Cortez, Kaete Anne B.

January 26, 2019

MPA

MANAGEMENT BY OBJECTIVES AND RESULT EVALUATION

1. COMPONENTS OF MANAGEMENT BY OBJECTIVES

Management by Objectives (MBO) is personnel management technique that involves

managers and employees that are working together in order for them to set a record and goals
for and within a specific length of time. This technique allows management to focus on the
attainable goals of the organization, and to work towards achieving the best possible results, using
the resources available to the organization. MBO is possible to use not only in industrial
organizations, but also in public institutions. Management by objectives can be a source of
creative energy. It can increase the involvement of employees, enabling them to participate in
management, which strengthens the whole organization. Everyone knows what is expected of
him, forcing management to set objectives and determine the timing of their implementation,
facilitates communication managers and subordinates, promotes understanding by employees of
the purpose of the organization, provides a fair assessment, and allows employees to self-
assessment of their work.

Individual MBO systems can be very different from each other. Some concern the
individuals in the organization and other organizations as a whole, some insist on planning at the
corporate level and other on individual and individual motivation. The most effective MBO
systems include following six elements or components:

a) Commitment to the programs. At every organizational level, managers’ commitment to

achieving personal and organizational objectives and to the MBO process is required for
an effective program. Managers must meet with those they supervise, first to set
objectives and then to review progress towards these objectives.

b) Top level goal setting: Effective MBO programs usually start with the top managers, who
determine the organization’s strategy and set preliminary goals that resemble annual
objectives in their content and terms. An examples at Sega might be ‘a 5 percent increases
in sales next quarter’ or ‘no increase in overhead costs this year’. This procedure gives
both managers and staff members a clearer idea of what top management hopes to
accomplish and shows them how their own work directly relates to achieving the
organization’s goals.

c) Individual goals: In an effective MBO program, each manager and staff member has
clearly defined job responsibilities and objectives. The purpose of setting objectives in
specific terms at every level is to help employees understand clearly just what they are
expected to accomplish and to help each individual plan effectively to achieve his or her
targeted goals.

d) Participants: As a general rule, the greater the participation of both managers and
employees in the setting of goals, the more likely the goals will be achieved. One of the
hallmarks of successful quality management programs is the joint participation in setting
goals.

e) Autonomy in implementation of plans: Once the objectives have been agreed upon, the
individual enjoys wide discretion in choosing the means for achieving them, without being
second guessed by higher ranking mangers.

f) Performance review: Managers and employees periodically meet to review progress

towards their objectives. During the review, they decide what problems exist and what

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 they can each do to resolve them. If necessary, objectives may be modified for the next
review period.

The idea of management by objectives (MBO) was first outlined by Peter Drucker in his
book, entitled “The Practice of Management” which was later on developed by George Odiorne,
his student. His concept suggests that objectives should not be imposed on subordinates but
should be decided collectively by a concerned with the management. This gives popular support
to them and the achievement of such objectives becomes easy and quick. He wrote that "the
effective management must be guided by the vision and effort of all managers toward a common
purpose."

Drucker (1954), considered to be the pioneer of MBO, suggested the following five steps
in applying MBO:

 Set organizational objectives: goals and objectives must be: specific, measurable,
agreed, realistic, and time-related.
 Cascading objectives down to employees: the organization needs to set clear
goals and objectives, which then need to cascade down from one organizational
level to the next until they reach everyone.
 Encourage participation in goal setting: managers and employees need to
understand how their personal goals fit with the objectives of the organization.
 Monitor progress: the monitoring system has to be timely so that issues can be
dealt with before they threaten goal achievement. With the cascade effect, no
goal is set in isolation, so not meeting targets in one area will affect targets
everywhere.
 Evaluate and reward performance: MBO is designed to improve performance at
all levels of the organization. To ensure this happens, a comprehensive evaluation
system must be in place and employees should be given feedback on their own
goals as well as the organization’s goals. The cycle is iterative, with a review of
the strategic, corporate goals in the light of performance and environmental
monitoring.

Start of MBO
Process

Set Organizational Objectives

Reward Performance Cascade Objectives to Employees

Evaluate Performance Monitor

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 Management by objectives (MBO) and management by results (MBR) represent the major
approaches used by managers to align system objectives with employees' goals and behaviors.
The practice continues despite warnings from quality experts that MBO often leads to internal
competition, selfishness, and a lack of cooperation.
According to W. Edwards Deming, MBO/MBR focuses on outcomes that are typically
expressed as an arbitrary numerical goal or target. The way to improve results is to focus on the
system that causes and that a goal beyond the capability of a system will lead to frustration,
discouragement, and loss of pride as employees were held accountable for things beyond their
control. Some managers advocate the use of accounting targets, but the use of numerical goals
and targets erodes the ability or organizations to meet the expectations of customers. Supporters
of quality management must view organizations as systems of interdependent processes that
must work together to meet the overall goal. Clearly defined goals, employees' understanding of
their jobs in relation to such goals, and cooperation among interdependent departments are
necessary.
While organizations recognize the importance of employee empowerment in reaching
their goals, few realize that empowerment cannot occur when organizations cling to MBO/MBR
management practices and rankings. Managers must realize that their real role is to improve the
system rather than lead the organization, use control charts to interpret processes, alter their
view of the purpose of measurement, and remember that management information systems may
provide noise that, in some cases, is used by management as signals. Managers can avoid errors
caused by confusing noise with signals by studying their systems with appropriate measurements.

2. OBJECTIVE SETTING

What is Objective?

Objective is a term used to describe the desired target state, which wants an individual,
a team, organizational unit or entire organization, to achieve in certain areas of
own entrepreneurship or other activities. The objectives are generally basis of management- they
are used in planning, particularly in strategic management, but also in operations management.
Modern and systematically conceived objectives set in organizations are based on principles of
mutual balance.
The objectives of the organization follow its mission, formulated vision. Properly defined
objectives satisfy the conditions and the principles of SMART (they are Specific, Measurable,
Attainable, Relevant and Timely). The achievement of measurable goals is measured and verified
by using indicators or metrics.

Practical use of objectives in the organization: The objectives are like a vision part
of motivating factors in the organization. We can say that each organization must have set some
objectives, whether it is to achieve sales, market share gain, service quality levels or very different
objectives. Objectives of the organization specify a vision, help managers to manage and motivate
staff. As well as vision, common objectives help “pull together towards its fulfillment.”

