MANAGEMENT BY OBJECTIVES
It was Peter F. Drucker who first gave the concept of MBO to the world way back in 1954 when his The Practice of Management was first published. The MBO concept, as was conceived by Drucker, reflects a management philosophy which values and utilizes employee contributions. Application of MBO in the field of performance appraisal is a recent thinking.
Four Steps in the MBO Process
How MBO works can be described in four steps:
The first step is to establish the goals each subordinate is to attain. In some organisations, superiors and subordinates work together to establish goals. In others. Superiors establish goals for subordinates. The goals typically refer to the desired outcome to be achieved. These goals can then be used to evaluate employee performance.
The second step involves setting the performance standard for the subordinates in a previously arranged time period. As subordinates perform, they know fairly well what there is to do, what has been done, and what remains to be done.
In the third step, the actual level of goal attainment is compared with the goals agreed upon. The evaluator explores reasons for the goals that were not met and for the goals that were exceeded. This step helps determine possible training needs. It also alerts the superior to conditions in the organization that may affect a subordinate but over which the subordinate has no control.
The final step involves establishing new goals and, possibly new strategies for goals not previously attained. At this point, subordinate and superior involvement in goal-setting may change. Subordinates who successfully reach the established goals may be allowed to participate more in the goal setting process the next time. The process is repeated. As with other approaches. MBO too has been criticised. One comment made against the approach is that it is not applicable to all jobs in all organisations. Jobs with little or no flexibility. Such as assembly-line work, are not compatible with MBO.
An assembly-line worker usually has so little job flexibility that the performance standards and objectives are already determined. The MBO process seems to be most useful with managerial personnel 'and employees who have a fairly wide range of flexibility and self-control in their jobs. Besides, when the result of an MBO system are to be used to allocate organisational rewards, employees may be less likely to establish challenging goals-goals they are confident that they can accomplish. Further, the allocation of merit pay on a semi-annual or annual basis may encourage the setting up of goals with short time horizons to the disadvantage of important long-term goals.
The performance appraisal presently followed in L&T reflects the principles of MBO.
Psychological Appraisals
Large organization employs full-time industrial psychologists. When psychologists are used for evaluations. They assess an individual’s future potential and past performance. The appraisal normally consists of in-depth interviews, psycho1ogical tests. Discussions with supervisors and a review' of other evaluations. The psychologist then write an evaluation of the employee's intellectual, emotional, motivational and other-related characteristics that suggest individual potential and may predict future performance.
The evaluation by the psychologist may be for a specific job opening for which the person is being considered. Or it may be a global assessment of his or her future potential. From these evaluations. Placement and development decisions may be made to shape the person's career. Because this approach is slow and costly, it is usually required for bright young members who, others think. May have considerable potential within the organisation. Since the quality of the appraisal depends largely on the skills of the psychologists, some employees object to this type of evaluation, especially if cross-cultural differences exist.
It was Peter F. Drucker who first gave the concept of MBO to the world way back in 1954 when his The Practice of Management was first published. The MBO concept, as was conceived by Drucker, reflects a management philosophy which values and utilizes employee contributions. Application of MBO in the field of performance appraisal is a recent thinking.
Four Steps in the MBO Process
How MBO works can be described in four steps:
The first step is to establish the goals each subordinate is to attain. In some organisations, superiors and subordinates work together to establish goals. In others. Superiors establish goals for subordinates. The goals typically refer to the desired outcome to be achieved. These goals can then be used to evaluate employee performance.
The second step involves setting the performance standard for the subordinates in a previously arranged time period. As subordinates perform, they know fairly well what there is to do, what has been done, and what remains to be done.
In the third step, the actual level of goal attainment is compared with the goals agreed upon. The evaluator explores reasons for the goals that were not met and for the goals that were exceeded. This step helps determine possible training needs. It also alerts the superior to conditions in the organization that may affect a subordinate but over which the subordinate has no control.
The final step involves establishing new goals and, possibly new strategies for goals not previously attained. At this point, subordinate and superior involvement in goal-setting may change. Subordinates who successfully reach the established goals may be allowed to participate more in the goal setting process the next time. The process is repeated. As with other approaches. MBO too has been criticised. One comment made against the approach is that it is not applicable to all jobs in all organisations. Jobs with little or no flexibility. Such as assembly-line work, are not compatible with MBO.
An assembly-line worker usually has so little job flexibility that the performance standards and objectives are already determined. The MBO process seems to be most useful with managerial personnel 'and employees who have a fairly wide range of flexibility and self-control in their jobs. Besides, when the result of an MBO system are to be used to allocate organisational rewards, employees may be less likely to establish challenging goals-goals they are confident that they can accomplish. Further, the allocation of merit pay on a semi-annual or annual basis may encourage the setting up of goals with short time horizons to the disadvantage of important long-term goals.
The performance appraisal presently followed in L&T reflects the principles of MBO.
Psychological Appraisals
Large organization employs full-time industrial psychologists. When psychologists are used for evaluations. They assess an individual’s future potential and past performance. The appraisal normally consists of in-depth interviews, psycho1ogical tests. Discussions with supervisors and a review' of other evaluations. The psychologist then write an evaluation of the employee's intellectual, emotional, motivational and other-related characteristics that suggest individual potential and may predict future performance.
The evaluation by the psychologist may be for a specific job opening for which the person is being considered. Or it may be a global assessment of his or her future potential. From these evaluations. Placement and development decisions may be made to shape the person's career. Because this approach is slow and costly, it is usually required for bright young members who, others think. May have considerable potential within the organisation. Since the quality of the appraisal depends largely on the skills of the psychologists, some employees object to this type of evaluation, especially if cross-cultural differences exist.