Running Head: MANAGEMENT BY OBJECTIVES

Introduction
Management by objective is one of the contemporary management techniques.
Management by technique gained huge popularity in the past twenty to fifty years ago. Thus, it is
one of the modern approaches used by managers to manage organizations. Peter Drucker
introduced this management technique in his principles of management book written in 1954
(Greenwood, 1981). Later, other scholars and scientists further elaborated his concept. In his

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book, Peter Drucker suggested that the most important thing in a business enterprise is a
management principle that will help individuals the required strength and responsibility as well
as provide a common direction and harmonize both the individuals and the organization goals
(Dinesh & Palmer, 1998). Therefore, the management by the objective technique is directed
towards helping an organization achieve individual and organization goals simultaneously.
Management by objectives (MBO) can be referred to as a system through which the performance
objectives are determined through a participative approach. In this case, the progress towards the
desired objective is continuously monitored and upon reviews, the rewards are awarded
accordingly. Thus, all the stakeholders in an organization must be involved at every organization
level.
Rationale
The MBO is based on various steps to be achieved. This process consists of five distinct
principles that must be followed for the desired results to be achieved. The first thing in an MBO
is to set the objectives to be achieved. In this first step, the management has a very specific task
of establishing the goals and the objectives that the organization wants to achieve within a
specific time span (Dinesh & Palmer, 1998). This time span may vary depending on the budget
and the plan itself. Among these objectives, the objectives are arranged according to the order of
importance and the way they are to be accomplished. Thus, the top management has to identify
those objectives that are primary and those that are secondary. Some of the goals have a shorter
lifespan while others have a longer lifespan. In case of any changes in the objectives, the people
in an organization are notified immediately. In setting these objectives, the top management must
every specific and set achievable goals. However, they are subject to modification as the

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environment is always dynamic. Consequently, when these managers are setting these objectives,
they establish a yardstick to indicate goal achievement (Dinesh & Palmer, 1998).
The second principle of the MBO is setting the subordinate objectives. In an
organization, the people handle achieving these objectives. Thus, the management mast notifies
the employees the specific requirements needed from them. Therefore, the subordinates are
asked what goals they can achieve, in what time and the resources required to achieve those
objectives. In this case, consultation and agreement must be arrived at between the manager and
the subordinate staff. When an agreement has been arrived at, the managers set those objectives
in a manner that invites confidence to the subordinate.
The nest principle is matching the goals and the resources. The objectives set by the top
management have little or no significance if require resources are not availed to achieve them.
Thus, when setting the goals, the manager must prudent to indicate the resource required.
Nevertheless, just like setting the objectives, the allocation f resources should be done in
consultation with the subordinates (Dinesh & Palmer, 1998).
.
MBO also operate on a principle that objectives have a recycling process. Thus, the
objectives are neither to start from the top level nor trickle down to the bottom nor are they to be
started from the bottom and go up the hierarchy. This principle recognizes that the goal setting is
a joint process combining the managers and the subordinates. Thus, all subordinate in any level
are involved in the objective setting. This principle allows the subordinates to have a feeling of
commitment towards the objectives set (Rodgers & Hunter,1991).

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The final principle is the reviewing and appraisal of the performance. Periodic review of
progress made between the managers and the subordinates is conducted. This process establishes
whether the subordinates are making the required and satisfactory progress. Besides, anticipated
problems are also reviewed and thus aid the subordinates to have an in-depth understanding of
MBO. The morale of the individual is improved. However, the appraisal technique in the course
of achieving the objectives should be conducted in a fair and measurable manner. Whenever
there is a need, the managers and the subordinated make the appropriate changes to achieve the
desired goals.
Advantages of management by objectives
According to Odiorne, MBO is considered as a primary way of thinking about the
management. MBO serves as a very useful for more effective planning and self- appraisal. In
MBO, the attention is focused on individual achievement motivating the individual to do the
required task and performance measurement based on results. This technique of management
enhances the integration of the individuals with the organization objectives. It also improves the
communication within the organization and reduces chances that a task will be duplicated
(Dinesh & Palmer, 1998).
Most Advantages of MBO are centered on the possibility that more objective
performance evaluation can be conducted. In this case, the desired higher level of performance
may be achieved when the set goals are understood by the subordinate stuff. MBO reduces the
anxiety and the ambiguity that surrounds any job. Thus, the MBO technique increases the
certainty of the jobs requirement, and this allow for a more confident method of evaluation