The most important part of organizational efficiency in the MBO model is the objectives.
The focus is on ensuring these are set through a participative framework and enough attention is
paid on ensuring the goals are realistic and attainable. In Management by Objective (MBO)
systems, objectives are written down for each level of the organization, and individuals are given
specific aims and targets. Managers need to identify and set objectives for both themselves, their
units, and their organizations. Ensure that you set the right objectives if you want
to achieve the right results. The objectives should be achievable and challenging.

According to Peter Drucker, for MBO to be effective, individual managers and team
leaders must understand the specific objectives of their job and how those objectives fit in with
the overall company objectives set by the board of directors. "A manager's job should be based
on a task to be performed in order to attain the company's objectives... the manager should be
directed and controlled by the objectives of performance rather than by his boss.” The MBO
process starts with the organization defining its objectives. The process of strategic planning, goal
setting, or visioning generates from its process a set of objectives that the organization should

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strive to achieve. From there it is up to the individual departments to form their objectives, most
if not all of which should align and support the organizational objectives. Individual objectives are
then established to support the departmental objectives.

Objectives which are written down and are verifiable can be far more useful if they
are SMART in nature. The S.M.A.R.T. method is one way to help you remember how to walk
through the process of setting your first MBO objectives.

 S for Specific: There are several key factors which should be present in the objectives that are
set in order for them to be effective. They should be specific. In other words, they should
describe specifically the result that is desired. Instead of "better customer service score," the
objective should be "improve the customer service score by 12 points using the customer
service survey."

 M for Measurable: The second example is much more specific and also addresses the second
factor—measurable. In order to be able to use the objectives as a part of a review process it
should be very clear whether the person met the objective or not.

 A for Achievable: The next important factor to setting objectives is that they be achievable.
For instance, an objective which states "100 percent customer satisfaction" isn't realistically
achievable. It's not possible to expect that everyone must be 100 percent satisfied with their
service. A goal of "12 percent improvement in customer satisfaction" is better—but may still
not be achievable if it's assigned to the database developer. They aren't likely to have enough
influence over the customer interaction process to improve satisfaction by 12 percent.

 R for Realistic: This leads into the next factor—realistic. Realistic objectives are objectives
that recognize factors which can not be controlled. Said another way, realistic goals are
potentially challenging but not so challenging that the chance of success is small. They can be
accomplished with the tools that the person has at their disposal.

 T for Time-based: The final factor for a good objective is that it is time-based. In other words,
it's not simply, "improve customer service by 12 percent," it's "improve customer service by
12 percent within the next 12 months." This is the final anchor in making the objective real
and tangible. This final factor is often implied in MBO setting. The implied date is the date of
the next review, when the employee will be held accountable for the commitments that they
have made through their objectives.

ADDITIONAL DEFINITIONS – smartER GOALS AND OBJECTIVES

 Extending:
 The goal should stretch the performer’s capabilities or make a significant contribution
to the mission and purpose of the organization. It is boring and can seem purposeless
if it doesn’t (and the “A” — acceptance and accountability – criteria will suffer too).
 Exciting:
 The goal must be engaging for the individual. When a person is excited by the goal or
the journey, they are more likely to apply themselves to the achievement of the
activity being discussed.
 Rewarding:
 A person should know what it will mean and what will result from a full effort in
completing the goal.
 Recorded:
 There is a written record of the objective, its constraints and the enablers required
for success. Having the objective written is said to help increase the likelihood of
completion and success, at the very least, it ensures that both parties have a common
understanding of what was agreed.

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WHERE and HOW to start SMART goal?

 Start by thinking about your whole job and the broad areas (or “buckets”) of
responsibility and results for which you are accountable.
 Develop a goal statement for each bucket. To get the scope right, remember to focus
on end results not tasks.
 Goals should be high level enough to encompass the core outcomes for which you
are responsible, but specific and clear enough so you will be able to measure success.
 Goals should be on-going job responsibilities and any new projects, assignments,
priorities, or initiatives that are specific to this performance cycle.
 Having too many goals can be an indicator that your goals are scoped at too low a
level and are focused more on tasks than on end results.
 If it seems that your goals are becoming too numerous and task-oriented, it may be
helpful to consider combining several goal statements into a broader outcome area.

Steps in Goal/Objective Setting

The goal setting approach of performance appraisal involves the following steps:

 The employer and the employee discuss and mutually decide the role and key result areas
for the employee.
 The employee prepares a list of objectives for a period of six months to one year.
 He discusses his plans with the manager and they decide on the final plan.
 The manager periodically checks up on the progress of the employee.
 At the end of the stipulated time period, to discuss the results and see whether targets
have been met.
 A further action plan is developed based on the outcome of the appraisal.

The goal setting method reduces the role of the manager’s involvement and ensures the
employees are fairly evaluated solely based on their performance.

Employees feel highly satisfied and the coordination between the workers and managers
improves. This approach is much better than the traditional approach as it gives
concrete verifiable results.

Limitations of Goal Setting

 This type of approach is only applicable in jobs that give definite results. This cannot be
very effective on blue collar workers.
 This is a very time-consuming approach and requires patience and proper coordination
between employers and employees. Any communication gap and this method are
ineffective.
 This approach more applicable to high-level executives who, in contract with low-level
employees are more open to new ideas.
 Operator workers do not like taking initiative are not very interested in setting their own
goals.

As you can see setting SMART goals are crucial to your success. Once you have a SMART
Goal clearly defined, you need to come up with an action plan of how you are going to get there!
Last but not least you need to take action towards your goals. Goals will not magically happen just
because you have written them down. Even if you come up with a fantastic SMART goal nothing
happens if you don’t act on them.

3. STAGES IN MANAGEMENT BY OBJECTIVES

The process of MBO involves six key steps that incorporate managerial activities in such
a systematic way, which is directly influenced towards efficient and effective achievement

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individuals and organizational objectives. The application of the model has to be systematic in
order for it to work. To implement it in an organization, the following five steps are crucial for
success. Drucker laid out the steps in his book and they are key to putting the model into practice.

