Management by objectives(MBO) is a system which attempts to improve the performance of the company and motivate, assess and train its employees by integrating their personal goals with the objectives of the company. The MBO system generally includes the following steps: 1. The superior and the subordinate mutually agree on the primary elements of the subordinate's job. 2. The supervisor and the subordinate mutually agree on the subordinate's specific objectives for the specified period 3.
The subordinate establishes a plan of action necessary to meet each objective. 4. During the specified period the subordinate periodically reviews progress toward objectives perhaps jointly with the supervisor. Progress checks may indicate the need to change action plans or modify objectives. 5. At the end of the specified period the supervisor and subordinate meet to jointly evaluate the subordinate's performance on objectives. Most MBO programs are conducted on a one on one superior subordinate basis.
However, one-on-one MBO does not account adequately for the interdependent nature of most jobs particularly at the managerial and supervisory level nor does it ensure optimal coordination of objectives between various organizational groups. Accordingly, it may be useful to take a team approach to reviewing targets and achievements, although this practice is wide spread. Essentially, team MBO involves the application of the basic MBO process to work groups. First, overlapping units work with "higher" and "lower" units on overall organizational objectives.
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Then individuals work with their peers and superior to define roles and to develop individual objectives. This approach can lead to greater participation by subordinates in setting objectives and can improve relationships within teams and between superior and subordinates. However, the success of a team approach greatly depends on the overall leadership style, climate and culture of the organization. In particular there needs to be high trust level a participative supportive leadership style and strong norms of openness and cooperation. The employee agrees with the manager what his or her performance objectives should be over a set period.
The objectives are ideally expressed quantitatively and are taken from key areas of the job, i. e. tasks which if done well will cause the whole job to be done well. At the end of the period the employee and manager review jointly the achievement of the objectives. Management by objective is included to encourage employee participation and increase job satisfaction by giving the employee a sense of achievement and involvement with his or her work. The manager can appraise the employee by referring to specific performances rather than by making subjective judgements.
Training needs may also emerge during the discussion at the beginning and of the review period. Other advantages are that: a) Employees are forced to think hard about their roles and objectives about why are necessary and how best to get things done; b) Targets are clarified and the crucial elements in each job identified; c) Superiors and subordinates are obliged to communicate with each other and there is forced co-ordination of activities between various levels of management, departments and between short and long term goals.
Many managers and employees find the joint objective setting and performance review interviews difficult and sometimes inconsistent with the general management company. The system may then degenerate into a routine in which the manager simply instructs the employee which objectives to pursue. Quite often it is difficult to find new objectives which offer a challenge and the system may encourage individual selfish effort to the detriment of the working group. Further possible problems include the following. a) Attempts to quantify performance in activities that are not really quantifiable.
b) Concentration on short term measurable goals while neglecting important but less precise long term objectives. c) Difficulties arising from subordinates being given objectives; but not the resources, information and authority needed to achieve them. Few companies now practise MBO in its entirely but it has left a beneficial legacy to the appraisal schemes which succeeded it, achievement of objectives being emphasised much more than the rather indefinable qualities of energy, co-operation, initiative, etc.
It has encouraged the use of open ended appraisal methods and the appraisal interview. Salaries or bonuses of senior managers are sometimes influenced by their performance against objectives set for them each year. Performance means the integration of employee development with results based assessment. It encompasses performance appraisal, objective setting for individual and departments, appropriate training programmes and performance related pay.
Appraisal of managers by their subordinates peers and people in other departments might also be included in the scheme. There has been in recent years a reaction against formal appraisals largely because of their tendency to decay into routine form filling, managers sometimes copying what they wrote the previous year. It has been said that a manager should as a normal part of the managerial process continually assess the merits of his or her subordinates and consider what training they need to improve their performance or meet new demands.
The manager should take action e. g. initiate a transfer, if his or her assessment indicates it is necessary and be ready to give a written appraisal whenever it is specifically required e. g. if a subordinates has applied for a promotion. There is general agreement, however, that an annual meeting between the manager and subordinate to review the latter's work during the year is useful because it gives formal recognition of the subordinate's efforts.
In many companies appraisal is one way secret; it can therefore only fulful the first three purposes of appraisal in 2 and ca not be used to motivate the employee by reviewing his or her job performance. A two way and open appraisal requires that an interview takes place between manager and subordinate based on the techniques. The self criticism that may occur in this process is much more likely to lead to action by the subordinate to remedy faults than criticism by the manager.
On the other hand it is said that in many companies relations between manager and subordinate are not good enough to permit a problem solving interview to take place. The subordinate will try to hide shortcomings rather than discuss them. Managers who have the time patience and social skills to conduct problem-solving interviews are also rather rare. Moreover one of the functions of a manager is to assess subordinates and tell them if their work is unsatisfactory; subordinates expect the manager to do this and will not respect that person if he or she appears to avoid the task.
SUMMARY Performance appraisal is the formal, systematic assessment of how well employees are performing their jobs in relation to established standards and the dialogue about that assessment with employees. How performance appraisal is conducted can have a decided impact on employees' motivation moral and plans for improvement. Appraisals can be conducted by the immediate supervisor, the employee, the employee's peers, customers or other outside appraisers, committees or the employee's subordinates, or combinations of these.
A committee of higher managers or a committee selected by the sometimes used to conduct appraisals in addition to the immediate supervisor. The most common approach is to have the immediate supervisor conduct the appraisal on a semi-annual or annual basis. The popularity of 360-degree feedback systems is growing rapidly. Laws and court cases affect the appraisal process. Performance appraisals are treated like employment tests under the EEOC guidelines and must therefore be reliable and valid.
Reliability and validity can be reduced by appraisal errors such as the halo error, central tendency or leniency. The use of job analysis written standards for rating scales. Supervisory training in the use of appraisal instruments, appeal or review procedures and documentation and counselling relative to substandard performance will tend to strengthen management's position in the event of legal challenges to management decisions for example in discharge cases. Courts have tended to allow fairly unsophisticated methods of appraisal, providing such conditions are present.
Numerous approaches are used in appraising performance, including the graphic rating scale, the check list, the essay, the critical incident method, behaviourally anchored rating scales, rating methods, and behavioural observation scales.
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