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Management by objectives Essay

Management by objectives Essay

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Management by Objectives (MBO) is a process of agreeing upon objectives within an organization so that management and employees agree to the objectives and understand what they are.

The term "management by objectives" was first popularized by Peter Drucker in his 1954 book 'The Practice of Management'. [1]

Contents Domains and levels

Objectives can be set in all domains of activities (production, services, sales, R&D, human resources, finance, information systems etc.).

Some objectives are collective, for a whole department or the whole company, others can be individualized.

Practice

MBO is often achieved using set targets. MBO introduced the SMART criteria: Objectives for MBO must be SMART (Specific, Measurable, Achievable, Relevant, and Time-Specific). [2] In some sectors (Healthcare, Finance etc) many add ER to make SMARTER. Where the E=Extendable R=Recorded ). [3]

Objectives need quantifying and monitoring. Reliable management information systems are needed to establish relevant objectives and monitor their "reach ratio" in an objective way. Pay incentives (bonuses) are often linked to results in reaching the objectives

This has been really helpful.

Limitations

However, it has been reported in recent years that this style of management receives criticism in that it triggers employees' unethical behaviour of distorting the system or financial figures to achieve the targets set by their short-term, narrow bottom-line, and completely self-centered thinking. [4] [dubious – discuss ]

A more fundamental and authoritative critique comes from Walter A. Shewhart / W. Edwards Deming, the fathers of Modern Quality Management, for whom MBO is the opposite of their founding Philosophy of Statistical Process Control [5] .

The use of MBO needs to be carefully aligned with the culture of the organization. While MBO is not as fashionable as it was pre the 'empowerment' fad, it still has its place in management today. The key difference is that rather than 'set' objectives from a cascade process, objectives are discussed and agreed, based upon a more strategic picture being available to employees. Engagemant of employees in the objective setting process is seen as a strategic advantage by many [6]

A saying around MBO and CSF's -- "What gets measured gets done" [7] -- is perhaps the most famous aphorism of performance measurement; therefore, to avoid potential problems SMART and SMARTER objectives need to be agreed upon in the true sense rather than set.

References

Other articles

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Mbo- Management by Objectives

Management by Objectives One of the Keys to Successful Command
Instructors Ping-Li Yen & Ray O. Shackelford

The Incident Command System
In designing the incident command system, basic management principles were part of the system. For example, unity of command- meaning that everyone on the incident has only one supervisor. Span of control- the recommended number of people reporting to a supervisor is 5-7 with 5 being preferred. Management by objectives- this lecture explores this management concept in detail

Managing by Objectives Defined
Is a strategy of planning and getting results in the direction that management wishes and needs to take while meeting the goals and satisfaction of its participants OR It is a blending of individual plans and needs of managers toward a largescale accomplishment within a specific period of time

Four Operating Principles of M.B.O.
1) Unity of managerial action is more likely to occur when there is pursuit of a common objective- In the incident command system the incident commander sets the goals and objectives to be accomplished. 2)The greater the focus on results one wants to achieve the greater the likelihood of achieving them- In the incident command system, we ensure focus as the objectives are reviewed every 12 hours as we develop the new action plan.

Four Operating Principles of M.B.O. (Cont.)
3) The greater the participation in setting meaningful work with an accountability for a result, the greater the motivation for completing it. Every objective is directly connected with a person who is responsible 4) Progress can only be measured in terms of what one is trying to make progress towardsThe work objectives developed on the 204 form are the expectations of work to be accomplished.

M.B.O. Creates a Management System
System defined “as an organized combination of things or parts forming a complex or unity whole” Every system has a purpose, a composition and a framework for fitting its parts.

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Resource Manager and Managing Multiple Responsibilities: a) Human resource management consists of numerous activities. What areas were illustrated by Sam’s schedule on this particular day? � Establish MBO (management by objectives). � A number of carryover and nagging employee grievance problems. � Al Noren (stockroom foreman) is not in for work. � Responsible for payroll. � Mail � Phone � Rate changes � Interview � Pension benefits � Staff meeting � Lunch with friend. � Replacement of stock clerk. �

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Superintendent called to discuss his need for several production people. � Boy Scout troop � Organize confidential employee files. b) List the areas of ineffective management and time robbers that are affecting Sam. � Doesn’t write down a things to do list. � Doesn’t prioritize that list. � Tries to do everything himself such as answering the phone and reading

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5 main Processes of Management by Objectives

5 main Processes of Management by Objectives

5 main Processes of Management by Objectives:

1. Preliminary Setting of Objectives at the Top:

First the top manager decides the long and short term goals. Subordinate staffs are also involved in setting the objectives. It is not trusted over them. Objectives framed at this stage are tentative and subject to modification".

