Organizational Development

Prerequisite if MBO
many of the organisations are designed so as to undermine the MBO philosophy. This is because they could not create the proper environment required for the adoption of MBO. Stated below are some of the prerequisites and problems contained therein for installing the MBO programme.

i. Purpose of MBO

MBO is not an end itself. It is simply a means to achieve the end. By MBO an organization has to achieve certain things and to solve many problems. Therefore, organization should be very clear with the purpose for which the MBO is being implemented. The purpose may differ from organization to organization depending upon the environment factors. Hence, if the purpose of MBO is not precisely defined and particularly technique suitable to the purpose is not emphasized, there is every possibility that results may not be achieved as anticipated.

ii. Top Management Support

Superior and a subordinate interaction is an important factor in any programme of MBO. If the attitude of top management is positive, the MBO will be a success otherwise its success is doubtful. This is due to the fact that if a subordinate feels that his superior’s perception is not positive towards MBO, his approach also shows a positive trend. MBO is a way of managing on a day-to-day basis rather than an exercise of writing objectives once a year. Top management support is necessary in introducing MBO due to the following responsibility:

  • Discussing the objectives already set with each subordinate.
  • Evaluating progress made in achieving these objectives.
  • Assisting and supporting the subordinate by removing obstacles and hindrances into the way of accomplishing his work.

iii. Training MBO

Another critical factor in implementing MBO is the existence of some style of training programme for people who will be operating under it. Systematic training is required in the organization for disseminating the concepts and philosophy underlying MBO. The training should start with the concepts, philosophy and need for MBO. If people in the organizations are not clear about the reasons for which MBO is being undertaken, they will fear and may show their resistance because people tent to show fear to what they do not understand. This fear can lead to suspicion and mistrust which in turn undermines people’s enthusiasm which is very important during the initial stages of MBO. The major type of training in MBO should be in the area of inter-group and inter-personal relationship, since MBO entails a lot of it. Interaction of people is the major element of MBO. A new behavioural culture should be developed in the people through this type of training because of the new configuration of authority-responsibility relationship.

iv. Participation

MBO requires individual’s involvement in the programme. It refers to commitment on the part of the subordinate. It refers to the identification with a participation in the system. Being a part of the programme the subordinate should not perceive that the technique used by superior is to control his performance. This may be avoided by encouraging the subordinate to play a meaningful role in the preliminary phases leading to actual writing of the objectives. Subordinates role should include:

  • Identification of accountable areas of his job.
  • Determination of mutually agreeable performance measures.
  • Identification of the present performance level. However, the areas and scope for participation may vary in their relative emphasis according to functional areas or hierarchical level to which an individual belongs. Therefore, no standard can be set for participation.

v. Feedback for Self-direction and Self- control

In MBO system a man directs and controls his own performance. Everybody knows what he has to achieve and how well he is achieving them. He also knows ‘where he stands’ and ‘where he is going’ so that he may overcome shortcoming of his performance and may make necessary adjustment to achieve the desired results on his own. Feedback under MBO may take two forms:

  • The individual should get periodic report on where he stands on an overall performance basis. This is required specially when he asks for help from his superior.
  • Feedback is necessary at the time of periodic counseling and appraisal interview.

vi. Other Factors

Besides the above major considerations, there are several other factors that influence the success of MBO. To the extent those responsible for implementation are aware of the various problems, they can make provision in advance to overcome these. These are as follows:

  • Implementing MBO at Lower Levels

If the full benefits of MBO are to be realized, it must be carried all the way down to the first line of the organization. There is a tendency for active participation in objective setting itself and for periodic feedback and review to diminish, the further down the management ladder the programme gets. If such a tendency prevails, to that extent, MBO will be ineffective.

  • MBO and Salary Decision

One of the most elusive aspects of MBO is to tie the organization’s compensation system with the MBO programme. Though this problem does not arise at the initial level, later on , this becomes a crucial issue. This because rewards and punishments are among the accepted ways of exercising organizational authority over its members. There are various problems to the organizational remuneration with MBO.

