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Performance Appraisal Technique: Managing by Objectives

One well-regarded and widely used approach to performance appraisal is called management by objectives (MBO). By definition, under this method, you evaluate your employees on the basis of results. MBO is more than performance appraisal — it’s a construct for managing the entire organization. Its breadth includes the organization’s vision, values, strategies, goals, and performance measurement.

MBO begins with managers at the top of the company setting goals. Then managers and employees at each successively lower level develop their own goals. Employees’ goals are designed to support the goals of their own managers. In this way, the entire organization is linked together in the pursuit of objectives.

The focus is on outcomes that are clear, specific, measurable, and supported by action plans, benchmark dates, and deadlines. All aspects of the goal-setting process also apply to
the employees’ personal and developmental goals, such as building their skills or knowledge base.

After employees meet with their managers to establish their goals and action plans, the employees return to work newly energized and focused on specific short-term and longer-term targets. Simultaneously, their managers monitor the employees’ performance, provide coaching and support, remove barriers or help employees overcome them, and make adjustments and course corrections as necessary. The employees’ performance and progress are clear, measured, documented, and transparent every step of the way.

Employees are highly motivated through MBO because they’ve been able to actively participate in the process of setting goals, instead of simply having the goals dumped on them. Their involvement in this type of decision-making helps meet many of their higher-level needs for accomplishment, achievement, recognition, and self-worth.

MBO brings a wide range of advantages to the appraisal process:

  • It helps build relationships between managers and employees. MBO includes a great deal of contact and communication between managers and their employees, which builds camaraderie, communication, and trust — all key elements in strengthening teamwork.

  • It fosters a comfortable climate in the workplace. MBO helps build an atmosphere of respect and trust within a given department and beyond.

  • Because managers work directly with employees to identify and solve problems, MBO improves the quality of decision-making and problem solving.

  • It’s fair. Employees are evaluated on the basis of their performance and attainment of goals, which is regarded as fair and energizing.

  • It’s quick and easy. Performance evaluation forms associated with MBO are a breeze to complete. Typically, they spell out each objective as established at the beginning of the cycle, and then provide a space for the manager to summarize the results.

Some MBO forms also include a scale that asks for a numerical assessment of the employees’ success in meeting their goals. These scales guide the managers in the rating process by including specific descriptions of excellent, good, fair, and poor levels of goal attainment.

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