THE IilAHAGETI'IEHT BY OBJECTIVE$ SY$TEIII{Source: Stoner, James F. lg80. Management.

New Jersey: Prernice Hdl. pp. 154-t6t).

MBO programs can vary enarmousty. Some are designed for use in a small ubunit of anorganization, while others are used for the organieation as a ufiole. The particularmethods and approaches that managers use in an MBO pragram will differ, There alsomay be wide differences in emphasis. In the United Kingdonq for example, MBO isknown chiefly as a system for corporate planning or strategr developmint. The emphasisis on efficienry in reaching compaffy objectives- In the United States" individuatmotivation is more often the focus of attention. Managers concentrate on human needsand on increasing snrhordinate participation in goal sctting rather than on stratqgy.Nevertheless, in most effeAive MBO systems" there are several cofilmon elementso whichare dessibed nent.

Topl*vcl Goel Setting. Effective planning programs fbr an organization usually startwith top managers setting preliminary goals after consultation with other manag$r$ in theorganization- As much an possible, these goals are stded in specific ternrs - "h 5 p€rcentincrease in sales for the y€ar,"'h 15 percent expansion in the number of patients processedin our clinic,"'bo increase in overhead costs for the y€ar," and so on. With specific goalsset, people in the organization will have a clearer idea of what top management hopes toaccomplish. They will also be better able to plan realistically for achieving these goals"

Individual Gonl Sctting. One of the basic characteristics of effective MBO programs isthat each manffger and subordinate will harre clearty defined job descriptions andodectives - for examplg '"The manager of Subunit A will be responsible for increasingsalesby 15 percent oyer a twelve-nnonthperiod-" Agaiq the purpose ofmakingobjectives at every level of the organieation as specific as possible is to help managers andsubordinates underntand clearty whm they should accomplish- In this way" their effsrtswill b€ purpos€ful and efficient, instead of being dispersed in too many directions"

To be most effective, the objectives for each individual are reached fu joint mansger-subordinate consultation. Subordinates help managers develop realistic objectiveq sincethef know best what they are capable of achieving. Managers help zubordinate* *raise

their sights" toward higher objectives, by indicating confidence in zubordinates and awillirqgness to help zubordinates cvercome obstacle*- Suchjoint consultation is inrportant,because individuals will be most committed to objectives that they have helped developand that reflect their oum iril€re$ts and abilities.

Participetion. The dqgrre of zubordinate participaiion in the setting of objectives canvary enormousty. At one s)ftreme, zubordinates might participate onty by beins preseirtwhen objective$ are laid down by nranag,ement. At the othm extreme, subordinates mightbe cornpletely free to set thsir own objectives and methods fcr achieving them, Neith€rofthese extremes is likety to be effective. Managers might set objectives without ftll

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knowledge of the practical constraints under which their subordinates must operate;subordinates rnigh select objectives that are inconsisted with the organization's goals.As a general rule, the greater thc rrurtual participarion of managers and zubordinates in thes€tting of goalq the more likeh it is the goals will b€ achieved-

Autonorny in Implementation. Once the objectives have been set and agreed upon, theindividual hns a wide rarige of discretion in ckmsing the means for achieving theobjectives. Within the normal constraints of organization policies, managers should havethe freedom to develop and imple,rrent programs to achieve their goals without beingsecond-guessed by their immediate zuperiors. This aspect of MBO is one that is mostappreciated by manag;ers in an MBO program.

Review of Perfonntncc. Regular, periodic intenriews are held between manager andsubordinate to revisw progress toward the prwiously set objectives. To be frir andmeaningful, the review is based on specific, meazurable performance rezults rather than onsubjective criteriq zuch as attitude or ability. For example, rafiher than attempting toreview how energetic a salesperson has been in the field, emphasis would be placed onactual sales figures and dstailed knowledge of specific outputs.

During the review process? rnanager and subordinate decide whato if any" problems existand urhat thery can mutually do to help resolve thenn- If necessary, the objectives will bemodified for the next review period.

