How Management By Objectives (MBO) Works – Advantages / Disadvantages

Management By Objectives (MBO)

Management by objective (MBO) or management by Result is both a philosophy and a technique of management. The philosophy is aimed at harmonizing individual manager goal with those of the organization (it is an embodiment of precise strategic plan and its translation into departmental and individual goals, which are reviewed when result are obtained).John Humble saw MBO as a mean of integrating organizational goals such as profit and growth with the needs of individual manager to contribute to the organization and their own self- enhance a common purpose and direction amongst the management of an organizational goals such as profit and growth with the needs of individual manager to contribute to the organization and their own self development. MBO, as such, seeks to enhance a common purpose and direction amongst the management of an organization in accomplishment of business result.

The importance of MBO therefore is:

1. Focuses on ends rather than means (result rather than on activities like policies, procedures, strategies programmes etc) which will impede the organization objectives.

2. It professes logical corporate planning process by translating corporate and department objectives into individual manager- objectives,


Douglas McGregor, in his book “ the Human side of the Enterprises” suggested that there are two set of assumptions about how people are motivated to work:

1. Theory X assumptions.

2. Theory Y assumption

The assumption of theory are based on the traditional view that human being regard work only as something that must be done to survive. Thus they will avoid work whenever it is possible for them to do so. According to this view, managers have to be strick or authoritarian with subordinates, because otherwise subordinate would accomplish very little work. Theory Y assumption represent a much more positive assumption of human behaviour. It holds the view that people do not inherently dislike work but can find it great sources of satisfaction. If some people avoid responsibility, lack ambition, or are only concerned with security, it is because of their particular life experience or work situation. Obviously, the extent to which managers subscribe to one theory or another will radically affect their attitudes towards subordinates. If there is a lack of motivation among employees, a theory Y manager will assume that there has been a failure on management’s part to provide a proper environment for realizing the full potential of employees. The task of a manager, according to theory Y assumptions, is not to control subordinates but to help them achieve their fullest capacities within the organization.



Most MBO programmes provide some means for superior and subordinates on every level to review the subordinate goals, make sure they meet certain criteria. The goals should be as follows:

1. realistic (achievable but hard enough to be challenging).

2. specific and concrete (e.g) to increase production by 10%rather than to increase production as much as possible.

3. Measurable (preferable quantifiable but at least definite enough that one can, know whether or not the goals have been reached.

4. Compatible with the goal of one’s organizational superior.

5. Flexible (capable of being altered as conditions change).

Typical MBO programme call for a regular performance evaluation on the basis or accomplished results. Actual achievements are evaluated against previously set goals; and, by allowing for an unpredictable and uncontrollable influences on productivity, the more effectively the goals are achieved, the higher a person’s performance evaluation. This is better than evaluating an individual on the basis of personality characteristics and other equality of irrelevant standards.

In summary – the heart of MBO technique is the practice of goal setting at every level of management, and sometimes throughout the ranks of non managerial employees. The techniques can be applied in such a way that it is compatible with either an authoritarian or a participative leadership style. In some programmes each individual’s goals are assigned; in others, each individual is able to set his or other own goals, subject to approval by superiors.


Henry L. Tosi and Stephen J. Carroll in their survey of employed in U.S.A found that MBO have the following major advantages:

1. It lets individuals know what expected of them

2. It aids the planning by making managers establish goals and target dates.

3. It improves communication between managers and subordinates

4. It makes individuals more aware of the organization’s goals

5. It makes evaluation process more equitable by focusing on specific accomplishments.

6. It makes subordinates know well they are doing in relation to the organization’s goals


MBO, it should be understood, does not; of course solve all the organization’s problems. Like many other managerial concepts, it I pregnant with a lot of weaknesses. The first category of MBO weaknesses include

a. The amount of time and effort involved, and manager, reluctance to do the considerable paper-work usually required.

b. the second category are weaknesses that theoretically should not exit but that frequently seem to develop in every properly implemented MBO programmes. In general, MBO has the following disadvantages

1. It consumes a lot of time and effort.

2. It involves too much paperwork which managers are reluctant to do.

3. Management style and support. If top management prefers a strong authoritarian approach with centralized decision making, they will considerable re-education before they can implement can MBO programmes.

