MBO originally flourished from the idea of improving a company's performance, it has maintained its place among other managing methods. MBO has a more organized way to manage work than most methods. Harry Levinson suggests that as a result of dissatisfaction in the workplace, line-managers turn to MBO. In order for MBO to be successful, there needs to be a balanced combination of control, planning, and leading. According to Levinson, “The MBO process has been installed with consideration to two major things: (1) The dynamics and (2) The mechanics of the process.” Furthermore, “don't get overly preoccupied with the mechanics; look at the dynamics of what you are doing.” 4 Pg. 16.
The utmost success of MBO relies on two significant concepts: first, everyone in the company must accept the technique, and second, everyone needs to follow the specific attitude needed for this technique to thrive and survive. When introducing a new program, or at least planning to introduce a new program, it is favorable that employees are asked to give their projected results. The employee is asked to form his or her objectives, meanwhile being informed of your (manager) own objectives and plans. Manager-employee collaboration in this manner is necessary for the performance of the task on hand from a functional and mental viewpoint.
Management by objectives differs from other programs in the sense that it goes deeper into what is expected of the results, as opposed to other programs where functions are merely specified with no further explanation. Mr. Levinson makes a very convincing claim about ones willingness to obligate him or herself to a goal when he says “If I control your plans, you have little or no freedom. If I, as your superior, ask you to commit yourself to some results, you do not necessarily need to look at the plans unless you have to synchronize with someone else.” 4 Pg. 17. It is necessary that we link our obligations to MBO with our responsibilities. To further explain this, when one has a job to complete, one is responsible for the completion of this job and that is why one will become committed until the end so that what is expected to be achieved is indeed achieved. So this is why we connect our obligations to MBO with our responsibilities. For example, if you are working on a campaign or act for a good cause, you may feel that because you have signed up for this job that it is your responsibility to not only deliver the work but to make the extra effort in actually completing your task, your initial determination to complete what you started and your commitment will subconsciously add this task to your responsibility list which pushes you to work till the end in order to scratch that responsibility off your list.
For a successful management by objectives, goals should have three characteristics: “(1) operating goals, (2) relationship goals and (3) self-development or self-improvement goals.” 4 Pg. 17 Levinson, uses an example to explain the importance of relationship goals. In his example, he stresses the result of not maintaining appropriate relationships with colleagues. He also suggests that we combine our self-development goals with that of the MBO to obtain our personal achievements. Last of all, operational goals remain the most important goals of all due to the fact that the entire point of MBO is to reach these goals, both in the short and long-term.
A critical point is that the truth is faced if a manager or employee is incapable of reaching his or her foreseen aim rather than covering up, it is best that he or she confront the problem and ask for help. From a manager's viewpoint, it is preferred that the reaction to an employee's failure is not a negative reaction in order for employees to see that it is ok to tell the truth when they do not succeed. This is extremely important in order to maintain honesty.
Management by objectives allows employees to advance individually as well as in a group. “It is damn tough to do.” 4 Pg. 18 This is common sense. Introducing MBO requires employees to be open to change and accept it with a positive attitude. The entire system that employees are so accustomed to is flipped into another, and this can be intensely difficult. To finish up this point, a demotivated manager is a demotivated business. Employees cannot be expected to commit and invest in their jobs if the manager does not do the same. It is his or her motivation that encourages the rest to commit.
This article is introduced with the president of a company receiving a pitch to adopt the MBO program in his organization. The main reason was to be able to assess single performances of individuals. However, the program did not work as well as everybody would have liked. Some problems that arose “managers saw no relation between the program and their daily managerial job, the training department failed to integrate the program with existing managerial procedures, and the training department failed to heed the “spaced vs. massed learning” principle by cramming an entire philosophy of management into a three-day program.” 5 Pg. 10 Because of this failure, it was more of a training program rather than a refurbishment of present programs. MBO is considered functioning when “The primary organization has written, clearly defined, and understood measurable goals and objectives, the goals are translated into specific plans for individuals within the organizational units with specific measures as to who is going to do what and when, and a procedure is in place whereby the plans are regularly reviewed, revised, and new ones developed with the individual who is responsible.” 5 Pg. 11 Management by objectives differs from one organization to another depending on the extent of planning taken on, that is bigger firms will of course necessitate more research and planning.
An experiment was carried out involving three businesses within one company. The three businesses were similar in size, production method, goods sold, and location. Three types of methods were practiced. The methods were, “an objectives-based performance appraisal system, feedback to each manager of the results of a survey of his man-management practices, and a Management by Objectives program.” 5 Pg. 11 Outcomes of this was that employees that were given the most attention, as in all three methods were practiced on them, demonstrated a great deal of transformation.
This business, which used all of the above methods, demonstrated the largest development. MBO was also tested in a smaller company with the idea pitched to the president in hopes of “(1) to accelerate his understanding of who was doing what, (2) exert his influence on operations, and (3) start his group functioning as a team with common objectives but separate accountabilities.” 5 Pg. 12 Therefore, due to the company's size, a less complex structure was used. In conclusion, MBO is capable of working in different sized and managed companies.
MBO doesn't work for all companies. It is not something to be taken lightly, it requires extensive research of its potential advantages and disadvantages regarding your company. MBO is a means of achieving a goal. MBO can be looked at from both Theory Y and Theory X objectives, “For some it is a means of introducing a Theory Y oriented form of autonomy in which managers are given freedom to set their own goals. Others approach it in terms of Theory X - as a means of tightening managerial control and getting subordinates to do exactly what management wants.” Â Â Â Â Â Â Â Â Â Â Â Â Â 7 Pg. 10 MBO specializes in resolving dilemmas and reviewing an employee on assessable and tangible aims that have been set by him or her with the support of the manager. It was also at one point in this article used as a method of budgeting.
Once again, management by objectives requires that every step and goal be clearly defined and understood. This allows goals to be achieved more efficiently. Also, it creates a sense of belonging in the workplace as employees are aware of what they are working towards. Therefore, throughout the hierarchy employees will be in on concluding objectives and the method adopted to meet those objectives.
Now that we have established that MBO involves both managers and subordinates setting goals together to achieve them, what is the incentive that drives the subordinates to keep working until they have achieved their goals? The answer is that MBO is connected to a rewards system (employees' wages). In short, an employee will be compensated for his or her good work monetarily. Therefore, management by objectives involves shared goals appointed by both managers and subordinates.
The John Hancock experiment was conducted on MBO with the following factors: “(1) setting long-range company goals and objectives; (2) implementing them with departmental one-year and five-year plans; (3) translating the latter into specific one-year objectives of supervisors, managers, technical personnel, and above; and (4) establishing, primarily through group effort of all other personnel, short-ranged unit goals developed in what we call PRIDE programs.” 3 pg. 59 There are four phases of implementing MBO. Phase 1 involves explaining the goals to the employees. Phase 2 involves different work units preparing strategies in compliance with the goals. Phase 3 is the integration of the short term strategies with the long term strategies. Finally, phase 4 involves the employees implementing each goal into its specific specialty. Keep in mind that throughout these phases, supervision must be maintained consistently.
There are two known perceptions of MBO. The first is George Odiorne who believes in the integration of setting objectives between the higher leveled employees and the lower. The second is Peter Drucker who leans more towards the higher leveled employees' control over establishing goal. In contrast, Odiorne stresses on the importance of subordinates while the second stresses that final decisions should pass back through managers before implementation.