Management by Objectives (MBO) is a method used to evaluate the performance of employees on a regular basis. This method helps to define specific strategic objections that help employees bring their performance in line with company expectations and long-term goals. By measuring performance against the standards and goals set in place, it becomes possible to create defined objectives where success or failure have metrics of measurement. There are certain benefits that come with MBO, but there are certain disadvantages that must also be considered. Here is a look at the key points to consider.
The Pros of Management By Objectives
1. It creates detailed reviews.
Employees need to have feedback in order to improve their performance. Feedback can only come from observations of their conduct, behavior, or work in comparison to stated objectives. MBO allows for specific feedback to be developed so that employees have less confusion over what it is they need to do or what adjustments they may need to make to better meet the objectives that have been set forth for them.
2. The approach toward each employees is quite flexible.
Instead of having one set of standards that all employees must be able to achieve, Management by Objectives allows for individualized plans to be developed instead. Every person can have specific metrics set in place to allow them to maximize their contribution to the team. The end result is that each strength of each employee is evaluated, weaknesses are shored up, and this allows team members to benefit from their differences instead of being defined by them.
3. It saves time.
There is very little confusion when an MBO is created to evaluate an employee. The goals that are set forth are very clear. The actions an employee has taken during a review period to meet those goals are specifically documented. This creates a review that is simple and straightforward because employees should already know what the results of the review happen to be. It creates a system of accountability for personal conduct that not every system can claim.
4. It naturally increases the commitment levels of each employee.
People don’t like it when others have a negative perception of them. Although there are always exceptions to every rule, most employees will commit themselves to the goals that have been set for them because they want to be known as someone who can meet or exceed expectations. Sometimes incentives are used to further enhance this commitment, but they are not always necessary.
5. It stops rogue employees from causing too much damage.
Every team has that one individual who is dreaming up better ways to get a job done. That innovation should be encouraged because sometimes brilliant ideas do come forth. Innovation should not come at the expense of the entire team, however, so MBO can help to make sure each employee, including those who have a reputation for “going rogue,” are able to align themselves better with the company mission.
6. It encourages greater levels of communication.
Managers, executives, and supervisors are all encouraged to interact more with their direct reports because open communication is the key to success under MBO. This allows standards and goals to be better understood by both parties so that the detailed information needed for an enhance performance can be received. This is especially true when there are tangible rewards assigned to employees when goals are met, including those who hold a position within management.
The Cons of Management By Objectives
1. It is a system that cannot evaluate everything.
There are always little things that people do every day that help to further the success of a team or a business that never get tracked. That is still true with Management by Objectives. Contributions that may be very important don’t get measured unless they are part of the progress towards the specific goals that have been laid out for them. This means that the true nature of each employee may never be fully captured by this evaluation system.
2. There is a significant amount of setup time.
Although MBO is an easier system to use, setting it up can be very time extensive. All executives, managers, and supervisors must buy into the system and know how to use it. There must be training involved to help those with direct reports learn how to set goals with metrics and how to observe people so those metrics can be measured. This takes time and it takes money which may not always be available.
3. It can create systems of poor quality.
When the focus of an employee is on meeting a specific goal, then everything gets thrown at the goal which needs to be met. This can quickly lead to a poorer overall quality of work because the focus isn’t on the daily needs, but on the overall goal. Targets that are set must include quality targets so that employees don’t try to use a system that meets their evaluation goals with whatever is necessary to do so.
4. It requires a long-term commitment in order to be beneficial.
Although companies that use MBO can see gains in productivity which exceed 50% when compared to companies that do not use it, this isn’t a system that will see those gains right away. To achieve that comparative gain, it took organizations 30 years of implementing MBO consistently. When a long-term commitment isn’t created, the comparative gain in using MBO is just 6% higher than companies that don’t commit to it at all.
5. It can create too many standards if not properly controlled.
There are MBO evaluation systems that have hundreds of standards which apply to employee performance. If left unchecked, an organization could create a system of evaluation for every action, reaction, or lack of action. Should this happen, the amount of information can be just as harmful to the employee as having an information gap tends to be.
6. Information can still be personally interpreted in incorrect ways.
Although metric data tends to create more uniformity in interpretation, this isn’t 100% true. Data can always be misinterpreted by those who are observing it or certain actions may be seen in negative ways instead of positive ways. MBO helps to create checks and balances to prevent this from happening in a majority of cases, but it can still happen.
The Management by Objectives pros and cons is helpful because it sets specific targets. That may also be its one big disadvantage because it causes workers to focus on those specific targets. Does your company need a boost of targeted productivity? By evaluating each key point, organizations can determine if they can benefit from this type of evaluation system.