The six steps or stages in Management by Objectives are as follows:

1. Determining Organizational Goals

- Defining and verifying organizational objectives is the first step in MBO process. Generally
these objectives are set by central management of the organization but it does so after
consulting other managers. Before setting of these objectives, an extensive assessment
of the available resources is made by the central management. It also conducts market
service and research along with making a forecast. Through this elaborate analysis, the
desired long run and short run objectives of the organization are highlighted. The central
management tries to make these objectives realistic and specific. After setting these goals
it is the responsibility of the management that these are known to all members and are
also understood by them.

2. Determining Employees’ Objectives

- Once the organizational objectives have been identified, it’s time to translate them to
employee level. This means turning the organization-wide objectives into detailed
operational level objectives that are defined in terms of the different parts of the
organization. The aim is to guarantee each employee is aware of the objectives, but also
participate in the process.

For the second step to work, the SMART method must be applied. The Acceptable aspect
of the SMART method is especially key at this stage, as it refers to an agreement between
the superiors and the subordinates. The part of the method is about ensuring the goals
fit the current situation and are attainable by all. Therefore, it requires both the
employees and the organization to agree on the terms of the objectives. The goals cannot
be determined by one side, but require the involvement of both, even it it’s technically
just about the buy-in.

According to the principle of the MBO model, the management can’t determine
objectives without the input from the employees. This doesn’t just relate to the defining
of the objectives, but also explaining them to the employees. The organizational
objectives have to be recognizable by the employees, with the specific responsibilities of
each employee identifiable in relation to these goals.

Therefore, the step is about establishing clear communication routes between the
superior and the subordinates. It is about understanding and identifying the expectations
of both parties and creating the feedback structures to enhance the communication,
making the following steps easier.

3. Continuous Monitoring Performance and Progress

- The process of MBO requires regularly meetings between the managers and their
subordinates to discuss the progress achieve in the accomplishment of the objective
established for the subordinates. For this purpose the managers need to establish the
standards of performance or check points to evaluate the progress of their subordinates.

These standards need to be specified as for as possible quantitatively and it should also
be ensured that these are completely understood by the subordinates. This practices
needs to be followed by all managers and these should lead to an analysis of key results
has the targets are represented in terms of the results.

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 4. . 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.

5. 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.

6. Performance Appraisal

- is the process of evaluating how effectively employees are fulfilling their job
responsibilities and contributing to the accomplishment of organizational goals. To
appraise performance effectively, a manager must be aware of the specific expectation
for a job, monitor the employee’s behavior and results, compare the observed behavior
and results to expectations and measure the match between them.

In most cases, a manager should also provide feedback to employees, a process that can
produce strong reactions. Performance appraisals are extremely important to an
organization, although they may be difficult to conduct. They tell organizations whether
their selection methods are right. They demonstrate where training, development
and motivational programs are needed and later help to assess whether these have been
effective.

As a matter of fact, many organizational policies and practices are evaluated, in large part,
through their impact on performance. Performance appraisals, after all, are the basis on
which managers make decisions about compensation, promotion, and dismissal. They
also use feedback about people’s performance to recognize them for a job well done and
motivate them.

4. LOGICAL FRAMEWORK

The Logical Framework Approach is a form of Management By Objectives that was first
used as a planning tool for overseas development activities by the US army in the early 1970's.
Logical frameworks constitute a central example of a management style that demands precisely
ordered objectives. The LFA involves the development of a hierarchy of objectives and the
selection of a preferred implementation strategy. The reasoning behind LFA is that relevant
stakeholders are to begin planning for a project by defining higher-level objectives first, and then
analyze which set of outputs is the best to accomplish these objectives.

The LFA method is based on the idea that what legitimates and justifies projects is that
the service and the products that the project delivers respond to the needs of the target group.
In other words, it is not the resources (inputs) and activities implemented such as training
workshops or consultations that are most essential. Instead, what is most essential is what is
achieved: the results of the activities at different levels, the relevant outcomes and impacts, e.g.
improved quality of schools, healthcare or environment, decreased poverty in region X etc.

According to the LFA methodology, the project planning process includes the nine steps
below:

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  Analysis of the project’s context/environment (Background information)
 Problem analysis / Situation analysis (What main problem shall be solved by the
project? Which are the causes and effects of this main problem?)
 Analysis of stakeholders (Which individuals and stakeholders are affected by and
affect the project?)
 Formulation of objectives (What do we wish to achieve with the project? What
are SMART objectives?)
 Activity planning (Which measures shall be implemented to achieve the
objectives?)
 Resources planning (Time management, staff, budget and if needed, necessary
equipment)
 Indicators and means of verification (MoVs) (How do we measure results?)
 Risk analysis and risk management (Which factors may affect our results?)
 Analysis of assumptions (Prioritization, what can the project handle and what will
other stakeholders handle?)

It is important to state that the vertical logic of LFA is a product of a large process. The
vertical logic of LFA is simply a conceptualized plan of action for the project. The plan is divided
into four levels of objectives, which are linked in a cause and effect sequence. Moving from broad
to specific, these objectives are: goal, purpose, outputs and activities. The relationship between
activities and goals is assumed to be linear and is therefore illustrated by a vertical linear
relationship.

What Does the Vertical Logic of LFA Really Mean?

According to the vertical logic of LFA, a project's activities are supposed to, if planned and
implemented in a suitable way, yield the desired output. The output is in turn expected to lead to
the achievements of the purpose, which will influence the goal. LFA hence rest on the assumption
that there is a single chain of goals and that a project's activities and objectives are linked to each
other in a linear vertical structure. Therefore, this plan of action is called the vertical logic of LFA.

Since 1969, when the Logical Framework Approach (LFA) was firstly developed by
Practical Concepts Incorporated and used by USAID, this instrument became a core component
of a larger set of project management tools, used both for project planning, as well as for project
monitoring and evaluation.
Despite several recurrent failures, LFA still plays the central role in project management
lifecycle, providing a convenient overview of a project objectives, results and activities. The
literature has identified certain weaknesses of applying the method, which has generated, over
the years, contradictory points of view regarding the method’s effectiveness.

If we assume that there are four main sources of failure in using LFA in the project
planning, monitoring and evaluation processes, we could identify some alternatives for
preventing further LFA failures, in order to improve its performance and relevance as an essential
tool for effective project management.

