4 Main Steps Involved In the MBO Technique of Performance Appraisal to Improve the Efficiency

of Your Organisation

Article shared by Vignesh Rajshekar

MBO Process: The main steps involved in the MBO technique of performance appraisal are as
follows:

Steps

1. Set Organisational Goals:

Goals of the organisation have to be set after a thorough analysis of internal environment
(strengths and weaknesses) and external environment (opportunities and threats) of the
organisation. The goals set should be defined in clear, precise and measurable terms. Goals
should be challenging and attainable.

Goals

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2. Defining Performance Targets:

Every subordinate writes down his own performance goals, which are work-related and career-
oriented. His manager also writes down the goals he thinks the subordinate should strive for.

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The two then discuss them, reach an agreement and put the agreed goals in writing. Thus,
employees at all levels are actively involved in goal setting. Joint goal setting and joint action
planning are essential elements of appraisal through MBO.

Clear attainable goals help channel energies in the right direction and let the employee know the
basis on which he will be judged. The goals are periodically reviewed and revised to keep them
flexible and up-to-date.

3. Performance Reviews:

Frequent performance review meetings between the manager and the subordinate are held. In
the review meetings, progress is assessed, weaknesses and constraints are identified and steps
to be taken to improve performance are decided. Subordinates actively participate in this
process.

4. Feedback:

After every performance review, feedback on performance is communicated to the employee so

that he can regulate and improve upon his own performance. On the basis of performance
review rewards are decided. New goals and performance targets are determined for the next
period.

Benefits of MBO:

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1. MBO provides a way for objectively measuring the performance of subordinates. An employee
knows in advance the results expected of him and the basis on which his performance will-be
judged.

2. Judgmental role of the superior is avoided and subordinates are provided the opportunity for
self-appraisal.

3. Co-ordinates individual performance with company goals. MBO makes goals more explicit and
focuses attention on key result areas. This helps to ensure that activity of every person is
ultimately contributing towards organisational goals.

4. Clarifies the job to be done and defines expectations of job accomplishment. Every individual
understands his area of work and the role he is to play in the organisation. Responsibility for
results in clearly defined and there is no misunderstanding as to performance goals.
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5. Improves superior-subordinate relationship through a dialogue that takes place regularly.

6. Active participation of subordinate in goal setting and performance reviews helps to satisfy
ego and self-actualisation needs. Job satisfaction and morale of employees tend to be higher.

7. Fosters increased competence, personal growth and opportunity for career development.

8. Continuous feedback and opportunities for self-control help to develop the leadership
potential of lower level executives.

9. Stimulates self-motivation, self-discipline and self-control.

10.Harmony between objectives at different levels provides a sense of common direction to all.
It becomes easier to initiate and implement organisational change.

11.Serves as a device for integration of many management functions.

12.Supplies a basis for more equitable salary determination, especially incentive bonuses.

Limitations of MBO:

1. It often lacks the support and commitment of top management.

2. Its objectives are often difficult to establish. It is often difficult to set truly verifiable goals for
all jobs. Short-term immediate goals may over-ride long term goals.
3. Traditional hierarchical structures and authoritative attitudes do not allow active participation
of subordinates in goal setting.

4. MBO programme involves considerable time, energy and expenditure. Its implementation can
create excessive paperwork if it is not closely monitored.

5. MBO can be self-defeating if it fails to take into considerations the deeper emotions of people.

6. MBO often fails due to lack of knowledge about the philosophy and process of MBO. Failure to
carefully monitor the system is also a problem.

Quite often while using MBO as an appraisal tool, people comment MBO is okay in theory but
not good in practice. There is an element of truth in this statement. In practice all leadership
styles may not be compatible with the participative culture advocated by MBO. All jobs do not fit
in with the philosophy advocated by MBO. In traditional appraisal techniques, all personnel are
rated on common factors.

In MBO, each person will have different sets of goals of non-comparable complexity and degree
of accomplishment.

3. Assessment Centre Method:

This method of appraising was first applied in the German army in 1930. Later business
organisations also started using this method.

This is not a technique of performance appraisal by itself. In fact, it is a system, where

assessment of several individuals is done by various experts by using various techniques.

In this approach, individuals from various departments are brought together to spend two or
three days working on an individual or group assignment similar to the ones they would be
handling when promoted.

Evaluators observe and rank the performance of all the participants. Experienced managers with
proven ability serve as evaluators.

This group evaluates all employees both individually and collectively by using simulation
techniques like role playing, business games and in basket exercises.

An assessment centre generally measures interpersonal skills, communicating ability, ability to

plan and organise etc.

Personal interviews and projective tests are used to assess work motivation, career-orientation
and dependence on others. Paper and pencil tests are used to measure intellectual capacity.

In order to make this method effective, it is necessary to

1. State the goals clearly

2. Obtain top management support

3. Conduct job analysis

4. Train the assessor and

5. Periodically evaluate and revise the assessment programme.

4. Human Resource Accounting Method:

Human resources are a valuable asset of any organisation. This asset can be valued in terms of
money. When competent, and well- trained employees leave an organisation, the human asset is
decreased and vice versa.

Human resource accounting deals with cost of and contribution of human resources to the
organisation.

Cost of the employee includes cost of manpower planning, recruitment, selection, induction,
placement, training, development, wages and benefits etc.

Employee contribution is the money value of employee service which can be measured by
labour productivity or value added by human resources. Difference between cost and
contribution will reflect the performance of employees.

Human resource accounting method is still in the transition stage.

5. Psychological Appraisals:

Psychological appraisals are conducted to assess the employee potential. It is conducted in the
areas of employees

(a) Intellectual abilities

(b) Emotional stability

(c) Reasoning and analytical abilities

(d) Sociability
(e) Interpretation and judgement skills

(f) Motivational responses

(g) Ability to foresee the future

Psychological appraisal results are useful for decision-making about employee placement, career
planning and development, training etc.

6.360 Degree Appraisal:

It is a method of appraisal in which people receive performance feedback from those on all sides
of them in the organisation-their boss, their colleagues and peers and their own subordinates.

Thus, the feedback comes from all around them, 360 degrees.

This form of performance evaluation can be very beneficial to managers because it typically
gives them a much wider range of performance-related feedback than a traditional evaluation.
What is 360 degree feedback?

360-degree feedback is a method and a tool that provides each employee the opportunity to
receive performance feedback from his supervisor and four to eight peers, reporting staff
members, co-workers and customers. