1. Definition of Management By Objectives (MBO)
• MBO is a process in which managers / employees set objectives for the employee, periodically evaluate the performance, and reward according to the result.
• MBO focuses attention on what must be accomplished (goals) rather than how it is to be accomplished (methods).
2. Classification of Objectives
• Corporate objectives
• Functional objectives
• Individual objectives
3. Conditions of Management By Objectives
An objective must be satisfied SMART conditions:
• Relevant, and
4. Advantages of MBO
• It is based on the assumption that the individual (employee) knows more than anyone else about her/his own capabilities, needs, strengths, weaknesses and goals.
• A further advantage of MBO is that the emphasis is on the future rather than on the past. Appraisal thus becomes a means to a constructive end.
Objectives and policies of performance appraisal
1. Objectives of performance appraisal
• Improve performance effectiveness and feedbacks: the whole company.
• Plan human resources: promotion, especially in management, overtaking.
• Recruitment and selection: Score tabulation allows forecasting employee’s work accomplishment possibility and measuring the effectiveness of tests.
• Development of human resources: Show the demand for training, education and development; identify employee’s imperfections to be corrected.
• Career plan and development: Identify employee’s potential imperfections; help them to carry out the plan.
• Salary and treatment: Decision of salary increase, bonus increase.
• Inferior personnel tie: Promotion, reduction in grade, contract termination, work suspension, transfer.
• Employee potential appraisal: Based on employees’ work accomplishment, examine past activities to forecast future performance. Common mistake is made when one of high professional capacity is promoted lacking leading capacity. The evaluated object needs to be specified so that an objective appraisal is guaranteed.
2. Policies of performance appraisal
Specify in handbook or publicize at meetings. Managers must bring these in their minds.
• Maintaining encouragement of outstanding achievements.
• Maintaining leading quality improvement, bonus increase for those of good performance.
• Creating favorable conditions for employees to get involved in management decisions.
• Encourage employees’ integration and involvement in company’s structure and goals.
• Creating opportunities for employees to excel, demonstrate talent and potential.
• Managers support their employees, labor force.
• No breach of state laws and company’s disciplines, no bias.