Management By Objectives (MBO): 'An objective system for evaluating performance of staff

The design of a system for the evaluation of personnel performance is one of the main activities of a human resources department within an organization. It is very important to have an objective, fair and credible performance appraisal system, which implies achieving objectives. Objectivity is a key component of an effective evaluation system.

This system differs from the others because it is based on objective criteria and does not allow the use of subjective measurements. MBO as a system requires the evaluation of staff based on achievement of predetermined objectives, which are co-decided by the staff and their immediate superior.

The three main features (procedures) of the system are:

1. The existence of targets  - a process for setting targets: In addition to the implementation of the 'SMART test', personal objectives must be identified with the objectives of the department to which the person concerned belongs, which in turn identify with the goals of the whole organization. Thus, when at the end of the prescribed period in which the goal must be achieved, performance evaluation takes place and any weaknesses as well as training needs of the individual are identified, we will know that the training that follows will actually be constructive.

2. Participation of the assessed individual in the process of defining its own objectives: Personal goals must be the product of discussion and exchange of views between the individual in question and his immediate superior. During the process of targeting, the head is responsible for creating the right conditions and the right climate which assists the free exchange of views and promotes equality.

3. The objective feedback:  The individual assessed has to be given objective feedback in order to know whether and to what extent the objectives were attained. This will help him grow continuously, since he will have a clear idea as to where he is headed and what is required of him in the future.

Various studies have shown that this system is effective, if fully implemented. Its full implementation requires the full implementation of the above 3 processes. The key to their implementation is the top level management of the organization: The greater the support on behalf of the management of the organization, the more efficient becomes the implementation of each process.

To check the effectiveness of the MBO system in an organization, two key and interrelated factors should be analyzed. The first has to do with increasing the efficiency and productivity of staff, and the second with increasing employee satisfaction in relation to their jobs. These factors should be examined not only in each process individually but also in terms of support by the management of the organization.

Once these factors are examined the management should analyse the results and constantly readjust the system of implementing objectives. Objectives that may now appear challenging and motivating may lose their drive over the period of time. It is thus imperative to monitor the system closely and to make the necessary corrections where necessary, always in accordance with the desires and feelings of the employees.

Marios Charalambides

Lecturer in Economics and Business Organisation

The Cyprus Institute of Marketing