It is foolish to push top management dictated objectives down the throats of subordinates since forced objectives, can hardly induce an indispensable sense of subordinate commitment".

2. Clarification of the Organisational Roles:

Organization's goal must be compared with the areas of fuzziness where classification is needed. Coordination must be ensured at this stage.

3. Setting up subordinate's Objective:

"After making sure that pertinent general objectives, strategies and planning premises are disseminated to the subordinate manager concerned, the superior can then proceed to work with him in setting his objective".

The superior must hear his subordinates as to their capacities to accomplish the goals. The final responsibility for approving goals for his subordinates must vest the superior:

4. Goals and Resources:

Goals are tied to the resources-like capital, material and human resources to accomplish the result.

5. Recycling the objective:

Meeting point in setting the objectives by a superior and his subordinates is needed and it is done by recycling the objectives framed by both.

"This process is worth the time. People involved will have better understanding of their target and how they fit, they cannot help but have a better feeling of commitment to meet them, the structure of objectives is likely to be characterized by a better fit and the people involved are more likely to meet their targets".

Staff Appraisal Research Paper Example

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Research Paper on Staff Appraisal Example Research Paper on Staff Appraisal: Theories and Recommendations Introduction

The human resource management practice of performance appraisal has attracted the attention of practitioners and researchers for decades. Although most businesses, managers, and employees believe in the need to have ratings of individual level job performance, often they do not have confidence in the performance measurement process in place. Employees express concern that managers are biased or fail to differentiate between high, average, and low performers. One solution that is frequently advanced in response to these reservations is to focus on objective indicators of performance rather than on subjective manager ratings. Although this solution is strongly encouraged, performance in most jobs cannot be measured objectively, especially in the knowledge economy. Furthermore, the definition of job performance has evolved over the decades and includes a wider range of behaviors that cannot always be measured objectively. Hence, subjective ratings of individual level job performance will continue to form the basis of numerous performance appraisals.

Traditionally, managers were exempt from performance evaluation. This, along with several other factors, has changed in the last thirty years. According to one survey, 92 percent of responding firms that had some type of performance appraisal system (BNA Survey no. 135, 1999) conducted appraisals of their staff.

Trends in performance evaluation

Researchers have identified three trends in use of performance appraisals: (1) the methods used to appraise performance have undergone substantial evolution, with the older methods of appraisals gradually being replaced by newer methods, which have been shown to be more valid measures of performance; (2) the number of uses for performance appraisal data has increased; and (3) changes such as more training of evaluators and form revisions are prevalent. The increased number of uses of performance appraisal data is noteworthy. No longer just a method to determine wage and salary adjustments, performance appraisal has become an important part of counseling and development of the managerial employee.

Essays, are decreasing in use as appraisal instruments. Essay or narrative evaluations can range from a simple summary of a supervisor’s thoughts about the subordinate’s performance to a rich, complex description of performance that is useful to both employer and employee. The major problems with this technique are the variability between and within raters as to the quality of the finished product, the accuracy of the performance assessment, and the tendency of raters to focus on traits that the candidate possesses or lacks (i.e. leadership ability, initiative, creativity), instead of specific behaviors that are more under the candidate’s control. The continued use of essay evaluations for managerial positions is likely due to the difficulties in developing specific behavioral criteria for managerial positions.

Rating scales are by far the most researched appraisal technique, which has resulted in the creation and validation of numerous scales. The scales are grouped into various forms, including graphic scales and behaviorally based scales. Graphic rating scales are used to rate managers on traits such as their leadership ability, initiative, and interpersonal competence. Assessments are also made of the manager’s quantity and quality of work. These trait-type scales are easy to create and administer, but they have rather poor psychometric properties. The extent to which they yield accurate descriptions of performance, as well as the tendency for multiple raters to give different ratings to the same person, have led to sharp criticisms of graphic rating scales.