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(Rodgers & Hunter,1991). Similarly, the technique creates an appropriate environment through
which the senior and the subordinate staff can communicate freely.
MBO is based on a genuine participatory nature of all the stakeholders within the organization.
This technique, therefore, allows the organization to utilize the potential of members. It provides
a way for the manager to nature the role of directing and controlling owing to the gradual,
stressful and risk taken by the managers.
MBO is a method of exhibiting fairness and reasonable behavior. It allows prediction of
performance and judge it in a more prudent way. Individuals are given an opportunity to selfmotivate themselves by setting their objectives. Also, the manager can control his performance
(Rodgers & Hunter, 1991).
Disadvantages of management by objectives
Just like any other new management technique, the MBO has its challenges. The first
challenges are lack of total commitment toward the organization. Some of the failures of MBO
have been attributed to lack of involvement and commitments towards the organization goals.
When the top management show disinterest in the organization objectives, the image portrayed is
a negative one towards the subordinate stuff. MBO means different things to the different
organization. According to some of the top management, the MBO technique is viewed as a
project to be completed by the subordinates. The top management views it as a means of
controlling the junior stuff. Thus, inadequate knowledge of the technique makes the top
management adopt a passive role in the technique. As a result, implementation becomes a duty to
be accomplished by one manager (Rodgers & Hunter, 1991).

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In organizations, the result-oriented systems only have a short-term impact. There is a

lot of enthusiasm in the beginning but as the time goes on, the enthusiasm diminishes. Besides,
lack of commitment of top management towards the technique deprives off the required
incentives for the improved performance of the participants.
Another disadvantage of MBO is a lack of prerequisite implementation. Although many
people view MBO as a simple process, it is not. The managers need the pre-service program to
allow them understand and accept the technique. According to scholars, it takes three years for
the managers to introduce the technique of the organization. Besides, sufficient time is not
allowed for the organization and the individuals development. Hence, this results in the failure
of the objective-setting system.
MBO has a problem of integrating both the organization and the individual goals. Even
though there has been a promotion of the MBO program, the management does little to know the
personal goals and the ambitions that individuals have within the organization. There is little
concern on whether the objectives of the individuals are in line with those of the organization.
Because of lack of this little concern towards the integration of individual and organization goals,
the participants make little participation. More often, the management assumes that the
subordinate staff will be challenged by the management goals and objectives. Since the top
management has failed to show appropriate concern towards the MBO effort, hostility and
resentment results between the management and the subordinates (Rodgers & Hunter, 1991). The
objectives set by the management have little importance if any if they do not coincide with
personal ambitions and goals within the organization. Most of the human relations problem
results from the lack of congruency between the verbalized level and the actual level influence.

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When individual; and organization goals are not integrated, individual efforts may directed
towards other activities that do not coincide with the organization.
Another challenge of MBO is the exaggerated emphasis on goals attainment. Emphasis
on goal achievement makes a huge influence on the goals that are set. Some of the goals are
easier than others to measure. If the management makes MBO programs that are measured
wholly on goals attainment, there is a tendency to set easily quantifiable goals. The subordinates
are likely to fulfill the targets targeted for them. It becomes irrational for the subordinate to
maximize his risk by accepting challenging goals. Thus, there is a high tendency of selecting
easily attainable goals. There is no incentive to set challenging goals since these goals increase
chances of failure when the performance is based on goal attainment alone.
When the goals are over emphasized, the individuals are frustrated and increase the
paperwork when setting stating the set objectives in quantifiable means. Managers, therefore, are
treated as if they operate in a vacuum. When target set on the manager-subordinate basis with no
reference to targets set for other managers creates conflicts within the organization, which hinder
the achievement of the organization goals.
Finally, there is inadequate appraisal mechanism for the MBO technique. Organization
members are constantly confused, as they do not know the purpose of the appraisal. They do not
know the nature of the appraisals and who sets the appraisal. The main causes of problems in
appraisals are caused by interpersonal relationships.
MANAGEMENT BY OBJECTIVES IN MARKETING
For the executives in the marketing to implement MBO, they must have a good
understanding of the MBO process. To implement MBO, a tailor-made and systematic program

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needs to be developed. Just as the way organization change is implemented the top of the
organization, the marketing department must understand The MBO. The participants in the
marketing department must be motivated to use MBO. If the marketing department fails to
prepare for potential implementation, they fail. The implementation of MBO involves three basic
steps, that is, actual implementation, evaluation, and modification. Regardless of where MBO is
used, the three steps are paramount (Etzel & Ivancevich, 1974).
The learning phase
Before the marketing team tries to implement MBO, necessary knowledge must be
acquired. If appropriate training of the participants on setting the objectives, intermediate
reviews, and the final evaluation conduction, the marketing unit will be misinformed and
frustrated. The training involves informing the participants of the various process involved in the
MBO. This training can be conducted through a first-hand method where the real experience is
obtained (Humble, 1970).
In training the participants, the actual examples of marketing should be used. The use of real
objects improves learning method. Besides, it is important to show the participants how the
marketing units are to be integrated with the MBO process. The little available research shows
that there is increased the probability of improving effectiveness if prudent integration
procedures are taken. In this case, each marketing unit has to develop its job-related program for
the learning stage. According to the scholars, the best way in which these skills can be learned is
in a formal setting. In the programs, the emphasis is on transforming information, performing the
MBO process steps, and reflecting on the training progress. Each of the processes should be
tailor-made its program depending on its need (Rodgers & Hunter, 1991).

