Does Management by Objectives (MBO) Work?

Assessing the effectiveness of MBO is a complex task. Let’s briefly review a growing body of literature on the relationship between goals and performance. If factors such as a person’s ability and acceptance of goals are held constant, more difficult goals lead to higher performance. Although individuals with difficult goals achieve them far less often than those who have easy goals, they, nevertheless perform at a consistently higher level.

Moreover studies consistently support the finding that specific difficult to achieve goals produce a higher level of output than do no goals or generalized goals such as do your best. Feedback also favorably affects performance. Feedback lets a person know whether his or her level of effort is sufficient or needs to be increased. It can induce a person to raise his or her goal level after attaining a previous goal and indicate ways to improve performance.

The results cited here are all consistent with MBO’s emphasis on specific goals and feedback. MBO implies, rather explicitly states that goals must be perceived as feasible. Research on goal setting indicates that MBO is most effective if the goals are difficult enough to require some stretching.

But what about participating? MBO strongly advocates that goals be set participatively. Does the research demonstrate that participatively set goals led to higher performance than those assigned by a manager? Somewhat surprisingly, the research comparing participatively set goals with assigned goals has not shown any strong or constant relationship to performance. When goal difficulty has been held constant, assigned goals frequently do as well as participatively determined goals, contrary to MBO ideology. Therefore, it is not possible to argue for the superiority of participation as do MBO proponents. One major benefits from participation, however is that appears to induce individuals to set more difficult goals. Thus, participation may have a positive effect on performance by increasing one’s goal aspiration level.

Studies of actual MBO programs confirm that MBO effectively increase employee performance and organizational productivity. One of the more critical components of this effectiveness is top management commitment to the MBO process. When top managers had a high commitment to MBO and were personally involved in its implementation, productivity gains were higher than if this commitment was lacking.

How do you set employee objectives?

Employee should have a clear understanding of what they’re attempting to accomplish. Furthermore, as a manager you have the responsibility for seeing that this task is achieved by helping your employees set work goals. Although these two statements appear to be common sense, it’s often a little more complex. Setting objectives is a skill that every manager needs to perfect. You can facilitate this process by following these guidelines:

Identifying an employee’s key job tasks:
Goal setting begins by defining what you want your employees to accomplish. The best source for this information is each employee’s job description.

Establish specific and challenging goals for each key task: Identify the level of performance expected of each employee specify the target for the employee to hit. Specify the deadlines for each gal. Putting deadlines on each goal reduces ambiguity. Deadlines however should not be set arbitrarily. Rather they need to be realistic given the tasks to be completed.

Allow the employee to actively participate: when employees participate in goal setting they are more likely to accept the goals. However, it must be sincere participation; that is employees must perceive that you are truly seeking heir input not just going through the motions.

Prioritize goals: when you give someone more than one goal, it is important to rank the goal in order of importance. Prioritizing encourages the employee to take action and expend effort on each goal in proportion to its importance. Rate goals for difficulty and importance. Goal setting should not encourage people to choose easy goals. When goals are rated, individuals can be given credit for trying difficult goals even if they don’t fully achieve them.

Build in feedback mechanisms to assess goal progress; Feedback lets employees know whether their level of effort is sufficient to attain the goal. Feedback should be both self generated and supervisor generated. In either case, feedback should be frequent and recurrent.

Link rewards to goal attainment: It’s natural for employees to ask what’s in it for me? Linking rewards to the achievement of goals will help answer that question.