Behaviorally based rating scales were created to answer some of the criticisms levied against graphic scales. Behavioral rating scales fall into one of three predominant forms: Behaviorally Anchored Rating Scales (BARS, Smith and Kendall, 1963), Behavioral Expectation Scales (BES, Campbell et al. 1973), or Behavioral Observation Scales (BOS, Latham and Wexley, 1981). BARS and BES are basically identical scales in which a rater checks off on a form behaviors that could be expected on the part of the candidate. BOS scales eliminate the rater’s subjective judgments by asking the rater to recall specific behaviors they have seen the candidate perform.

The goal of all forms of behavioral rating scales is to make the rating process as accurate and reliable as possible, to help free the rater of subjective judgments, and to ensure that as wide a range of employee behaviors are rated as possible. However, all are based on prior job analyses that determine the behaviors appropriate and necessary for successful job performance, which often is difficult to describe for managerial positions. Thus, behavioral rating scales are not as widely used on managers as they are on lower level positions.

Management by objectives

Management By Objectives (MBO) has become quite popular and seems particularly suited for making managerial ratings. MBO, in a nutshell, consists of setting specific performance goals for each employee (Ordiorne, 1965). These goals may be participatively set by the individual being appraised and his or her supervisor. The goals are highly individualistic, which is appropriate for managerial positions, for job descriptions may differ quite radically even between two managers at approximately the same level in an organization. Performance appraisals tend to be conducted annually for most employees. For employees whose performance is appraised, annual intervals appear most common according to the results of one survey.

Check-in staff at British Airways are assessed on the basis of both their performance and personality (Cox and Cooper, 1999). A wide breadth of experience involving many functions, and often several different industries, is a key element in executive success. Most British Airways employees tend to believe that, in order to be promoted, an employee must be familiar with the various aspects of his organization, and that this familiarity is best achieved through experiential learning of management functions.

In summary, the skills characteristic of successful check-in crew member at British Airways include an analytical ability to define the core problem elements and ignore irrelevancies; a capacity to make and implement unpleasant decisions; strong communications skills; and a long time-horizon. Communication skills are all the more important because the managerial process itself may be more important than the end results, or bottom line. In accordance with the principle of fair play, a basic British Airways social norm, honesty and integrity, predictability, and a reputation for honoring commitments and generating trust are core values for an employee. Check-in staff leaders at British Airways also expect their subordinates (who usually belong to a different social class) to display these characteristics, while accepting a paternalistic style of management and trusting their superiors to look after their interests.

Most companies, including British Airways, apply some kind of formal performance appraisal system to employees. This is comprised of structured or semistructured questionnaires, completed by direct supervisors once or twice annually and before promotions. Some organizations conduct such performance appraisals across the board, usually a few months before the annual salary increase, whereas others complete these appraisals on the individual employee’s birthday or employment anniversary.

This appraisal system for British Airways check-in staff is based on specified job descriptions together with performance measures. British Airways also uses short-term objectives as partial criteria for job performance. In some cases, behavioral skills are also assessed during this evaluation. However, comprehensive MBO systems (Ordiorne, 1965) are normally used only by the subsidiaries of American companies in Britain. Employees may be provided with either written performance appraisals, in full or in part, or with verbal summaries only. In most cases, performance appraisals are used as a means of determining compensation levels.

Managerial performance appraisal

Performance appraisal does not exactly follow the traditional pattern of objectives jointly and contractually set with clear rules to be applied. However, this does not mean that performance appraisal will not follow a useful purpose. Bypassing the formal communications structure, establishing personal relationships, or providing information used for self-guidance, for example, constitute positive side effects of such a system. From the negative standpoint, however, the system can be manipulated and become a stake in a game where one tries to avoid the other’s influence and to acquire power by subtly storing materials for building up a case to be used when needs arise. Finally, the performance appraisal instrument is powerful enough that, in a number of cases, under the influence of the dominant managerial theories, it is applied to some degree according to its initial purpose.

An APEC survey (APEC, 1996) notes that 80 percent of the large enterprises that answered the survey had formalized appraisal procedures, with the appraisal most often taking place during a meeting between superior and subordinate. Therefore, the range can go from the highly formalized MBO with forms filled and stored, to a simple meeting with a very general discussion. According to the same survey, the criteria used to appraise cadres were very diversified.