Firstly – there is the problem of equating the degree of difficulty to the achievement of various objectives in various functional areas.

Secondly- if the monetary differences between the superior and the average performer is not perceived being significant the superior performer will lose enthusiasm to continue his outstanding performance.

Thirdly – some argue that to link MBO with reward punishment system would amount to bringing in piece-rate system from the shop floor to the manager’s office. Thus, linking MBO with rewards and punishments is really a difficult problem.

  • Conflicting Objectives

One of the outcome of MBO programme is that, to degree, it builds a competitive climate. This is because MBO generates commitments. But it is often found in practice that over-commitment leads to competitive rivalry with respect to claims on the scare resources of the organisation. This may be dangerous if it exceeds the limit. The accomplishment of result in organisations largely requires interdependent cooperation and interaction of efforts. The persons responsible for introducing MBO must be certain that competing objective is not set. Some educational effort is needed to enable managers to adopt an overall approach to performance reviews at regular intervals which should reveal the humans dynamics of such sub-optimal behavior.

Benefits/Benefits of MBO

Beck and Hilimar have given as much as thirty five reasons why MBO is a better and effective concept for managing an organization. This is possible because MBO can be applied in several aspects of organisational activities like performance appraisal, organisation development. Long-range planning, integration of individual ad organizational objectives and so on. Therefore, the benefits of MBO can be seen in the following terms.

i. Better Management

MBO helps in better managing the organisational resources and activities. Resources and activities are put in such a way that they result into better performance. There are five basic assumptions about what improves performance. These are:

a) Clarity of objectives

b) Role clarity

c) Periodic feedback of performance

d) Participation by managers in the management process

e) Realization that there is always scope for improvement of performance in every situation.

Taking these assumptions, MBO tries to improve performance in five ways:

a) People may perform if they know what exactly they have to do because they focus their attention exactly at where it is required. Further, objectives form the basis of appraising the performance and therefore, they aid in planning resulting in corrective action.

b) By clarity of roles we mean that every manager in the organization exactly knows what he has to contribute and what others can contribute to the organization .in other words, everyone knows what role he has to play towards the achievement of objectives. This facilitates increased co-operation on both vertical and lateral levels and helps in avoiding unnecessary friction. Role clarity can be achieved much better in MBO.

c) Periodic review helps in better performance by giving feedback about one’s action and its results. Existence of objectives without a system of review of performance is useless. Periodic review provides opportunities for taking stock of the situation and planning future course of action. Periodic review of performance is an integral part of MBO.

d) Participation in MBO process is expected to ensure achievement of objectives. Participation elicits commitment of people and motivates them. They have a sense of feeling that they achieving their own objectives. This commitment enhances the chances of getting better performance.

e) MBO provides a base for the philosophy that there is always scope for improved performance. As objectives are evaluated periodically, shortcomings in objectives are eliminated and standards/objectives are set at higher level because of their motivation and commitment. Performance can be improved by reducing time, reducing resources, improving quality and for quantity in MBO.

ii.  Classification of Organization

MBO tends to provide the key result areas where organizational efforts are needed. Since organizational objectives are defined very clearly, they help in relating the organization with its environment. A key factor in objective setting is the external environment in which the organization separated and any change in the environmental factors should be considered very carefully at the time of objective setting. Thus, it provides the basis for long range as well as short range planning. Besides the external factors, internal factors also help in setting objectives and therefore they should also be considered suitably. They define what the organization intends to do, what it can do, where it takes and how this gap can be bridged. All these factors lead to define the organization very clearly in the environmental context of its various competitors.

iii. Personal Satisfaction

MBO provides greatest opportunity for personnel satisfaction. This is possible because of two closely related phenomenon :

  • participation of individuals in goal setting
  • rational performance appraisal

When the individuals are involved in objective setting, they derive satisfaction because of the feeling that they are important to the organisation. Besides they are very sure that their performance will be measured in terms of their actual performance and will not be affected by managerial prejudices, biases and other personal factors.

iv. Basis for Organizational Change

MBO initiates and stimulates organizational change. It provides guidelines for planned change. It enables the top management to initiate, plan, direct and control the direction and speed of change. MBO makes the change process easier s there is lesser amount of resistance on the part of workers because people in the organisation become more dynamic and innovative. It is possible because there is constant interaction between superiors and subordinates, frequently reviewing the situation.

v. Development of Effective Control

MBO sparks more effective planning. It also aids in developing effective controls. Objectives serve as the standards for appraising performance. Actual performance is compared against the objectives, and deviation is identified and corrected. Future plans are formed in the light of those deviations. It ensures that goals are reached.

