What are the challenges and problems of Management by Objectives?

Management by objectives, or MBO, is a management strategy that stresses the goals of the company in a way that lets managers and employees understand how to achieve the goals. MBO methods of performance appraisal can give employees a satisfying sense of autonomy and achievement. But there are challenges with MBO techniques, and unfortunately, these methods can lead to unrealistic expectations about what can and cannot be accomplished reasonably.

The shortcomings are caused by objectives that are not negotiated between all levels of management. If they are, the objectives will cause employee morale to decrease, and actually may have the opposite effect on meeting goals. It may make the movement away from the objectives instead of meeting them.

Rodney Brim, CEO of Performance Solutions Technology, LLC, and a critic of MBO, identified four reasons for the weakness of the MBO technique. He believed that the method went into decline in the market turndown of the early 1990s when “downsizing,” “right sizing,” and other coping mechanisms captured management attention. “With the upturn of the market and the start of the Internet gold rush,” Brim wrote, “management by objectives slipped further into the past. The term ‘management’ itself seemed to lose a sense of compelling interest. Riches were made based upon technology, upon acquisitions, upon something new, upon association with the WEB, not (for heaven’s sake) management of work effectiveness.”

Brim’s tally of weaknesses of management by objectives includes the following points:

1. Emphasis on goal setting rather than on working a plan: Managers might drift off and focus solely on the goal setting process or the goal tracking activities, and forget that the most important activity is enabling employees to work on achieving the goals.
2. Underestimation of environmental factors, including available or absent resources and the crucial role of management participation (already referred to above): This is a general problem in the planning process, but may become more apparent once goals and goal tracking create transparency. Before, employees could hide the fact that goals had not been reached, but the moment you start tracking and defining goals, there is no longer a way to scapegoat unachieved goals.
3. Inadequate attention to unforeseeable contingencies and shocks, which sometimes makes objectives irrelevant: Business environments are changing, and therefore the previously set goals may no longer be relevant. It is necessary that managers and employees know from the beginning that it is entirely possible that goals might be scrapped before they have been achieved. They must know that this is not the failure of a manager or an employee, but of external influences.
4. Finally, a neglect of human nature: Setting goals and achieving them is a great feeling. But missing goals can have an equally dramatic impact on the psychology of employees in the negative direction. This tends to happen if the reason for not achieving the goal is outside the scope of influence of the employee. If these situations occur, it is necessary that managers prevent the goal-setting exercise from becoming a bargaining exercise.

About the final point, Brim said: “People, the world over, set goals every year but don’t follow them through to completion. One can surmise that this is the standard goal follow through behavior.” Brim points out that business is well aware of this tendency, one reason why “work-out clubs ‘predictably sell more memberships at the first of the year than they plan on supporting through the year. The problematic assumption is that if you manage by goals and objectives, direct reports and team members will organize their work around what you are managing by, e.g. those same goals and objectives.”

Despite these challenges in implementing MBO, one has to keep this essential rule in mind: every management method has downsides, and if used mindlessly, downsides exist for every management system. Nevertheless, with the right approach to implementing an MBO system, you can unleash untapped performance potential in your organization.

Bernhard S