Mbo - Is It Outdated?

MBO - Outdated?

Management by objectives (MBO) is a system in which people at each level of the organization set goals in a process that flows from top to bottom, so employees at all levels are contributing to the organization's overall goals (Noe, Hollenbech, Gerhart, & Wright, 2009). MBO has been part of corporate doctrine for many years. However, as the years have gone by some companies have found that the strengths of MBO have become liabilities and new, more empowering and flexible models for performance management have been introduced.

There are a several reasons that MBO has grown increasingly obsolete. First, due to the ever increasing rate of change in markets, technology, and trends in today's turbulent business environment, this year's goals set during the initial MBO phase may be obsolete within months, weeks, or even days. Second, trying to measure an individual's productivity has become increasingly difficult as companies grow more complex and responsibilities begin to overlap. Third, when employees sit down to set the MBO goals they tend to be conservative in their estimates so they can meet them. This limits the amount of creativity and perspective that will be achieved by the employee. Lastly, when employee goals have been predetermined they tend to try and work around problems that will hinder them from meeting their MBO goals rather than working through them.

In William Roth's article entitled, Is management by objectives obsolete? we are given an example of a new approach which was implemented at the Bridgeport Paper Company. This approach is an alternative to MBO and is built around a non-traditional reward and merit system, and should be considered by any company looking to empower its employees.

Bridgeport Paper Company was in a difficult market in the Philadelphia area and if they wanted success they would have to take customers away from established competition. Bridgeport's goals to achieve success were to find ways to generate a high level of commitment of its employees, taking advantage of their expertise, and building a true team effort.

The first step that Bridgeport Paper used was to ask for suggestions from everybody. From these suggestions there were several valid ones. One suggestion stemmed from the fact that most of the customers that Bridgeport dealt with were woman but all the sales staff were men. This initiated a move to hire more female sales people. Another suggestion provided was to start delivering 24 hours a day since the competitors only delivered during daytime hours. After hearing these initial suggestions the owner could see that the employees should play a larger role in the business.

The second step that Bridgeport Paper used was to make the employees responsible for designing key organizational systems such as communication, access to information, decision making, work design, training, recruiting,