Performance appraisal is an ongoing process, with both formal and informal aspects. The criteria for performance appraisal for British Airways check-in staff takes three forms. First, performance is based on quantifiable objectives, usually set in terms of balance sheet responsibilities or a level of sales performance. Second, annual goal-setting meetings are common for employees dealing with less quantifiable programs; these meetings link the employee’s objectives with the overall corporate plan. These agreed-upon goals become the criteria for the employee’s performance evaluation. Third, less formal criteria are usually worked out in routine interaction between employee and supervisor. In these cases, the criteria for a employee’s performance are the accomplishment of the specific tasks assigned by the supervisor. The actual performance appraisal process can be formal or informal. In many cases, the informal performance appraisal is the more critical and meaningful of the two.

Informal performance appraisal is carried out in the daily interaction between check-in crew and supervisors. This relationship can be characterized as one of candid communication and interaction. When a member of check-in crew is not performing adequately, the supervisor speaks with the manager directly and immediately. This type of communication is not viewed negatively; rather the employee regards such a session as positive criticism. To some extent it may be seen as a type of coaching that goes on between supervisor and employee, although it is more directive and critical than most forms of coaching. This interaction becomes an important part of the performance evaluation process.

Most formal performance appraisals for check-in staff at British Airways are done through periodic written evaluations, assessment centers, or performance review commissions. Not all large, sophisticated organizations use a formal written performance appraisal. In many cases, this formal, written performance appraisal is viewed as somewhat of a bureaucratic exercise to supplement the more important and frequent informal performance appraisal sessions. Assessment centers were also used by some companies. There are small-scale centers, which assist in selecting candidates for entry-level positions, as well as larger centers that are used for performance appraisal of employees.

Goal-setting theory and rater’s training

The accrued empirical evidence has revealed that it is particularly the various abilities displayed by the assessors, in this respect, that has accounted for the major part of variation in appraisal errors. The best-known technique for improving raters’ efficiency is subsumed under the MBO. Essentially, the system requires that goals be set for each employee to attain. Subsequently, the appraisal process is carried out to determine how the actual level of goal attainment compares with the goal set. Theoretically, the MBO capitalizes on goal-setting theory.

Goal-setting theory claims that the most immediate, direct motivational determinant of task performance is the individual’s goal or intention. A goal is defined as that which the individual is consciously trying to achieve. Generally speaking, very simple forms of goal setting are recognized, implicitly or explicitly, by virtually every theory of work motivation. Scientific management and management by objectives schools have used the MBO explicitly. The technique was, however, largely ignored by early versions of human relations and expectancy theories, but now it is more explicitly acknowledged. In contrast, cognitive growth and behavioral modification schools tend to deny the significance of goal setting, yet they do endorse the method implicitly when they use it in putting their theories into practice (Locke, 1977).

The results of numerous experimental investigations in both laboratory and field settings have supported the conclusion that specific and/or challenging goals do indeed lead to higher levels of performance than do vague or easy goals (Ivancevich, 1987). In a recently completed field experiment, Tziner and Latham (in press) documented the significantly positive and substantial effects on organizational commitment, perceived fairness of evaluation, and work satisfaction when the MBO was utilized in conjunction with the BOS-based performance appraisal.

Relating specifically to performance appraisal, four steps may be outlined in describing how the MBO could be used relating to evaluation of check-in staff at British Airways. In the first step, goals are set for each member of the staff to attain. The second step entails setting the time frame within which a member of the staff must accomplish the set goals. In the third stage a comparison is made between the actual level of goal attainment and the set goals. Lastly, a decision is reached concerning new goals, and strategies are set for achieving goals not yet attained. It is possible to train raters so that typical errors in evaluation are virtually eliminated. The most appropriate training method for this purpose involves workshops that allow for active learning and feedback for raters on the quality of their performance appraisal. The effect of what is learned by raters in an active, sustained framework is likely to last a relatively long time.