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Actual implementation
In spite of the training programs, most of the MBO programs are difficult after the
training process. Most of these failures are as a result of the shock that the trainees that have
been learned theoretically in class. It is easier to talk about specific periods and percentages
rather than the size of the sale and the frequency of the sale (Rodgers & Hunter, 1991). The most
important thing in the implementation program is the development of a working manual setting
forth the procedures and all the relevant MBO process. For instance, a large food company
attempted to implement the MBO in the marketing department. However, the managers were
frustrated, as there was no procedure to follow and, as a result, failed to meet the set deadline.
The whole MBO process failed and was discarded by the company. This is a common
phenomenon in the organization (Etzel & Ivancevich, 1974).
Another issue in the implementation stage is the decision on who will handle MBO.
According to some people, the setting of objectives should start with the lowest level managers
and passed up the organization. Another suggestion involves the personnel department initiating
the process and then passing it to lower levels. Then the personnel department is entitled to
oversee the whole process (Humble, 1970). However, the most successful way of implementing
the MBO process is starting from the top most level and then move down. Starting and initiating
the MBO is not the major hindrance. Rather, the commitment of all the participants is the major
concern. A marketing unit having the executive taking a passive role on MBO process will have
difficulty convincing the subordinate staff on the importance of the program.
Evaluation and modification

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Despite MBO having been there for more than thirty years, there are not evaluation and
modification plans. It is important for the marketing department to ensure that attitudes of the
participants, actual activities, and the effectiveness are evaluated. Although this processes time
consuming, it is important if proper modifications needed by the organization (Etzel & Ivancevich,
1974).

Marketing unit diagnosis

Before an implementation of any change such as the MBO, the marketing executive are
to perform careful diagnosis in the diagnosis procedure, certain questions must be answered.
These questions include:
1.

Is the marketing team ready for the MBO change? The management should be careful to

look at whether they have the proper environment for training, implementation and evaluation of
the program.
2. Are the top managers willing to devote time and more energy to the process for it to
succeed?
3.

Has the marketing department taken careful consideration of the participants in the program?

4. Are the participants motivated to be involved in a challenging a difficult program?

5.

Is the marketing department ready to be patient and study the outcome of MBO program?

By answering the above questions, the marketing executives are made aware of the exact
program they are to start.
Extinction and the reinforcements

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The marketing executive should consider whether the effectiveness obtained from
adopting MBO can be sustained for a longer period of two years. According to some studies,
MBO over a long period has shown to result in hostility between the superiors and the
subordinate stuff. Because of this behavior, the organization is affected and any improvements
that might have been achieved by MBO reversed. To sustain any improvement in MBO
effectiveness, positive reinforcement is necessary (Krueger, 1994). These reinforcements may
include
1. Encouraging the participants to work hard by constantly reminding them the expected
benefit of the program. The executive should state clearly that the involvement level
2. The subordinates should be provided with periodic feedback they are making.
3. Te executive should spend time with the participants
Conclusion
Different areas of the marketing can benefit from MBO program if it is implemented
properly and successfully. These areas include sales management, market research, physical
distribution, and new product development. From the above view of the MBO process, it is not a
solution to management problems. Some of the organizations have successfully implemented the
program while others have discarded it after initiation stage. Those organizations that have failed
have done so due to the assumption that the MBO program is simple and easy to implement as
well.

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References
Dinesh, D., & Palmer, E. (1998). Management by objectives and the Balanced Scorecard: will
Rome fall again?. Management Decision, 36(6), 363-369.
Etzel, M. J., & Ivancevich, J. M. (1974). Management by objectives in marketing: Philosophy,
process, and problems. The Journal of Marketing, 47-55.

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Greenwood, R. C. (1981). Management by objectives: As developed by Peter Drucker, assisted

by Harold Smiddy. Academy of Management Review, 6(2), 225-230.
Humble, J. W. (1970). Management by objectives in action.
Krueger, D. (1994). Strategic Management and Management by Objectives. Small Business
Advancement National Center.
Rodgers, R., & Hunter, J. E. (1991). Impact of management by objectives on organizational
productivity. Journal of Applied Psychology, 76(2), 322.
Thomson, T. M. (1998). Management by objectives. The Pfeiffer Library.