LFA is typically praised in policy documents of its user organizations for providing clear
directions and an understanding of cause and effect relationships between activities and set goals.
It is also acknowledged for encouraging an integrated view of project objectives and for
encouraging attention to wider significance. (Gasper 2001) There is relatively little written on the
specific approach of LFA in academic literature. Hersoug (1996) however, argues that for contexts
with multiple diverse stakeholders and considerable change and uncertainty the LFA tends to
over-specify objectives and over-emphasize control as opposed to flexibility when essaying a path
forward. Gasper (2001) also states that even though an orderly and hierarchical specification of
objectives often helps, there may also be problems with presenting objectives in the short, simple
means-ends chain that the vertical logic of LFA prescribes. He argues that trying to clarify links to

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 broad societal goals while still retaining a realistic connection to the activities within a project may
not be possible in just the few steps that the vertical logic of LFA offers. In addition, he also
highlights the risk of ignoring process objectives in terms of how things are done rather than what
the end-state outcomes are. This project planning approach, with a single input-output vector,
according to Gasper (2001), tends to create a restricted learning path, as new alternatives are not
recognized as they arise throughout the project.

5. KEY RESULT AREAS OF MANAGEMENT BY OBJECTIVES

Setting Objectives is not just important to manage teams effectively; it is actually the
starting point on from which an entire performance management framework can be built. By
using an approach like Objectives and Key Results (OKRs) to help employees set clear, measurable
goals, managers can support their teams and drive them towards excellence, both on a personal
and organizational level.

Bersin by Deloitte research on business goals reveals there are three principles behind
effective goal setting and management:

 Setting clear goals

 Achieving continued clarity
 Making goals matter to teams

OKRs naturally satisfy each of these principles. By incorporating metrics into each
Objective and Key Result, managers can help their teams set SMART goals for utmost clarity and
specificity. When employees have clear goals, they know what matters most to the organization
and can thus laser focus their efforts to contribute to these shared priorities. Clear, measurable
goals also make it easy for managers to track progress and hold teams accountable throughout
the quarter to ensure expectations are being met.

Since OKRs give teams visibility into goal progress with real-time updates, they also
provide continued clarity. OKR software can further assist in achieving ongoing clarity by
providing insights like visibility into how everyone’s efforts align with top goals, as well as cross-
alignment among teams. Managers can also receive updates on goal progress which they can then
discuss during weekly one-on-one check-ins with their direct reports to re-clarify expectations.

Finally, OKRs allow managers to create Objectives that matter to their teams. Firstly,
teams get a direct line of sight into how their individual and departmental Objectives support the
overall company priorities, allowing them to understand the true value of their contributions.
Secondly, managers can also collaborate with employees to create some of their own goals, so
there is a healthy blend of bottoms-up and tops-down goal alignment. This approach allows every
contributor to maintain autonomy, exercise their strengths, and understand how their role affects
the success of the organization.

The organizational objectives are based on the mission and the vision of the organization.
Therefore, if the organization does not have a clearly defined vision and mission, the first step is
to outline it. Once a vision is established, the organization is able to draw the objectives from the
mission statement. Furthermore, the process refers to the identification of Key-Result Areas
(KRAs).
Peter Drucker believed that the survival of the company was at risk when managers
emphasized only the profit objective because this single objective emphasis encourage managers
to take action that will make money today with little regard for how a profit will be made
tomorrow.
The top management perspective for the future. Even though KRAs are most durable, the
list of KRAs gets considerably changed over the period in response to new needs and
opportunities. Sometimes, the achievement in a particular KRA also provides to new needs and
opportunities. Sometimes, the achievement in a particular KRA also provides the impetus for a
new KRA in future.

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 The eight key areas in which managers should set management system objectives are:

i. MARKET STANDING: Management should set objectives indicating where it

would like to be in relation to its competitors.
ii. INNOVATION: Management should set objectives outlining its commitment to
the development of new methods of operation.
iii. PRODUCTIVITY: Management should set objectives outlining the target levels of
production.

iv. PHYSICAL & FINANCIAL RESOURCES: Management should set objectives

regarding the use, acquisition, and maintenance of capital and monetary
resources.
v. PROFITABILITY: Management should set objectives that specify the profit the
company would like to generate.
vi. MANAGERIAL PERFORMANCE & DEVELOPMENT: Management should set
objectives that specify rates of worker productivity as well as desirable attitudes
for workers to
possess.
vii. WORKER PERFORMANCE & ATTITUDE: Management should set objectives that
specify rates of worker productivity as well as desirable attitudes for workers to
possess.
viii. PUBLIC RESPONSIBILITY: Management should set objectives that indicate the
company’s responsibilities to its customers and society and the extent to which
the company intends to live up to those responsibilities

6. ADVANTAGES AND DISADVANTAGES OF MANAGEMENT BY OBJECTIVES

ADVANTAGES

Management-by-objectives approaches have a number of advantages over many

of the other methods. Perhaps the most compelling is that it encourages face-to-face
communication between manager and employee to identify the degree to which the
employee has achieved the standards or objectives. On balance, the employee is more
likely to receive information detailed enough to improve performance— provided that
the process is done properly.

MBO has some distinct advantages. It provides a means to identify and plan for
the achievement of goals. If you don't know what your goals are, you will not be able to
achieve them. Planning permits proactive behavior and a disciplined approach to goal
achievement.

Advantages of Management by Objectives are many, primarily aligns the company goals
and objectives with the employees. Here are some others:

 Management by Objectives develops a result-oriented philosophy: The

Management by Objectives (MBO) process is all about the delivery of results
(outcome) as opposed to management by crisis (MBC)). While managers are
expected to develop goals and objectives; action plans and provide their people
with the resources they need, employees are expected to do their part by making
positive contributions towards the organizational goals.
 Formulation of clearer goals: In many organizations, goals are only set once a
year. The goals that are set in the MBO process are done in a way that makes
them measurable and verifiable, whilst making sure that each and every one can
be attained. The idea is that problem areas are highlighted, with goals put in place
to iron out those issues, thus making everyone more effective in the job that they
do. This process encourages the active participation of every employee, with the
end result being that the organizational goals are met within the agreed
timeframe.

