MANAGEMENT BY OBJECTIVE: A REVIEW of Literature

Peter Drucker in his book, The Practice of Management (1954) first discussed about

the advantages and disadvantages of Management by Objectives. Based on this

literature available many people have tried to voice their opinions for and against MBO.

During the review of MBO, I came across many conflicting ideas which make it difficult

to point towards an attribute alone. Many other renowned personalities mentioned in

this review are satisfied with Peter Drucker’s take on MBO. The difference in opinion is

mentioned separately.

For starters, Peter Drucker himself seems to have had contrasting opinions. During the

90’s, he equivocated on the fact that MBO, could prove to be effective if & only if the

Management had a clear vision of the Objective. He went on to say that only 10% of all

Managements practicing this style would bear desirable results. This, he justifies by

stating that most of the managers who are involved in seeing the project through, mostly

always focus on the day to day activities instead of the long run objectives, which are

invariably forgotten.

Peter Drucker also suggests that strategic planning is traditionally done by the top

level of the management. However they are not physically present while implementing

the same. This gives rise to difference in opinion & perspectives. If these opinions are

not voiced at the beginning of the strategy development & implementation phase, it is

most likely to fetch sub standard results. The Middle Managers need to understand the

feasibility of the strategy being proposed & believe that the same can be achieved. Most

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often, the communication between the top & middle managers are limited to automated

reports generated by Management Support Systems. He therefore strongly stresses on

the fact that the Line managers should also actively participate in the formulation of

strategic plans & share ideas based on real time experience.

Job empowerment is one of the commonly noted aspects in an organization following

MBO, where the operatives as well as line managers work towards achieving their set of

goals, most often individually and in their own ways. They are expected to be flexible in

their approach. When every single employee has finished the task assigned to them,

these are all merged together and handed over to the respective departments.

However, he also states that the managers shouldn’t just stop at distributing the job;

they should also suggest the best methods of implementing & achieving these short

term goals.

Peter Drucker also suggests that since MBO relies heavily on the distribution of work

it is essential to review the Goals & Objectives frequently. The Line managers should be

actively involved in getting feedbacks from the operatives & communicating the same

with the middle managers. It is very important that every employee knows what is

expected off him/her & their duties & responsibilities towards achieving the desired

goals & Objectives. He expects the employees to be competitive and have essential

technical knowledge as well as practical knowledge especially those in the knowledge

bases industries.

The chances of the company achieving their goals & objectives without going off course

due to unforeseen conditions are at most, rare. These unforeseen circumstances can

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range from low level of employee motivation, weather conditions, country’s economy,

strikes, to bankruptcy of suppliers etc. Therefore, it is essential that a Roll over plan is

in place at all times. This is usually easy to implement during contingencies as all

important steps have already been broken down. This ensures that the business can

get back to normal without starting all over again.

Once the production process is operating and fully functional the middle managers are

expected to follow up with the Line managers with regards to the course of action

being taken. This can be done either through meetings or through Management Support

Systems. Briefings & Debriefings at a consistent rate ensures that the efforts are in line

with achieving the Objectives.

Considering that previous goals had been achieved, the middle managers are expected

to evaluate the entire process & highlight the pro’s & con’s of every action taken by the

line manager in order to achieve higher productivity the next time around. Motivating the

employees throughout remains a constant at all stages. Appreciation in the form of

Recognition, bonus etc is commonly used & effective in keeping the morale high. (Refer

Citation 1&2.)

Andy Grove, program manager at Intel is of the opinion that when following MBO, it is

important to keep the objectives short & precise. He states that Managers should be

actively involved in the process of reviewing & revising goals at all times. They should

have a good understanding of the long term objective & should recognize when to

implement changes in the short term goals that help in attaining them.

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Rigidity in operations is also one of the limitations faced by MBO style organizations. It

is expected that every possible methods of achieving goals & Objectives are considered

and narrowed down to a few recommended modus operandi. This means any other

approach towards achieving these objectives technically result into violations of the

modus operandi even though they seem to be generating desirable outcomes. He also

recognizes that every employee has their own ways of achieving targets, therefore in

order to obtain full productivity from them, it is essential to recognize their

developmental needs. (Ref Citation 3)

W. Edwards Deming mentions that MBO can prove to be successful only if all the

employees have a clear understanding of the Objective that had been previously

defined. Failing this, achieving these targets becomes much too difficult, not to mention

the waste of time & resources. The author of the 14 Points (Total Quality Management)

also mentions in his 7th point that the managers should be involved directly in the

production process, that they should take initiatives to lead from the front, rather than

wait to review the report submitted by the line managers. He also points out the fact the

Peter Drucker had made it abundantly clear that a systematic step by step approach

was required in order to make MBO a successful strategy which seems to be difficult to

keep up with once empowerment takes over. (Ref Citation 4&5)

Mr. Ethan Winning, former Vice President of Personnel for Wells Fargo Bank, has

mentioned that in his opinion, Management by Objective is a thing of the past.

According to him Management by Objective can hold good only in those departments

where the performance cannot be measured. It should not be used in departments

which are dependent more on analyzing figures & assess performance. However he

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also states that MBO still retains an important place in any organization as it helps in

establishing goals. (Ref Citation 6)

Kenneth R. Thompson, University of Notre Dame, Fred Luthans, University of

Nebraska, Willbann D. Terpening, University of Notre Dame made a combined field

study on the effects of MBO on performance & satisfaction in a public sector

organization. They concluded that there was a significant change in performance

following MBO practice as opposed to not applying the same. (Ref Citation 7)

Following the success of MBO in the commercial field, attempts were made to apply

them in the Military sector of USA. However, the results were astonishingly negative.

