Analysis of MBO (Management by Objective) Performance Appraisal Method

This report delves into the Management by Objectives (MBO) performance appraisal method, a modern approach for evaluating employee performance, particularly in managerial positions. It traces the origins of MBO to Peter F. Drucker, highlighting its core principle of mutual goal setting between subordinates and supervisors. The report outlines the MBO process, including goal setting, performance standards, comparison of actual and potential output, and periodic reviews. It also provides an example of a performance appraisal format. Furthermore, the report examines the potential impact of MBO, referencing examples from organizations like MOPAN and the IMF. It also discusses ethical and legal challenges that may arise, such as lack of support, employee discomfort, and excessive paperwork. The report concludes by suggesting resolutions to these issues, emphasizing the importance of top management support, clear communication, and continuous revision of objectives. Finally, the report highlights the MBO's effectiveness and emphasizes the need for motivating employees.

Running head: MBO (management by objective)
PERFORMANCE APPRAIsal method
MBO (management by objective)

MBO (management by objective) 1
Introduction
In the following paper, we will be discussing the method of the performance appraisal that is used for
the measuring the employee's performance in an organization. The method that has been taken for the
evaluation of the performance of employees is one of the modern methods named as MBO
(management by objective) which is used for evaluation and is more useful for the managerial
positions. This is one of the best methods to compare the potential performance with actual
performance. This concept was yielded by the Peter F. Drucker in the year 1954.
Body
The method that has been taken for the evaluation of the performance of employees is one of the
modern methods named as MBO (management by objective) which is used for evaluation and is more
useful for the managerial positions as this method of the performance appraisal have overcome the
traditional problems that have been suffered in evaluating, the problem is being subject to the
incompatible decision of the raters. The concept of MBO (management by objective) was yielded by
the Peter F. Drucker in the year 1954. The concept of MBO can be marked as the practice where the
both subordinate and the supervisors of an organization mutually recognizes the collective goal and
use to outline every single individual's key area of the responsibilities that will result in the
achievement of their goal and the result will be measured using the technique named as MBO
(management by objective) which will help in the direction of its operational unit and for evaluating
the contribution of each of its employees. In other words, we can say that the MBO is being required
by the managers for each employee to set their goals individually in respective of their key areas and
then from time to time use to discuss his or her advancement towards their goals that were being made
(Aksoy, E.,2014)
The MBO is not only the method of performance appraisal by it is also beheld by the practicing
managers and the subordinates and it is also used as a view point of the managerial practice as this

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method is used for making the goals of each employees as per their major key areas and this method
by which supervisors and the subordinates used to design, consolidate, communicate, regulate and
examine according to both of them.( Negoiţă, D. O.,2017)
A programme of MBO has four major procedure to follow:
 Goal setting
 Standard of the performances
 Comparison of the standards
 Periodic review
In the first step, the goals are being set that each employee can attain and the goals are being made
collectively by the both subordinate, and the supervisors of an organization and this setting of the goal
refer to the goal of an individual that each employee will be going to achieve.
In the performance standard, the standard that is being set by the both of them for the subordinate.
When the employees are doing the work to achieve the goal this step will help them in measuring their
performance as what they have being done or what is being left that is to be done to achieve the
objective. (2017)
In the third step i.e. to compare the potential output with the actual output or the standard that is being
made by the them for the achievement of their goal as this comparison will help in the achievement of
their goal by the gap analysis by seeing where he employee lacks due to which he is not able to
achieve the objective.
In the last step of the periodic review, the corrective measure is being taken if there is any deviation
between the potential output in comparison to its actual output or the standard output. This is a kind of
intervallic progress review that has been directed in a productive rather than a disciplinary manner.
(2017)
Example of performance appraisal format of MBO (management by objective) is shown below:

MBO (management by objective) 3
This is one of the formats that is being used for the measurement of the performance appraisal by the
supervisors for analyzing their performance. This will help in comparing the performance with
potential output in relation to actual output or the standard for the achievement of their goal as this
comparison will help in the achievement of their goal by the gap analysis by seeing where he
employee lacks due to which he is not able to achieve the objective. And use this for reviewing the
performance, and the corrective measure is being taken if there is any deviation between the potential
output in comparison to its actual output and the standard output. This is a kind of intervallic progress
review that has been directed in most of the organization in a productive manner rather than a
disciplinary manner. (2017)

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Potential impact of MBO
The company named MOPAN i.e. multilateral organization performance assessment network is a
group of sixteen subscriber countries that have joined the forces to assess the performance of the

MBO (management by objective) 5
organizations in which they have funded using the method of MBO in which they have selected the
employees of the one major areas and have made the plan that this should be done in this particular
time which has improved the effectiveness of the employees.
In the year 2011, an evaluative report is being submitted by the IMF (international monetary fund)
regarding its performance that has been prominent up and about to the global financial and the
economic crises. The use of the method of MBO has made them analyze the all the threat and the
weaknesses of the employees that will help the supervisors to cope up with it and they have finally
achieved their goals by using this method and further this is being used by the board of IMF for
assessing their results and analyzed how the management has operated that have led to their success
The center of effective philanthropy that has an advanced theoretical agenda for measuring the
performance of the employees as this agenda provides a way for foundation to accomplish their social
benefits that have been created by its activities in relation to the resources it has been capitalized and
this has made the managers in the considerate of their performance of their organizations over time
and in respect to other practicalities. Better Evaluation. (2017)
Ethical and legal challenges that arise due to the method of MBO
The issues that can arise in the method of MBO in context to ethical and legal challenges are:
 Firstly, the major issue is when the supervisors or managers have less support that will lead to
the failure of any goal or objective
 As the goals and the objectives are being set by both in which may be employee is not
comfortable in sitting with the manager or provide any suggestion to him as they can be scared
due to which the morale of the employees can fall, and they will not be able to cope up with
the goal
 As the goal of the supervisor is idealistically high which made the employee confidence and
morale to fall down
 There is considerably too much paper work, and the major emphasis is on the short-term goal

MBO (management by objective) 6
 Some of the supervisors are not good in interpersonal skills like motivation, counseling which
is being required at the at most level to achieve the objectives
These are some of the major issues that can arise in the method of MBO. (2017). Management Study
HQ)
Resolution to the issues that have arisen in MBO
It is important to support the employees so the top managers should listen to them and help them for
the achievement of the goal and the objective not only the MBO can lead to the success they need to
work on it for achieving the success. The objectives should be clearly communicated, should be
genuine and attainable and the MBO should be based on the global viewpoint of the organization and
the entire group. Mainly the objectives that are being made should be uninterruptedly revised and
should be modified as per the requirement, and the deviations must be analyzed properly as the
deviation is creating the difference between the standard and the actual output. The style of managing
should be made in such a manner that will help in the motivation of employees (2017). Management
Study HQ)
Conclusion
From the paper, I have concluded that the MBO is one of the methods which is used for evaluation
and is more useful for the managerial positions as this method of the performance appraisal have
overcome the traditional problems that have been suffered in evaluating, the problem is being subject
to the incompatible decision of the raters.
There are some major issues also occurred which can be resolved by the support of the top
management and the goals should be uninterruptedly revised and should be modified as per the
requirement, and the deviations must be analyzed properly as the deviation is creating the difference
between the standard and the actual output. The style of managing should be made in such a manner
that will help in motivating the employees.

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References
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http://www.managementstudyhq.com/advantages-and-disadvantages-of-mbo.html
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