Management by objectives (MBO) involves setting specific goals and objectives within a company, with employees actively involved in the decision-making process. Benefits include increased employee motivation and communication, but downsides include potential unrealistic goals and measuring employee performance against an ideal model.
Also known simply as MBO, management by objectives is a strategy that focuses on setting specific goals and objectives within a company. In theory, the company’s management and employees agree to support these goals and work together to ensure that the company’s goals are achieved. To some extent, this approach allows all parties to be involved in the decision-making process, as it requires feedback from everyone involved with the business.
There are several benefits to the management by objectives model. One has to do with employee motivation. Because employees are actively involved in setting goals and often in the process of designing processes and procedures that drive the company to achieve those goals, they tend to have a stronger sense of ownership in the overall process. This leads employees to pay more attention to their productivity, thereby improving employee performance at all levels. As a result, the company has a much better chance of succeeding and achieving its goals.
Increased communication throughout the organization is also one of the advantages of management by objectives. Both managers and employees interact regularly to ensure that the operation of all departments and areas of the company is functioning at the highest levels. This open line of interaction helps minimize the potential for miscommunication and therefore supports the overall production efforts of the business. This clear communication process also helps ensure that everyone clearly understands how well the company is working to achieve its goals and what each party can do to help that process.
While there are benefits to the management by objectives approach, there are also some potential downsides. Attention to setting goals can overshadow the practical aspect of designing policies and procedures to achieve those goals. At the same time, strategy can suffer if all parties involved do not have a clear understanding of what resources can reasonably be used in shaping the company’s objectives. Without this grounding in reality, established goals can be unattainable and lead to great frustration on the part of employees and management.
There is also the risk of measuring employee performance against some ideal model rather than the talents and skills the employee brings to the effort. In other words, the employee is expected to live up to some example that may or may not be realistic. Unless the management-by-objectives process focuses more on what an employee can do today and less on what he or she can become tomorrow, there is likely to be frustration on the part of both the employee and the manager that increases the chances of failure.
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