4. Adaptation to change. MBO may require many changes in organizational structure, authority patterns and control procedure. This, of course, may cause problems.

5. Interpersonal skill. The manager subordinates appraisal and goal setting procedure require a high level of skill in interpersonal relations. Many managers have neither previous experience nor natural ability in this area.

6. Appraisal of subordinates is a particularly difficult area, because it involves status, salaries and promotions. The importance of this is that easy target may be set to allow a promotion

7. In the MBO process, the emphasis is shifted from judging subordinates to help them. It is a difficult shift for many managers to make.

8. Naturally some employees do not want to be held responsible and. Goals forced on them may lead to ill-feelings.


MBO should not be deemed a cure- all solution as regards organizational planning, motivation, evaluation and control needs certainly; it is not a simple process that can be quickly and easily implemented. Nonetheless, there is wide recognition of the advantages of having some mechanism of goal. Setting and evaluation for managers and of having individual goals intergrated within the organization. In the nearest future, many of us will work in organizations or subunits within an organization that have some form of formal objectives setting programme. For this reason, it is necessary to touch on how to make an MBO programme effective:

1. ACCEPTANCE AND USE BY MANAGERS: For MBO to prove a success, it must not only be supported by subordinates but also used by management.

2. CLEAR FORMULATION OF OBJECTIVES: managers and subordinate must be satisfied that objectives are clearly understood and realistic, and that they will be used to evaluate performance. Training should be given to them to develop their skills.

3. AVAILABILITY OF FEEDBACK: an MBO system depends on well informed staffs. Setting goals is, in itself, not sufficient as an incentive; regular performance review and feed-back of results is necessary to realize the full potential of the prgramme.

4. Encouragement of participation: managers must realize that participation by subordinates in mutual goals setting may mean a reallocation of power. They must be willing to relinquish some control over the work environment and to encourage subordinates to take more active role in achieving their objectives. Managers may be somewhat uncomfortable with this loss of power, but only if they accept that loss, can an MBO programme be effective.

a. Is the chosen strategy likely to work?

b. If so, will it work better than others?

c. Is the chosen strategy working in terms of the result expected?

d. Has the chosen strategy worked? If not, what t went wrong?

e. Can changes be made now to put the plan back on track?

f. Should we modify, change our strategy in light of new information? Or should we maintain the current strategy because we believe it will work in the long run?

g. Are we achieving our desires production level?

h. Are our costs within control?

i. Is the market reaching positively to the product, services the price and promotional efforts?

j. What do the profit figure look like so far? Are they within expectations? Too ambitious?

k. What is the level of man- machine productivity? Is it in line? Do we need more training for workers?

l. What is the workers’ morale situation like so far?

m. What is the impression of investment analysis regarding our performance so far?

n. Are our results so far within the framework of the budget. The strategic planning process is thus a complex one that requires skill, dedication and commitment by all those directly concerned with planning and plan implementation. the business organization may evaluate its performance in terms of profits, return on investment, sales volume, market share, satisfaction of customers, well-being and development of employees, and a host of other measurements. The polytechnic may measure its performance in terms of output of students, the stature of its alumni, the perceived quality of its faculty, the research output of the institution, and services provided to the community. It is impossible for the complex organization to set forth a single measure of performance for its multiple goals.


Performance measurement is associated with EFFECTIVENESS (The degree to which goals are accomplished). EFFICIENCY ( the utilization of resources in attaining goals)and PARTICIPANT SATISFACTION( the motivation aspects).in most instances, effectiveness and efficiency are mutually exclusive, however, the organization frequently demands to establish different sort of measurements. The organization may be effective in accomplishing goals but may not be efficient in the utilization of resources. Our Nation was effective in construction of oil refineries in different parts of the country but proved inefficient in recent times in management and distribution of petroleum products, else, the scarcity. Conversely, an organization could be efficient without being effective. A business might be efficient in the use of resources but not effective in reaching its sales targets because of a declining market, severe recession, or other factors. Organization has to evaluate its performances generally. It must establish measure of performance for all its transformation processes- not just the financial and technical transformations. It is desires able to establish measures of performance in each of the major subsystems- goals setting,

How Management By Objectives (MBO) Works – Advantages / Disadvantages

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