Management by Objectives

Fundamentals

MBO has a solid foundation in the behavioral sciences. Its effectiveness is due primarily to its emphasis on three core variables that are critical for motivating employees in work settings, namely, goal setting, performance feedback, and participation in decision making. More than 1,000 empirical studies in organizational psychology on goal setting show that specific, high goals lead to significantly higher performance than not setting goals or setting a vague one such as urging employees to do their best. Goals serve a dual function. First, they are motivating in that employees exert effort and persist until the goals are attained. Second, they serve as standards for performance evaluation. Interestingly, having a large number of goals has not been found to lead to negative results. In fact, employees who worked for supportive managers reported greater effort with increased number of goals. The setting of priorities is related to positive feelings about an MBO program and improved relations with one’s manager. Hence, many organizations use MBO [Page 459]to conduct performance appraisals of individuals, teams, or both.

Hundreds of studies in both experimental and organizational psychology have shown that feedback on one’s performance is necessary for both learning and motivation. Specifically, feedback allows employees to determine what they must start doing, stop doing, or be doing differently to attain their respective goals. Research shows that people who receive feedback are motivated to solve problems and are more likely to do so. Feedback can also increase an employee’s self-efficacy that an objective is attainable. Given that the feedback is provided in a supportive manner, it is typically interpreted by an employee as interest and concern by the person’s supervisor. Feedback given in a negative manner typically lowers job performance. Participation with one’s supervisor on the goals that should be set, and the ways to attain them, increases an employee’s understanding of his or her boss’s expectations, and the appropriateness of the goals that are chosen. It also has been found to increase job satisfaction, particularly for employees who have a high need for certainty.

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