Setting goals in Management by Objectives (MBO) is a key process that involves collaboratively defining objectives, monitoring progress, and evaluating performance to achieve organizational success. MBO, in essence, is a strategic approach to enhance organizational performance by aligning goals and subordinate objectives throughout the organization.
The Goal-Setting Process in MBO
The process of setting goals in MBO typically involves several steps, as outlined below:
- Define Objectives: This initial step involves clearly defining the overall organizational goals and specific objectives that need to be achieved.
- Share Objectives with Employees: Once the objectives are defined, they must be communicated effectively to all employees, ensuring everyone understands their role in achieving them. According to the reference, the objectives need to be shared with employees.
- Encourage Employee Participation: Employees are encouraged to actively participate in setting their own individual and team objectives, aligning them with the broader organizational goals.
- Monitor Progress: Regular monitoring of progress is essential to track performance against the set objectives and identify any potential roadblocks.
- Evaluate Performance and Reward Achievements: The final step involves evaluating employee performance based on the achievement of their objectives and rewarding them accordingly. The reference states, "evaluate performance and reward achievements".
Potential Pitfalls of MBO
While MBO can be an effective management tool, it's essential to be aware of its potential drawbacks. As noted in the reference, critics of MBO argue that it "incentivizes employees to achieve these goals by any means necessary, often at the cost of the company." This can lead to unethical behavior or a focus on short-term gains at the expense of long-term sustainability.
Example of MBO Goal Setting
Consider a company aiming to increase sales by 20% in the next fiscal year. The MBO process might look like this:
| Step | Description |
|---|---|
| Define Objective | Increase company sales by 20% in the next fiscal year. |
| Share Objective | Communicate the sales target to all sales teams and related departments. |
| Employee Input | Sales managers collaborate with their teams to set individual and team sales targets that contribute to the 20% increase. |
| Monitor Progress | Track sales performance monthly to identify any deviations from the target. |
| Evaluate & Reward | At the end of the fiscal year, evaluate sales performance and reward teams/individuals who met or exceeded their targets. |
Practical Insights
- Clarity is Key: Clearly defined and measurable objectives are crucial for the success of MBO.
- Employee Involvement: Engaging employees in the goal-setting process fosters a sense of ownership and commitment.
- Regular Feedback: Providing regular feedback and support helps employees stay on track and address any challenges.
- Ethical Considerations: Emphasize ethical behavior and long-term sustainability to avoid unintended consequences.