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  Management by Objectives Facilitates objective appraisal: The evaluation
process is designed to be fair from the start, with all of the goals are put together
in by the entire team. Giving individuals the freedom to exercise their own
creativity makes for a happier set of employees, all of whom become fully
committed to reaching the organizational goals.
 Raises employee morale: Too many employees feel as though they are left out
of the decision process, but this is not the case with Management by Objectives.
Since they play a part in setting goals, the bigger picture becomes far clearer to
everyone. This in turn leads to a companywide boost in morale.
 Management by Objectives Facilitates effective planning: The Management by
Objectives program makes organizational planning much more effective.
Everyone is forced to look at results as opposed to winging it when crises arise.
When effective planning is put in place, fewer of those problems tend to arise,
allowing mangers to focus on what is important.
 Acts as motivational force: Since everyone is on the same page when it comes to
reaching the goals of the organization, there is a higher level of imagination and
creativity that comes with that. With everyone working together for a common
goal, there is a much higher level of motivation to reach them.
 Management by Objectives facilitates effective control: One of the main
features of MBO is the continual monitoring of progress. This allows everyone to
measure their performance against the standards that have been put in place. It
is those clear standards that allow everyone to work towards a very identifiable
set of goals, all allowing for better control.
 Management by Objectives facilitates personal leadership: MBO helps everyone
within the organization, but it gives mangers in particular the opportunity to
display their leadership skills. Keeping the entire group focused will paint a
manager in a very positive light and make them more likely to advance within the
company

DISADVANTAGES

There are some limitations of Management by Objectives, here are some of the pitfalls
and issues:

 Time-consuming: Management by Objectives is incredibly effective, but it can

take up an inordinate amount of time. The process of setting objectives is not
something that tends to happen quickly. Regular meetings are required in order
to assess just how well the system is working, all of which chew up even more
time.
 Reward-punishment approach: Management by Objectives can create a
situation where a great deal of pressure is put on employees. Since the process
means constantly reaching goals, employees that fall behind the timeline are
subject to penalty, while those who do well are rewarded. This reward-
punishment method can create a high level of stress on certain members of the
team.
 Increases paper-work: It’s easy for an organization to become weighed down
under the avalanche of paperwork that comes with employing the Management
by Objectives method. It is not just the training manuals, newsletter, and
instruction booklets that pile on the paper, it’s also the inordinate amount of
progress paperwork and reports that employees are expected to submit that adds
to the weight.
 Creates organizational problems: Too many organizations fall into the trap of
believing that Management by Objectives is the cure for all that ails. They fail to
see that there are a definite set of problems that can come with it. One of the
most common is that employees will try to keep targets as simple as possible,

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 whereas upper management will shoot for the stars. This wide gap in
expectations can make it difficult to find a common ground in the middle. The
program can also instill fear in employees as it is so closely tied to performance.
 Management by Objectives develops conflicting objectives: The goals and
objectives of each individual within the organization may not mesh with that of
other employees, which is particularly true when there are multiple departments.
Each department will have their own ideas of success, which they may feel is
different from the rest, all of which creates conflict.
 Problem of co-ordination: A number of problems can pop up when it comes time
to coordinate the company objectives across multiple departments. Since each
department has their own goal ideas, they may set unrealistic goals in order to
undermine others.
 Management by Objectives lacks durability: When MBO is first introduced, it
tends to generate a lot of excitement. That can fizzle out over time as the method
starts to become tired. It’s such a simple process, but also one that doesn’t really
leave space for new opportunities.
 Problems related to goal setting: MBO works best when everyone is on the same
page and find the goals set to be mutually agreeable. That can all fall apart when
the goals are considered to be too rigid or when they are particularly difficult to
set. There can also be major problems if employees start to believe that the goals
in place are more important than they are, or of they feel that short-term goals
have taken the place of the long-term health of the company.
 Lack of appreciation: While the purpose of Management by Objectives is to
involve everyone in the goal setting of the organization, it can still fail if the goals
are not properly passed down the chain. It may be that executives fail to fill in all
the details of the company objectives to management. It can also hit a snag if
management do not delegate properly or motivate accordingly.

The Management by Objectives pros and cons is helpful because it sets specific targets.
That may also be its one big disadvantage because it causes workers to focus on those specific
targets.

To attain maximum benefit from MBO the following steps could be helpful:

1. Support and commitment from top level management: It is essential that MBO should have
the support and commitment of the top management without this support, MBO can never
be a success. The superior must be willing to relinquish and share the authority with the
subordinates. They should consider the subordinates as part of the team for decision making.

2. Clear Goal and objectives: The objectives should be clearly formulated must be realistic and
achievable. They should be clearly understood by all concerned. The targets should neither
be very high nor very low.

3. Participation of subordinates in Goal Setting: The objectives and goals should be set with the
active participation of the subordinates. There should be effective two way communication
between the superior and the subordinates for setting the goals, and for discussing their
problems. These objectives must be properly communicated and clearly understood and
accepted by all. MBO works best when the goals are willingly accepted.

4. Overall Philosophy of Management: MBO should be treated as an overall philosophy of

management and the entire organizations. It should not be simply performance appraisal
technique or a divisional process. It should change and replace all the old systems rather than
just being added to them.

5. Delegation: MBO will not be effective if the manager is not willing to delegate sufficient
authority to the subordinates. The subordinates who have been given challenging

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 assignments through discussion with the superior must be given adequate authority to
accomplish their goals otherwise they will not be willing to accept new assignments and they
will resist the setting of clearly defined goals.

6. Revision and Modification Goals: The goals must be continuously reviewed and modified as
the changed conditions require avoiding inflexibility. The review technique should be such
that all deviations are caught early and corrected.

7. Orientation and Training of executives: As the philosophy of MBO is to be implemented by

the executives, they must be given format training in understanding the basis as well as the
contents of the program. They must be adequately oriented about the value of MBO. They
should be trained in how to set the goals, the method and tools to achieve these goals,
methods of reviews and evaluation of performance and provision to include and feed back
that may be given.

Integration of MBO Program: MBO cannot be implemented as an isolated program. It

should be accepted as a style of managing and should be synthesized with the organizational
climate. All personal involved should have a clear understanding of their role, authority and their
expectations. The system should be absorbed wholly by all departments and members of the
organization.

7. OBJECTIVE BY RESULT EVALUATION

What is evaluation?