Cornmitment to the Prograrn. [t requires a grsat deal of time and energy to imple,ment azucce*sfirl MBO prsgrnm. Managers must meet r$ith each subordinate, nct only to setobjectives, but to review progr€ss toward these objectives. For this reason, effectiveMBO programs require the fuU support of everyone in the organization from topmanagenr€nt down. There are no easy shortcuts; setting objectives without periodicreview will eventualty result in urmren oliectives; reviewing the progrecs of zubordinates inan overly judgmental way will result in rerentment.

The MBO Flocess

Ahhough emphasis and methods \iary considerably, rno$t e.ffective MBO programs includethe fallawing eleinents:

l. Effective goal settkrg and planning by top management.2. Setting of individust goals by managers and subordinates that are relded to the

organizational goals-3. Considerable autonomy in derreloping and selecting msans for achieving objectives.4. Frequent rwieur ofperfrorrrance as it relates to objectives.5. Commitment to the approach et all levels ofthe organization.

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When property introduced into the organieation, MBO can be hishly motiwtingIVlanagers and subordinates can soe th€ir individual position within the organizdion mor€cleady and will be motivated to contribute mors toward the organization"s goals as lrrell astheir owrl.

The Evafuation of [flBO

We have implied thrt MBO programs that inctude (1) th€ establishment and acceptance ofspecffic goals, (2) timely and accurate feedback on performance against those goals, and(3) the active involvernent of individuals in the goal-senting and revienr process shouldimprove the individual's and the organization's perfoffnanc€. Stephen f. Carroll andHq L. Tosi have revieu'ed the res€drch on thete three MBO concepts - goal settingfeedback on perfonnanffi, and participation - to determine if optimism about MBO isjustified.

Goat Setfing One ofthe mnin conclusionr reached frcm research into goal setting wasthat" in eff€ct, nothing zuccmds like success. Individuals setting their own goals tend toaim for an improvernent on past performance. If th€y achieve this improvement, thryagain set thernselves a higher goal. If thry fail to reach their target, however, they tend toset more conservative levels of aspiration for the next pedod-

The research also suggests that employees who are given specific goals do reach asignificilntly high€r performance l€rrel thon those whc are merely asked to do their best.However" if employm fe"el that goals are impossible rather than challarging , theirperformance is likely to decrease.

Although most of the research Carrol and Tosi reviewed was not performed inorganizations with establishcd bIBO programq the research doe* indicoe that MBOshould improve performance if the goals are realistic and acrepted by the employeesimolved" The actual degree of improvemenrt, however, rffill depend on ruany frctcrs, zuchas the individual employee"s past experience with suc,cess or failure in reaching goals andhon, difficuh the astual goals are.

Fdbark on per{ormense. Not surprisiogty, providing employees with feedback willgenerally lead to improvernents in their performance. In addition, Hback has be€nshorrn to have positive effwts on employ€€s' aftitudesi creating feelings of friendliness,confide,nce in manag:err€d , and a more tolerant acceptance of criticism.

Several studies showed a relationship between the quality of the fi:edback and the degrreon irnprovement: the mor€ specific and timely the fesdback , the rnore positive the effest.Also, the manner in which the feedback is provided also affects performance. Thefecdback should be given in a taetful msnn€r, partiGailady if it conveys a failure to meetobjectives. Otherwise, hostility and rduced perfiormance can rezult.

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Pafiicipntion. Most research studies on participation indicate that subordinates wlro setor participate in setting th€ir orf,n goals are likely to show highgr performance lwel thansubordinates who have goals set for them. In one well-known study of an MBO prograrn,G€neral Elechic subordinates who had more inffuence in setting oqotiu*s showed morefavorable attitudes and higher levels of achievement. On the other hand, subordinates whohad little inffue,nce and were dominated by their zuperiors shorued defernive behaviorand, in some ca$e$, lower levels *rf achievement.