Problems/Limitations/Disadvantages of MBO

MBO is not without its problems and weaknesses. Some of the problems are inherent in MBO system while others emerge because of wrong implementation. Each and every organization  is likely to encounter specific problems in MBO practice but some of the common problems are given below:

i. Difficulty in teaching the philosophy of MBO

MBO is a philosophy of managing an organization in a new way. However managers fail to understand and appreciate this new approach. They have a number of doubts about MBO like what purpose is served by MBO, how the performance is to be appraised and how organization will benefit. MBO demands rigorous analysis of basic facts, requiring both the base data and the expertise for analysis. Moreover, managers continue to think in their old way and do not appreciate this new philosophy. Hence they fail to teach the philosophy of MBO to their subordinates, as they lack initiative and fail to enthuse others to participate.

ii. Time and Cost

MBO is not as simple as it looks to be. It is a process which requires large amount of the most scarce in the organization i.e. the time of senior managers. Sometimes, managers get frustrated and feel overburdened. Further, MBO generates paper work, because large number of forums are to be designed and put into practice. Therefore, there is a problem of communication overload. However such problems are transitory and emerge only at the initial stages. Once MBO becomes a part of the organizational life, these problems disappear.

iii. Difficulty in Objective Setting

MBO requires verifiable objectives against which performance can be measured. However, setting objectives is difficult at least in some areas. Objectives are in form the of statement rather than in quantitative form. Of course, some objectives can be quantified and can be broken in terms of time period but others lack this characteristic for further course of action.

iv. Emphasis on short term objectives

In most MBO  programmes, managers set goals for the short term, usually for a year or even less. In short range objectives, performance appraisal becomes easier. Hence there is always a danger of emphasizing short term objectives at the cost of long term objectives. Sometimes, it becomes difficult to make compromise between long range and short range objectives due to some incompatible problems.

v. Inflexibility

MBO represents the danger of inflexibility in the organization, particularly when the objectives need to be change. In a dynamic environment, particular objective may not be valid for ever. In the context of revised objectives, changed premises, or modifies policies, it is useless to follow the old objectives. However, many managers often hesitate to change objectives during a period of time. Thus, inflexibility created by applying MBO may cause harm than what it may contribute.

vi. Frustration

Sometimes managers feel frustration by applying MBO. This is due to two reasons:

  • The experience shows that many organizations could not implement the system of MBO properly, resulting in utter chaos.
  • Introduction of MBO arouses high expectation in young managers. They are over enthusiastic in making rapid change in terms of growth and profitability for organization and career development for themselves. If rate of change is slower than expected they feel frustrated and even disenchanted with MBO.

vii. Quantitative Bias

In their desire to have verifiable goals, people may overuse quantitative goals and attempt to force the use of numbers in areas where they are not applicable. They down grade important goals that are difficult to state in end results.

viii. Difficult in verification

A favourable company image may be the key strength of an organization but it is very difficult to put it on verifiable terms.

ix. Failure of managers

Sometimes, managers fail to use objectives as a constructive force with the ample participation and needed assistance of the superior.

x. Difficulty in giving guidelines to goal setter

Like any other kind of planning MBO cannot work if those who are expected to set goals are not provided any guidelines. They must know what the organizational objectives are, how can they fit themselves in them if corporate goals are vague. Unreal or inconsistent, it is almost knowledge of major company policies. To plan effectively people must have some expectations of future, some understanding of policies affecting their areas of operations, an awareness of the objectives and programmes with which their goal interlock. Failure to fill these needs may result in a fatal vacuum in planning.

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