is important for any Organization

Determining Organizational Goals

The entire development of an organization depends on the set goals. A goal is the most critical and necessary factor behind the effectiveness and efficiency of an organization, so it is important to effectively manage set goals either single or many of different kinds. Prior to start working on the set goals, the managers should determine organizational goals with the aim to create a potential management that must be capable of handling different kinds of goals easily. Determining goals don’t mean creating goals, as the preliminary goals are set by the top-level supervisors based on in-depth analysis and judgment about what should be accomplished and how to do so in a certain period.

Determining Employees’ Objectives

After determining the organizational goals, the next thing to do is to know the individual’s goals or more clearly employees’ goals. It is the responsibility of the manager to ask employees about what goals they can accomplish within a specific time period and what resources will they use to achieve the goal. Also, if needed, then managers and employees can classify the goals from the most important to the least one in order to make the goal achieving process more easily and in favour of the organization.

Constant Monitoring Progress and Performance

The process of MBO is not just set for providing additional effectiveness to managers across the organization, but it is also equally important for constantly monitoring the progress and performance of the employees. There are certain things stated below that can help managers to monitor performance and progress.

• Checking less effective or ineffective programs by performing a comparison of performance with already prepared objectives.
• Using ZBB (Zero Based Budgeting)
• For measuring plans and individuals, implementing MBO concepts
• Defining short- and long-term plans and objectives
• Installing efficient and effective controls
• Eventually, composing completely sound structure of the organization with all things at appropriate places such as responsibilities, decision making and so on.

Performance Evaluation

As per the basic concept of MBO, the performance evaluation comes under the responsibility of concerned managers and is made by their participation. Keep in the mind, performance evaluation is one the most important factors of the organization that can help operating certain objectives smoothly.

Providing Feedback

The psychologically influential factor of MBO is constantly providing feedback to employees regarding their performance and individual goals, so that they can monitor, correct and extra improve their skills and mistakes. Mostly, the feedback is provided in periodic meetings where supervisors and their subordinates review the performance and progress towards achievement of goals. At one point, feedback helps individuals know their weakness. While on the other hand, it also motivates already potential individuals to enhance and develop their performance additionally.

The Performance Appraisal

Performance appraisals are the final step of the process of Management by Objectives. By definition, a day by day review of the employee’s performance across the organization can be called as performance appraisal. Performance appraisal is associated with the term performance evaluation, but in some cases, both differ from each other.