A part of the training program at British Airways should consist of a lengthy discussion of the context in which the appraisal process takes place. Possible relations between different dimensions of performance and their influence on the general impression formed by the assessor are discussed, in addition to the various tools that aid accuracy in judgment (Bernardin and Beatty, 1984). Through training procedures raters are assisted in deciding what to observe, in acquiring skills and methods for classifying and interpreting data, and in using the measuring scale on which the performance appraisal form is based. In the course of the training program, discussions are held and examples are presented of perceptual illusions and distortions, as well as errors of interpersonal judgment.

Conclusions

In most places of work the concept worker appraisal is still usually associated with the evaluation of the performance of a worker by a superior. However, it is recommended that the management of British Airways attempts to enrich check-in staff appraisal by providing, as it were, a broader base of information culled from different sources within the organization that commonly represent a variety of perspectives and opinions relating to the worker being assessed. By using more than one source of appraisal, it has also possible to obtain a number of factors that might account for ratees’ behavior in relevant performance areas that in turn will contribute toward the validation of an entire system. Of course, for this approach to succeed, the organization must prepare the participants in this system very well. Goals and principles must be clarified; the necessary skills must be taught. There are five possible sources of evaluation: evaluation by superiors, evaluation by peers, evaluation by subordinates, self-evaluation, and external evaluation.
Following the theoretical framework of organization staffing outlined so far, we are aware that one of the antecedents of work adjustment is satisfactoriness. This notion concerns the extent to which the organization is satisfied with the performance of the employee. It follows, therefore, that the assessment of satisfactoriness of check-in staff should focus on measuring the extent to which an employee meets task requirements and conforms to the organization’s demands regarding norms of behavior, rules of conduct, and so on.

Within this conceptual framework the objective is to arrive at a concisely stated evaluation of what can be derived from this research. The fact is that performance appraisal is always taking place in organizations, whether formally or informally, since the need to hire, fire, and promote workers demands that supervisors continually examine and evaluate the workers’ contribution to the organization.

Performance appraisal is intended to assist the organization in actualizing its inherent performance potential. It does this by facilitating the managers of an organization to enhance employees’ motivation and work-related skills, and perfecting the decision processes involved in the assignment of workers to new positions. In order for this process to achieve this aim, it must be founded on two fundamental behavioral principles. The first states that increased productivity and efficiency is dependent on creating a direct connection between the worker’s level of performance and achievement, on the one hand, and incentives and rewards (such as remuneration and promotion), on the other. The second principle is the need for feedback in which knowledge of the results of the performance appraisal assists in the process of changing behavior and increasing motivation. These principles are an essential condition for the successful functioning of a system designed to evaluate performance in an organization.
Constructing and operating a system for the performance appraisal of workers is an administrative challenge. There are several difficulties involved, which include the following: adjusting an appraisal system to specific applications; selecting, training, and directing the “appraiser”; assessing the appraiser’s ability to analyze information and communicate results to the subjects of the appraisal; and management’s ability to apply conclusions drawn from the accumulated information to the practical level of decision making in personnel management. We are thus concerned here with a formal process: performance appraisal that is planned in advance and designed to acquire reliable information about workers’ performance that is as valid and precise as possible.

The subject of organization staffing – or personnel selection and placement, as it is popularly known – most often incorporates the two aspects of placement and evaluation. However, for a long while – maybe too long – these areas of endeavor were conceived as being a pragmatic, empirical, and atheoretical field. Traditionally, organizational staffing was treated as a technology with a strong emphasis on statistical and psychometric factors.

Traditionally, job analysis has been largely geared to locating, quantitatively and qualitatively, the skills, knowledge, abilities, and personality traits needed to successfully meet job and organization demands. However, job analysis, approached from the viewpoint of work adjustment theory, requires that attention also be given to identifying the reinforcer potential of the analyzed job and organization. This information is essential in order to determine to what extent the reinforcement or reward patterns available in an organization would be consonant with an applicant’s work-related needs, motives, aspirations, and expectations.

Abilities, skills, knowledge, and personality attributes are gauged with a wide variety of instruments and methods, such as psychological tests, graphological assessment, peer assessment, reference checks, achievement tests, situational tests, and biographical forms, all of with have been extensively surveyed in a state-of-the-art review. There is definitely no need to use all of these instruments and procedures. Prediction can be done quite effectively with only a restricted number of core instruments and procedures, basically only those necessary to tap functional correspondence to work requirements, as obtained from job and organization analyses. As far as utility gains are concerned, it is extremely important to ascertain whether the increased costs associated with the use of more valid staffing methods do not far outweigh their benefits. The same comment applies to any planned improvements in the prediction of work adjustment that may also lead to a corresponding increase in costs.