Carroll and Tosi concluded from their research that participation $'ill lead to greateremployee acceptance ofperfoffnanc€ goals and man"ge*eot decisions. The very proces*ofparticipation, their studies suggest, invariably leads to increased communication andunderstandhg betwe€n managcrs and subordinates

The Strengths of nilBO

A sunrey of managers about their experience with MBO found that MBg's majoradvantages were? in the order mentiond as follows:,|. lt lets individuals knur wfiat is expected of them.2. lt ails in planning by makhg managers esilablislr goals and target dates.3- lt imprwes communication betueen managers and subordinates.1. lt makes individuals more aurare of the organization's goafs.5' lt makes the evaluation process more equitaHe by focusing on specific accomplishments.

It also lets subordinstes knGv how welf they are doing in retation to the organizationtgoals.

From this zuruey and other anatyses of MBO, it seerns clear that MBO can offer majoradvantages to the individual as well as to the organization. For individuals, perhaps themain advantage is that MBO allorrs thenr to gain an understanding of a nrpoio.'*expectations " This will allou'thern to concentrate their efforts where they are mostneeded and most likely to be retuard€d . [n addition, individuals will have to worry lessabout being evaluated on their personal traits or attitudes - which a particul* ,op*rio,mny dislike- Rathtr, they will be evaluated on how well thery have accomplished thespecffic objectives that they have helpd to establish. The result is that inaiviAuat in theMBO prosess 8re rnore likeb than others to perform their responsibilities willingly andwell.

All these individual benefits will, at least indirtrth benefit the organiedion a$ well. Inaddition" there are advantages to a successfirlly implementd MBO program that applydirectty to the organization. Since all lwels of the organization hdt io *"ttiog ob;ectives,the organization'$ goals and objectives will be more realistically based- This is palticglolyimportant in the planning process, whsr future goals for the organization ate established.In addition, the improved communication that rezults from MBO can help the organizationachieve its goals, since its activities will be better coordinated- Finalh, the srtire

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organization has an increased sens€ of unity: lorryer-level ur'rployees are m$ne aware oftop managemenrt's enrpectation* and in turn assist in establishing attainable objoctiveo-

MBO does nct, of course, solve all the organization's problems. Appraisal ofsubordinates is a perticuta*y diffialh area, because il invotves stdus, sdaries! andprornotions- The reYiew prooess might welt involve tensions and resentrn€nts even in thebe* MBO program. N$t all the accomplistrnents af a subordiaate can be guantified ormeasrred- Everi if achievements (or their larlk) are rneasurable - zuch as the totat numberof sales in a nftordin*e's arsa - the zubordinate might not be responrlble ftrttrem- Fsrexample, sales might drop deepite the zubsrdinate's best efforts Secause of someunorpected move by a conrpetilor- TIrc chaages MBO requires ln a manager's behaviormay nlso carne problems. tn the MBO proc€ss, the emphasis is shifted ftom judgngsubordinates to helping thffl This is a diffifirlt shift hr many man4g;ers to make-

The Weaknesses of illBO

Tlre weaknesses of MBO can be dividsd irfro trnro cdegories. In the first category areweaknesse s fuilwrent in the MBO prossss- The$e include the considerable time and effartinvolved in MBO and manageffi' reluctance to do the consid€reble papenuork usnraltyrequired. In the second calegory are weaknesees that theoretically should not exist butthat frequemly f,Gem to darelop in wen properly implemeffied MBO programs.

This second category inctudes several key, recurring problems in MBO that must becontrolled ifthe program is to be nrccessful:

l. *{onagemutt WIe wd nrryt, tftop manag€r$ prefer a strong authoritarianapproach with ce'lrtralired deci$ion making they will require consid€rable reedu-cationbefare they can implement an MBO pilogram. MBO stands little chance without thefull understanding and zupport oftop nmnag€rs.

2. Adffifun wd clunge MBO may require many changes in organizationnl structure,authority patternsb and co,r$rol procedures. They require the futl support of themanagers irmolved. Those who participate only hause they are ford to go alongErith the organization mily easily doom t.he prcgram to faitrure

3. Interpwxwals*ifls. The manager.zubordinate appraisal and goal-setting proceduresrequire a high level of skill in inte"personal relations. IHany firanag€rs hsve neitherprevious experience nor natural ability in these areas- Extensive training in counselingand interiewing is uzualty required.

