As discussed by Dalcher (2014) MBO or Management By Objectives is a process of performance management, where the employees and the superior authorities come together to identify and set their performance goals to achieve and create standards for assessing and evaluating the performance and decide the course of action to be followed.
Here, in the case study, the MBO was not much successful in attaining the organizational goals. As mentioned by Vinogradova et al. (2016) mismanagement of the MBO process may cause lack of objective clarity and dissatisfaction among the customers. In the given case, the organization faced the same issue. As discussed by Sharma (2013) for obtaining success through MBO, the companies need to create unambiguous, clear, realistic, relevant and time bound key performance indicators. However, the lack of clarity in the organizational objectives and specified line of action for the teams and the employees; may lead a company face employee dissatisfaction and increased turnover rate. Here, the companies need to specify the exact course of action and strategy for attaining the employee objectives.
Moreover, as mentioned by Hoffmann-Burdzi?ska and Flak (2016) for the success of the MBO, it is important to set the objectives with mutual communication and consensus of both the managers and the employees. Lack of employee satisfaction with the objectives may lead to the employee turnover. Hence, the management needs to involve the employees for setting their own goals. Moreover, while evaluating the performance, it is important for the companies to maintain the previously set standards. Anomaly in the evaluation criteria may lead to decreased level of commitment and employee satisfaction.
Initial ideas, scope and limitations:
For attaining the goal of financial efficiency, the company may opt for creating specified financial goals for the employees with standard course of action. With involving them in the formulation of the performance evaluation criteria, and maintaining the previously set standard for evaluation, the company may achieve improved employee efficiency and thus reduction of total organizational cost (Sharma 2013).
The issue involved in the case study was mainly dealing with the financial inefficiencies. Here, the top management set the MBO goals without any prior setting any SMART objectives (Dalcher 2014). Lack of clarity in the course of action for the employees created failure in other organizational activities (increased labour cost). Moreover, as discussed by while setting the performance evaluation criteria, the MOB managers failed align the organizational objectives with the employee objectives. It failed to identify an all inclusive approach for the attainment of the organizational objectives.
Moreover, as discussed by Sharma (2013) the measuring criteria of performance needs to be rightly aligned to the managerial objectives. In the provided case, the objective was reduction of the total organizational cost, but the management did not appreciate the performance of the employees for not meeting the criteria of labour cost. Here, the ambiguity in the evaluation criteria made the employees feel agitated. The limitation of the MBO strategies maintained by Valley Wide Utilities Company was the failure of providing a clear performance standard for employee appraisal.
Here, in this case, the president appointed two employees for taking decisions for rest of the others. It led to unrealistic goal settings and lack of employee engagement in the attainment of the objectives (Hoffmann-Burdzi?ska and Flak 2016). Lack of employee involvement and thus the setting of unrealistic objectives led to faulty achievement of organizational objective and employee dissatisfaction.
Dalcher, D., 2014. Whatever happened to management by objectives? Learning to look beyond goals. PM World Journal.
Hoffmann-Burdzi?ska, K. and Flak, O., 2016. Management By Objectives As A Method Of Measuring Teams'effectiveness. Journal of Positive Management, 6(3), pp.67-82.
Sharma, N., 2013. Management by Objectives and its implication in Indian Management. International Journal of Organizational Behaviour & Management Perspectives, 2(1), p.245.
Vinogradova, M.V., Larionova, A.A., Maloletko, A.N. and Kaurova, O.V., 2016. The Use of MBO (Management of Objectives) Method of Attraction and Evaluation of Effectiveness of Investments to the Tourism and Hospitality. International Review of Management and Marketing, 6(2S).