Evaluation is a process that critically examines a program. It involves collecting and

analyzing information about a program’s activities, characteristics, and outcomes. Its purpose is
to make judgments about a program, to improve its effectiveness, and/or to inform programming
decisions.
Many people think of evaluation as taking a snapshot of outcomes at the end of a
program to prove to a funder that it worked or failed. These same people don't hold evaluation
in much regard because they feel they are getting too little information too late in the day,
especially if their program fell short of expectations or made no difference at all. Evaluation can,
and should, however, be used as an ongoing management and learning tool to improve an
organization's effectiveness.

Well-run organizations and effective programs are those that can demonstrate the
achievement of results. Results are derived from good management. Good management is based
on good decision making. Good decision making depends on good information. Good information
requires good data and careful analysis of the data. These are all critical elements of evaluation.

Evaluation refers to a periodic process of gathering data and then analyzing or ordering it
in such a way that the resulting information can be used to determine whether your organization
or program is effectively carrying out planned activities, and the extent to which it is achieving its
stated objectives and anticipated results.

Managers can and should conduct internal evaluations to get information about their
programs so that they can make sound decisions about the implementation of those programs.
Internal evaluation should be conducted on an ongoing basis and applied conscientiously by
managers at every level of an organization in all program areas. In addition, all of the program's
participants (managers, staff, and beneficiaries) should be involved in the evaluation process in
appropriate ways. This collaboration helps ensure that the evaluation is fully participatory and
builds commitment on the part of all involved to use the results to make critical program
improvements.

Although most evaluations are done internally, conducted by and for program managers
and staff, there is still a need for larger-scale, external evaluations conducted periodically by
individuals from outside the program or organization. Most often these external evaluations are

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 required for funding purposes or to answer questions about the program's long-term impact by
looking at changes in demographic indicators such as graduation rate or poverty level. In addition,
occasionally a manager may request an external evaluation to assess programmatic or operating
problems that have been identified but that cannot be fully diagnosed or resolved through the
findings of internal evaluation.

Program evaluation, conducted on a regular basis, can greatly improve the management
and effectiveness of your organization and its programs. To do so requires understanding the
differences between monitoring and evaluation, making evaluation an integral part of regular
program planning and implementation, and collecting the different types of information needed
by managers at different levels of the organization.

8. MBO APPROACH TO PERFORMANCE APPRAISAL

Performance Appraisal includes all formal procedures used to evaluate Personality,

Contribution and Potential of group members working in an Organization. It is continuous process
to secure information necessary for correct and objective decision on employees.
In simple words Performance Appraisal is systematic evaluation of the employee with
respect to his performance on the job and his potential for development. The main features of
the Performance Appraisal are: It is a Systematic Process. It tries to evaluate the performance in
the same manner using the same approach. It provides an objective description of employee‘s
strength and weakness. It tries to find out how well the employee is performing the present job
and his capacity to shoulder higher responsibility.
The appraisal is a continuous process carried out periodically, according to a definite plan.
It is not a 'One Shot Deal'. Provide in put for decision about transfers, promotion and Training &
development Programs. Provides Input to review the company Policies. Various methods of
performance approval have been adopted since the era of Scientific Management. The traditional
Appraisal methods have been viewed as subjective - based on personal judgment of the appraiser.
They not only fail to meet the objectives of the organization but also fail to motivate and meet
the expectations of the present day‘s employee who are well informed and more sensitive to their
growth and want to have effective say in the management of the enterprises.

However the M.B.O based Appraiser system is a modern approach and meets the
requirement of a progressive and growth oriented organization.

If performance appraisals are done in the correct manner, they can provide us with a
series of valuable results. However, done incorrectly, the process of evaluating employee
performance can actually lead to lower levels of job satisfaction and productivity.

The following are the Performance Appraisal Process in Management by Objectives:

 Step 1. Job analysis. This is logically the first step because if they don’t know what
a job consists of, how can they possibly evaluate an employee’s performance?
They should realize that the job must be based on the organizational mission and
objectives, the department, and the job itself.
 Step 2. Develop standards and measurement methods. If they don’t have
standards of acceptable behavior and methods to measure performance, how
can they assess performance?
 Step 3. Informal performance appraisal—coaching and disciplining. Performance
appraisal should not be simply a once- or twice-yearly formal interview. As its
definition states, performance appraisal is an ongoing process. While a formal
evaluation may only take place once or twice a year, people need regular
feedback on their performance to know how they are doing.
 Step 4. Prepare for and conduct the formal performance appraisal. The common
practice is to have a formal performance review with the boss once or sometimes
twice a year using one or more of the measurement forms we will be learning
about.

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 It is needed to understand a critically important part of each step in the
performance appraisal process—accurate performance measurement.

Accurate Performance Measurement

- Performance should be accurately measured so employees will know where they

can improve. Knowing where to improve should lead to training employees to develop
new skills to improve. To be an accurate measure of performance, our measure must be
valid and reliable, acceptable and feasible, specific, and based on the mission and
objectives.

 Valid and reliable. As with all areas of the people management process,
they must make sure that all of the performance management tools are valid and
reliable. If the method of measurement is not valid and reliable, then it makes no
sense to use it.
 Acceptable and feasible. In addition to validity and reliability, we need to
look at a couple of other characteristics of our performance measures. We need
to analyze acceptability and feasibility. Acceptability means that the use of the
measure is satisfactory or appropriate to the people who must use it. However,
in performance appraisal, this is not enough. Acceptability must include whether
or not the evaluation tool is feasible.
 Specific. Next, we want any evaluation measure to be specific enough to
identify what is going well and what is not. The word specific means that
something is explicitly identified, or defined well enough that all involved
understand the issue completely. In performance appraisal, specific means that
the form provides enough information for everyone to understand what level of
performance has been achieved by a particular employee within a well-identified
job.

Creating specific measures is the only way that we can use a performance
appraisal to improve the performance of our employees over time. The
employees have to understand what they are doing successfully and what they
are not. Many times, evaluation forms may be too general in nature to be of value
for modifying employee behaviors because we want the form to serve for a large
number of different types of jobs. This can create significant problems in the
performance appraisal process.

 Based on the mission and objectives. Finally, you want to make sure that
your performance management system leads to accomplishment of your
organizational mission and objectives. As with everything else we do in HR, we
need to ensure that the performance management process guides our employees
toward achievement of the company’s mission and objectives over time. As
managers in the organization, making sure of this connection will allow us to
reinforce employee behaviors that aim at achieving organizational goals and to
identify for our employees things that they may be doing that actively or
unintentionally harm our ability to reach those goals.

