Management by objectives (MBO) is a process of defining objectives within an organisation so that management and employees agree to the objectives and understand what they need to do in the organisation in order to achieve them. The essence of MBO is participative goal setting. In order for MBO to work effectively in an organisation, objectives agreed on must possess certain inherent characteristics.
Required:
Identify and explain THREE of these inherent characteristics and how they facilitate Management by objectives (MBO). (6 marks)
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For objectives to facilitate the implementation of management by objectives (MBO) it should possess the ‘SMART’ characteristics. SMART is the mnemonics representing the following:
i. Specific: An objective must be a clear statement of what the organisation is trying to achieve, and must be easy to understand. For an objective to enhance MBO, it should avoid any form of ambiguities. For example, managers may set an objective to increase sales, profit or customer satisfaction.
ii. Measurable: This means objectives should include some quantifiable element. This way, performance can be monitored and evaluated against the objectives. Measuring performance against objectives is a key element of control in organisation.
iii. Achievable: For MBO to be effective, targets set should always be realistic. If objectives set by management cannot be achieved, those required to achieve the target will not be motivated by it. It may even discourage them, because they know the target can never be reached anyway, no matter the level of effort they put in. To work well, employee must believe that their efforts can be successful.
iv. Agreed: Sometimes, the ‘A’ is explained as agreed. In this sense, objectives or targets set need to be the consensus reached by the different people who are involved in the process. There is no need to impose targets on employees since it could discourage them from making any attempt to achieve it. The essence of MBO is participative management.
v. Relevant: An objective is relevant if it relates to an organisation’s mission, and will help it fulfill that mission. Thus, objectives must necessarily flow from the organisation’s mission otherwise it will lead to avoidable conflicts in its achievement.
vi. Realistic: Sometimes, the ‘R’ is explained as realistic. In this regard, the explanation will be the same as in achievable/attainable.
vii. Time-related: All objectives or targets should state quite clearly when they should be achieved. Managers and/or employees need to know exactly how long they have so that they can plan accordingly. When objectives are time-specific, it enables management to judge whether or not the objective has been achieved. This characteristic also facilitates management function of control. For example, if an organisation has an objective ‘To increase sales revenue by 5%’ how will managers know the time period over which this sales increase is expected. (Any 3 points)