The reasons identified were the formal structure of the army that does not allow for

flexibility, authoritative nature of the person handling the projects, difference in opinion

that leads to low levels of output. Since the power of making decision usually rests in

the hand of the commander in these institutions, it negates the theory of empowerment

& flexibility. Lieutenant colonel Philip J.Perles, is of the opinion that MBO is more of a

success where the above mentioned shortfalls can be implemented on a real time basis

& therefore admits that it can be used in limited areas of the military. (Ref Citation 8)

The combined review of these renowned authors focus on the following limitations:

 Empowerment

 Participation in strategic formulations

 Well defined Objectives & a systematic approach

 Relevant Knowledge & developmental needs of employees

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 Implementation of change

 In my opinion, MBO operates traditionally on deadlines set by top management.

If the communication between the middle managers & Line managers are not

frequent & adequate it may lead to undesirable results. Deadlines also imply that

each sub category of work that was entrusted to individual employees, be ready

in time. Failing this it would mean delays in putting together the job that was

entrusted to the line manager as a whole. Absenteeism, reduced inputs from a

few employees of a team due to boredom, dissatisfaction, low morale etc might

delay the whole outcome of the finished product or services.

 Manpower in any organization is almost always single handedly responsible for

achieving goals & Objectives. That being said it is expected that the hiring

process is carefully screened to filter the best possible employees from the job

market. Hiring based on experience in the relevant sectors are usually very

popular these days as they imply reduced costs in training. However, this also

reduces the company’s chances of gaining new ideas from the inexperienced

individuals. These ideas could be of utmost use as their perspectives are not

biased, not based on traditional methods of thinking & operating as opposed to

experienced employees.

 Nepotism is also one of the major drawbacks in achieving success in an

Organization that is dependent on MBO deadlines. As this allows employees of

non relevant back grounds to hamper the progress & speed of the task. Since it

is expected that every employee know what is required off them, these

candidates are likely to stray off course due to lack of job knowledge.

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The following points, in my opinion, explain how these limitations can be turned

into strengths for the company.

 Since MBO relies heavily on the distribution of work it is essential to review the

Goals & Objectives frequently. The Line managers should be actively involved in

getting feedbacks from the operatives & communicating the same with the middle

managers. It is very important that every employee knows what is expected off

him/her & their duties & responsibilities towards achieving the desired goals &

Objectives.

 In order to avoid boredom arising out of working on the same assignment &

tasks, a rota should be prepared which gives way to healthy job rotation amongst

the employees. This will also ensure that every employee gets to add on to his

skills & job knowledge.

 The Line managers should be actively involved in nominating & recognizing

employees based on their efforts. This can be done by rewarding the employees

with a bonus on successful completion of tasks/assignments. Bonding between

the employees & managers through get-togethers, social events, staff parties etc.

This will ensure that there are few or negligible communication gaps between the

managers & the operatives & also a high morale which leads to increased

outputs.

 Training sessions should be conducted on a frequent basis, where employees

that require key skill trainings should be allowed to work on their desired core

competencies as well as on their limitations.

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  Employee evaluation should be followed by one to one interviews to try &

recognize the requirements of the employee concerned.

 The managers should be able to implement necessary changes, where required.

Technological advances in the relevant fields must be considered, while looking

into cost minimization as well as effectiveness at the same time. Identifying

scope for improvement at all times & focus on realizing short term plans rather

than the end result alone.

 It is essential that recruitment be done without any bias and with the end result of

achieving goals & Objectives in mind.

Despite all these limitation MBO is known to attain desired results. Overcoming these

limitations is generally easier. In a Research conducted by Robert Rodgers & John

Hunters it has been noted that Management by Objective showed on average an

increased productivity by approximately 55% as opposed to other styles of

management.

CONCLUSION

Based on all of the review the bottom line, in my opinion is that MBO can prove to be

very effective in relation to employee performance & organizational productivity. The

two of them are visibly linked to each other & neither can be a success on its own.

Once the employees are made aware of their duties & responsibilities, a constant in the

form of motivation, feedbacks, evaluations, appraisals, etc can be used to harness all

the skills of employees that are essential for the growth of any organization.

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Management by Objective from my understanding was the launching pad of all the

newer & modified versions of Management. Therefore there are no chances of MBO

becoming obsolete as a concept in practice because it deals with the simple logic of

establishing an Objective before starting any business.

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CITATIONS

1. http://en.wikipedia.org/wiki/Management_by_objectives [Accessed 20th

March,2010]

2. Drucker, Peter F., "The Practice of Management", 1954. ISBN 0060110953

3. http://www.1000ventures.com/business_guide/mgmt_mbo_main.html

4. Deming, W. Edwards, "Out of the Crisis", The MIT Press, 1994, ISBN

0262541165

5. http://www.1000ventures.com/business_guide/mgmt_mbo_main.html

6. http://www.ewin.com/articles/obexre.htm

7. http://jom.sagepub.com/cgi/content/abstract/7/1/53

8. http://www.airpower.au.af.mil/airchronicles/aureview/1979/sep-oct/perles.html

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