Many appraisal types exist; from traditional to trendy, simple to complex, highly
structured to open-ended. Some of these types have been shown to work ‘better’ but the reality
is that appraisal types and systems should be as unique to a company as possible. Here is a great
overview of the most popular and common appraisal methods for a variety of business models.

To begin, we must first analyze the parties involved with the various appraisal
methods. Overall, performance appraisals can be set up to incorporate feedback from 3
different sources2:

 Feedback from the employee being evaluated

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  Feedback from the manager/supervisor
 Feedback from other stakeholders (peers, customers etc.)

EMPLOYEE FEEDBACK:

 Self-Evaluation Method

- Self evaluations are a great way to kick-off reviews. A self-evaluation is when the
employee is asked to judge their own performance against predetermined criteria. The
advantage of this kind of an appraisal is that the employee is allowed to give his input into
his performance appraisal, and the company can use this self-appraisal along with the
standard appraisal to give a more rounded employee review. The disadvantage is that an
employee may not be able to evaluate their own performance objectively, giving himself
an artificially high performance grade and making the self-appraisal less valuable.
Employee self-evaluations help to demystify the appraisal process and can provide
interesting insight into gaps between employee and manager ratings. Self appraisals also
help to ensure that employees have read and hopefully have analyzed every corner of
their performance.

 Journaling

- Technically, employees should be encouraged to keep ongoing journal notes to

document performance milestones and use those to support their self-assessments;
however, technology is causing this process to shift as employees can now use instant
feedback tools within appraisal systems to send performance notes directly to their
manager’s library of notes.

MANAGER FEEDBACK:

 Graphic Rating Scales

- This is probably the most common. Using this method, a supervisor rates an
employee on a numerical scale for a defined set of behaviors, traits, competencies, or
completed projects. This method gains points for simplicity and functionality, but it only
works well if both managers and employees share the same understanding of each point
on the scale (for example, on a scale of one to ten, is an “average” performance given a
mid-range rating or the lowest rating?) or if the rating categories focus on ‘traits’ rather
than ‘behavior’.

 Weighted Checklist Method

- A weighted checklist presents the evaluator with a set of yes or no questions that
each carry a predetermined value. Questions may include, for example, “Does the
employee follow directions carefully?” or “Does the employee make frequent mistakes?”
The numerical value of each answer is then added and applied to an overall determination
of his or her success. These kinds of questions must be both worded and weighted
carefully or the results can become confusing. But when properly executed, the method
is clear and allows easy comparison between each employee and the next.

 Paired Comparison Analysis

- This option relies on a grid that presents numerical values for each employee
based on an established set of criteria. After the values are collected, they can be
reviewed against other values presented in the same format and affected by the same
factors. This method can be complex and labor intensive if done manually, but it allows

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 the kinds of apple-and-orange comparisons that often present philosophical challenges
to HR managers who need to standardize evaluation methods across groups of employees
facing very different tasks.

 Essay Evaluation Method

- The Essay method is the grandfather of methods. This method provides managers
with an open-ended opportunity to describe an employee’s strengths and weaknesses in
short essays. Essay evaluations give supervisors a chance to assess behaviors within a
complex context, but it removes some of the easy comparability of the paired-comparison
method above and leaves a lot of room for confusion. Essay Evaluations are very
unstructured and are often riddled with bias. If this was one of the first methods used to
evaluate performance – it is no wonder why evaluations have been given a bad rep. There
is still a place for essays, but in a different form. Today’s essays are shorter, specific, and
usually used to support a rating.

 Critical Incident Method

- Like the essay method above, the critical incident method allows supervisors to
describe an employee’s excellent or poor response to situations arising during the year in
question. This method keeps answers open-ended, flexible, multi-dimensional, and
respectful of context. But it also resists standardization and comparison, and if the
incidents aren’t recorded and discussed as they occur, a subjective assessment made
weeks or months later may have limited value.

 OUTSIDE (360) FEEDBACK:

- Gathering feedback from multiple sources is a great way to ensure employees are
rated fairly and accurately. 360 feedback incorporates data from peers, supervisors and
even outside parties like customers and suppliers. This broad feedback can provide a
multi-dimensional picture of performance that can cancel the influence of bias or outlying
data points. The goal is to paint an accurate picture of employees strengths and
weaknesses. 360 feedback can be collected to gauge performance but can also be
executed solely for development

9. IMPLEMENTATION ASSESSMENT

The success or failure of a project is primarily determined by its management, becoming

the assessment of process what provides conclusive information on the fulfillment of project
objectives.

Another critical success factor for MBO is the implementation of a sound performance
measurement system. This may include daily, weekly, monthly or periodic review, depending
upon the nature of the objectives and the timescales in which they are to be achieved. The
outcome of each review action should be an assessment of the extent to which the goals are being
met, so that planning for the next stage can continue, based on accurate information.

As part of the measurement and evaluation system, a system of reporting is necessary;

this system itself should be regularly reviewed to ensure that it is doing its job properly and that
reports are not merely box-ticking exercises that offer no real evaluation.

Indeed, there are reports and procedures can be misused in at least three ways.

1. The first relates to the belief that procedures are instruments of morality;
2. the second is the idea that procedures can become a substitute for judgment;

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 3. And the third, the most common, is that the use of reports and procedures is simply a means
of management control .

To avoid these pitfalls, reports and procedures should focus on the performance needed
to achieve the results in key areas. They must be the tool of the person who completes them,
rather than themselves becoming the measure of performance. In any case, they should be kept
to a minimum, should be as simple as possible, and used only if they save time and effort.

It can be said that the measurement of performance should be open and well-understood
by all those involved, since such transparency helps in a merit-based reward system. Again, some
cultures do not operate their reward systems on merit, but rather on long service and according
to influences brought about through tribal and family affiliations. In an MBO culture, rewards are
attached to performance, and therefore its measurement and subsequent evaluation have to be
clearly-defined objective processes.

