Advantages and Limitations of MBO

Advantages of MBO:

• Improved planning — the discipline of setting specific, measurable objectives at every level improves the quality of planning throughout the organisation.
• Clarity of goals — every employee knows exactly what is expected of them, in specific and measurable terms, reducing ambiguity about their role.
• Higher motivation — because employees participate in setting their own targets, they feel a greater sense of ownership and commitment towards achieving them, compared with targets simply imposed on them.
• Effective control — since standards are clearly stated and measurable in advance, actual performance can be objectively compared against them, making the controlling function far easier and less subjective.
• Better communication — the process of jointly setting objectives, and reviewing progress periodically, forces regular, structured communication between superiors and subordinates that might not otherwise take place.
• Fair and objective appraisal — because performance is judged against pre-agreed, measurable targets rather than a superior's general impression, MBO tends to make performance appraisal more objective and less open to bias.

Limitations of MBO:

• Time-consuming — the process of joint goal-setting and periodic review at every level of the organisation takes considerable managerial time and effort.
• Overemphasis on quantifiable objectives — MBO works best for objectives that can be precisely measured (e.g. sales volume, units produced); it is much harder to apply meaningfully to jobs whose most important contributions are qualitative (e.g. building team morale, exercising sound judgement), and there is a risk that such important-but-hard-to-measure aspects get neglected.
• Encourages a short-term outlook — because performance is reviewed against objectives for a specific, often short, period, managers may be tempted to sacrifice long-term organisational health for results that look good within the current review period. …