“Peter Drucker and Management By Objectives (MBO)”– Prof.M.S.Rao

Every company has its own vision and mission. It will be effective only when the employees are actively involved in decision-making. The leaders and entrepreneurs set their vision and mission and to accomplish the same, it is essential to take support of managers and non-managers. In this process, the concept of MBO plays a crucial role in aligning employees with organizational goals and objectives and ultimately accomplishing them successfully.

What is MBO?

MBO is a management strategy. The concept has been coined by Peter F. Drucker in his book titled ‘The Practice of Management’ in 1954. It integrates individual goals with organizational goals. It is here where the employees set their goals and achieve their goals and take feedback for themselves. Precisely MBO is all about aligning the goals of employees with the goals of organization.
MBO program helps both the managers and non-managers to have clarity of their roles and responsibilities as they are briskly involved in setting their goals and objectives. There is a vast difference between hearing the goals from others and setting the goals by themselves. Setting the goals have better possibilities of achieving as the people know their strengths and weaknesses and set their goals based on their capabilities and competencies. When goals are imposed by others it makes things little more complicated. Whereas when people themselves set goals it makes them more responsible and accountable as well.

SMART MBO:

The employees must set their objectives in such a way that they must be SMART. SMART is the acronym for specific, measurable, achievable, realistic and trackable. They should clearly specify their goals to avoid ambiguity. For instance, by what percentage or by what means do they want to achieve must be specified clearly. They must be able to measure the duration by which they will be able to accomplish their objectives. The objectives must not be set in such a way that the employees must have competency and capability to achieve. Setting objectives realistically but not based on fantasy motivate employees to work harder and smarter. Finally the objectives must be trackable wherein the employees must be able to track the status of their performance. For instance, if they fail to reach the objectives in time, they must be able to analyze obstacles and overcome the same. It is a kind of feedback about their execution.

Merits of MBO:

MBO ensures clarity in the minds of the employees about their organizational goals and objectives and tune themselves accordingly. It provides a sense of satisfaction and confidence amongst the employees as they involve in decision-making. It motivates and challenges them to take up higher roles and responsibilities.
It helps ensure that both employees and management are well tuned and aligned with organizational goals and objectives. It helps in measuring the performance of employee as per the benchmarked standards. It provides better communication, promotes better coordination between the superiors and subordinates. Let us look at the same succinctly.
• Clarity in goals
• Effective communication
• Better coordination
• Proper facilitation
• More confidence among the people
• Clear demarcation of roles and responsibilities
• Higher morale among the people
• Helps in delegating authority in large organization.
However the concept has been criticized by W. Edwards Deming who doubted the viability and application of objectives. We shall now look at the other side of MBO.

Demerits of MBO:

• It is a lengthy process
• It may affect the main organizational goals
• At times people may not be competent to set their goals
• It may lead to organizational politics as people impose certain goals on their peers which they may not be able to accomplish

Conclusion:

Peter Drucker’s concept of MBO is here to stay in this 21st century. The globe is changing due to rapid growth in technology. Employees are clamoring for freedom and active participation in management. Advocating MBO help the employees to have sense of satisfaction and motivation as it enable them in the decision making and management process actively.