4. Ioh dmrtfiims. Framing a qpecific list ofindividual objectives and responsibilities isdifficuh and time-cannrming, especially whsn a zubordinnte's job is camplor Inadditior; job descriptions must be frequently reviewed and revised as ccxrditions within

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the organization change, This is particularly critical during the implementation stages,urhen the impact of the MBO syst€m itself may cau$e ctranges in duties andresponsibilities at every level. Too often, despite a manag€r's best efforts, zubordinatesstill fail to under$tand completely uftil is eirpectd of thern

5- Setting and coordimting obicctivcs. Setting challenging yet realistic objegives isfrequentty a source of confirsion far managem in an MBO sy$tern Problerns may oosurin making the objectives meesurablg in finding a happy medium between too easilyreached and irnpossible targets, and in describing the objectives in clear and preciseterms. In addition, difficulties may be encountered in coordinating objectives not onlywith the organization's overall aims but also with the personal needs and objectives ofthe individuat.

6. ContruI {SffiI oehiwuttent M*& Considerable frushation can resnrh if onemanager"s efforts to achiwe his or her goals are dependent on the achievement ofothers within the organiation Far example, production-line manag€rs camot beexpectd to meet a target of assembling 100 units p€r day if their departme,lrt is beingrupplied with parts fbr only 90 units. Group goal setting and flexibility are needed tominimize this type ofproblem.

Ittaking ilf BO Effective

MBO shculd not be considered a panasea for an organiz*ion's planning, motivatiorqevaluatioq and control needs. And it is certainly not a simple proc€$s that can be quicHyand eastly inrplementd. Nevertheles$, mafiy large organizations are using $om€ form ofMBO. There is wide rwognition of the advant4ges of having some mechanism of goalsstting and evaluation fon managers and of having individual goals imegrated within theorganization.

Maily ofus will wort in organizations or zubunits within an organizaion that have som€form of formal objective-setting progam. For this reasorL we will list the elements thatare needed to make an MBO{rye program effoctive.

Aceqtaace sad use by mgff/regerr. For MBO to succeed it must be not only zupportedby manngemem but also used by managemerfi. Subordinates must be alvare that thesystem is conrpany policy in practic€ as well as in name. For example, if performancelevels are set without connrltation with subordinates, the syrtem will rapidly fall apartbefore any appreciable benefit can be achieved.

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Cl*wfurnnlfriqt of @i*w. hdanagers and subordinates mrst be satisfied thrt

objectives af,e clearly undsstood and realistic, &d thd the'y s'ill bc used to evalude

p.rf"r**o. ffmanagers do not already know horu to set useful goals, ttrey may require

considerable trahiqg to teach ttrcm the skill-

Avaitability offudbar*. An MBO systun depends on those invotved knowing where

th€ry stand in t*tutioo to their objectiver. Settrng goals iq in itsdq not sufficienfi a$ an

incentive; rryular performance ievien'and fwdbask of renrhs ar€ necessary to realize the

full poternial of the pr$gram,

Mifiaing sxpport of progr&n Initial mrpport and enttnrsiasm for an MBO prograrn

may qi*Hy disappear "ot*r* effons are made to keep the systeln alive and fulty

functioning. 11,163119o* wtro find it diffinrh to set and rwiew objectives may quicklv revert

to more traditiond snd agthoritarian spproaches- Top manag€rs tmrst be aware of,these

tendencies and they rnust make spwial etrorts to keep the program a vital part of'the

orgnniation" s operming procedures.

Eacaxragwwfi dpAnc$Afut Managers mu$t realire that participation by

sgbordinates in fix1hlal goal setting mfly mean a realloc*ion of porver- They must be

wiuing to relinquish sorne control over the work environment and to encourag€

n$ordinates to take a morrg active role in achieving their oQiectives. bfanngers may be '

somewhat uncomfortable with this loss ofpower, but only if they accept that loss cfln an

MBO program be effestive.