As you perform the post-implementation assessment, certain methods and practices will help
you obtain the best possible information:

 Define the scope of the assessment beforehand -The last thing you want to do is to
create a political problem. Given the number of people often involved in a project, it's
easy to hurt someone's feelings when reviewing the project's success. Clarify your
objectives for the review, and make your intentions clear – this will better ensure that
people share their experiences openly and honestly. Then make absolutely sure that you
stick to these intentions, and that people's egos aren't unnecessarily bruised by the
process!
 Review key documents – gather the key project documents. This will help you assess the
project planning process, as well as the actual benefits achieved through the project.
 Consider using independent reviewers – Where possible, use outside people in your
review process to get an objective, unclouded view of the project. Some people
recommend using only independent people in the review, however, you can learn a lot
from the perspectives of those who were directly involved in the project – this is why the
best strategy is probably to have a balance.
 Use appropriate data collection – Collect information in the most appropriate way, for
example, by using interviews and surveys. Also, test the deliverable yourself, to make sure
you get firsthand information.
 Deliver appropriate reports – Report your findings, and publicize the results. Remember
that the assessment is designed to help project managers conduct more effective projects
in the future, as well as to measure and optimize the benefits of the specific project being
reviewed.
 Present recommendations – Present the detailed recommendations to the organization
and the project leaders, as well as to customers and other stakeholders. Include as many
people as necessary so that you keep – and apply – the best-practice information in the
future.

10. THE MONITORING SYSTEM AND EVALUATION

Monitoring is the systematic and routine collection of information from projects and
programs for four main purposes:

 To learn from experiences to improve practices and activities in the future;

 To have internal and external accountability of the resources used and the results
obtained;
 To take informed decisions on the future of the initiative;
 To promote empowerment of beneficiaries of the initiative.

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 Monitoring is a periodically recurring task already beginning in the planning stage of a
project or programme. Monitoring allows results, processes and experiences to be documented
and used as a basis to steer decision-making and learning processes. Monitoring is checking
progress against plans. The data acquired through monitoring is used for evaluation.

Evaluation is assessing, as systematically and objectively as possible, a completed project

or programme (or a phase of an ongoing project or programme that has been completed).
Evaluations appraise data and information that inform strategic decisions, thus improving the
project or programme in the future.

Evaluations should help to draw conclusions about five main aspects of the intervention:

 Relevance
 Effectiveness
 Efficiency
 Impact
 sustainability

Information gathered in relation to these aspects during the monitoring process provides
the basis for the evaluative analysis.

In general, monitoring is integral to evaluation. During an evaluation, information from

previous monitoring processes is used to understand the ways in which the project or program
developed and stimulated change. Monitoring focuses on the measurement of the following
aspects of an intervention:

The evaluation process is an analysis or interpretation of the collected data which delves
deeper into the relationships between the results of the project/program, the effects produced
by the project/program and the overall impact of the project/program.

The establishment of a monitoring and control system in organizations that apply MBO is
necessary in order to measure results and undertake the necessary periodic evaluation. As well
as helping to establish fixed rules for measuring performance, such a system also contributes to
the extent to which the objectives are actually achieved, since it enables the feedback upon which
behavior can be sustained, or changed to realize better outcomes/. Hence, monitoring and
evaluation is a fundamental principle in the MBO process. However, the monitoring and
evaluation function of MBO has undergone considerable change over the years from it being
purely an appraisal tool in its Organization’s Objectives Departments to one that integrated
individual and organizational objectives, and then to one that expanded to include long-range,
strategic planning.

If it is to remain a viable and effective managerial system, MBO must continue to evolve.
Where appropriate, new knowledge concerning monitoring and evaluation should be included in
MBO. This new approach recognizes the interdependence of the organization and its
environment, and the fact that the organizational inputs are transformed through the MBO
process to produce the outputs; the outputs themselves must continue to be monitored and
evaluated. Odiorne (1987) pointed out that, as goals are jointly set by superiors and subordinates,
MBO provides a basis for evaluating an individual’s performance, in which the individual is given
sufficient freedom to appraise his/her own activities. An interesting aspect of MBO is that, as
individuals are trained to exercise discipline and self-control, this management by self-control
replaces management by domination, and consequently, appraisal becomes more objective and
impartial. It has been noted already that McGregor (1966) considered conventional appraisal
mechanisms to fall short in this respect, being focused mainly on personality traits, and not being
attractive to managers who were not convinced of their validity. The whole essence of MBO is
that whilst individuals are certainly evaluated, they are assessed primarily through a self appraisal
approach

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 The monitoring process is being regarded by one of the most important project financing
bodies, World Bank, as the continuous assessment of project implementation in relation to agreed
schedules and use of inputs, infrastructure and services by project beneficiaries unlike the
evaluation process, which is regarded as the periodic assessment of relevance, performance,
efficiency and impact assessment (expected and unexpected) of the project in relation to stated
objectives.

Monitoring and evaluation need not be expensive or complicated, nor do they require
specialists or grand calculations. The complexity and extent of the studies can be adapted to fit
the program needs. The job of the project manager in this process is to point out those areas in
need of monitoring or evaluation. If this is left to the researchers, the studies may tend to be too
academic and not as useful to project management.

Evaluation and monitoring systems can be an effective way to:

 Provide constant feedback on the extent to which the projects are achieving their goals.
 Identify potential problems at an early stage and propose possible solutions.
 Monitor the accessibility of the project to all sectors of the target population.
 Monitor the efficiency with which the different components of the project are being
implemented and suggest improvements.
 Evaluate the extent to which the project is able to achieve its general objectives.
 Provide guidelines for the planning of future projects.
 Influence sector assistance strategy. Relevant analysis from project and policy evaluation
can highlight the outcomes of previous interventions, and the strengths and weaknesses
of their implementation.
 Improve project design. Use of project design tools such as the logframe (logical
framework) results in systematic selection of indicators for monitoring project
performance. The process of selecting indicators for monitoring is a test of the soundness
of project objectives and can lead to improvements in project design.
 Incorporate views of stakeholders. Awareness is growing that participation by project
beneficiaries in design and implementation brings greater “ownership” of project
objectives and encourages the sustainability of project benefits. Ownership brings
accountability. Objectives should be set and indicators selected in consultation with
stakeholders, so that objectives and targets are jointly “owned”. The emergence of
recorded benefits early on helps reinforce ownership, and early warning of emerging
problems allows action to be taken before costs rise.
 Show need for mid-course corrections. A reliable flow of information during
implementation enables managers to keep track of progress and adjust operations to take
account of experience.

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