Works Cited
Association for the Employment of Cadres. 1996. Review of Cadres. Paris: APEC.
Bernardin H. J. and Beatty R. W. 1984. Performance appraisal: Assessing human behavior at work. Boston: Kent, 109.
Bureau of National Affairs. 1999 (February). PPF Survey No. 135: Performance Appraisal Programs. Washington D.C. Bureau of National Affairs, 12-5.
Campbell J. P.; Dunnette M. D.; Arvey R. D.; and Hellervik L. V. 1973. “The Development and Evaluation of Behaviorally Based Rating Scales.” Journal of Applied Psychology 57:15-27.
Cooper C. L. and Cox C. J. 1989. “Applying American Organizational Sciences in Europe and the United Kingdom. In C. A.B. Osigweh, ed. Organizational Science Abroad: Constraints and Perspectives. New York: Plenum Press, 57.
Ivancevich J. M. 1987. Subordinates’ reactions to performance appraisal interviews: A test of feedback and goal-setting techniques. Journal of Applied Psychology, 67. 581.
Latham G. P. and Wexley K. N. 1981. Increasing Productivity Through Performance Appraisal. Reading, Mass. Addison-Wesley, 91.
Locke E. A. 1997. “The Myths of Behavior Mod. in Organizations,” Academy of Management Review, 2. 543.
Ordiorne G. S. 1965. Management By Objectives: A System of Managerial Leadership. Belmont, Calif. Fearon, 53-4.
Smith P. C. and Kendall C. M. 1963. “Retranslation of Expectations: An Approach to the Construction of Unambiguous Anchors for Rating Scales.” Journal of Applied Psychology 47:149.

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Essay on management by objectives process

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1. What are the four functions of management?

· Leading – Motivating others to work toward the goal.

· Controlling – Monitoring and regulating progress toward the goal.

· Organizing – Coordinating work activities.

· Planning – Formulating goals.

What do managers manage?

· Rank the items individually in rank order based upon your opinion.

· As a group pick a leader.

· As a group analyze and pick the five most important items.

· Things to do list.

· Individual thought process (good ideas individually).

· Had to compromise with group.

· Addresses the Management Decision Process.

3. Business Plan:

· Goal, objective, and mission.

· Budget – rent, salaries, marketing, equipment, phone, and advertising.

· Sources – referrals (word of mouth), direct mail, telephone, cold canvas, seminars, nest (family and friends), television, and paper.

4. The Human Resource Manager and Managing Multiple Responsibilities:

a) Human resource management consists of numerous activities. What areas were illustrated by Sam’s schedule on this particular day?

· Establish MBO (management by objectives).

· A number of carryover and nagging employee grievance problems.

· Al Noren (stockroom foreman) is not in for work.

· Responsible for payroll.

· Lunch with friend.

· Replacement of stock clerk.

· Superintendent called to discuss his need for several production people.

· Boy Scout troop

· Organize confidential employee files.

b) List the areas of ineffective management and time robbers that are affecting Sam.

· Doesn’t write down a things to do list.

· Doesn’t prioritize that list.

· Tries to do everything himself such as answering the phone and reading the mail.

c) Discuss Sam’s career progress. Is he now promotable? Sam shows that he is ineffective and not promotable.

5. Pygmalion Handout:

· Pygmalion means self-fulfilling prophecy.

· Rockaway Office (three groups)

a) Superstars – performed as expected

b) The manager was enthusiastic, positive, and encouraging. He believed his people would perform. Result: self-fulfilling prophecy.

c) The manager told them that they were inadequate. Result: they didn’t do well.

· Culture (custom, ethic)

· Government (taxes, tariffs)

7. Management Decision Process:

· Analyze current situation (where are we now)

· Goal or mission (where do we want to go)

· Courses of action (what are the choices)

· Make your decision

· Execute that decision

Some people will add a 6th decision process, which is to evaluate.

8. Ethics in Business:

a) Personal Moral Code:

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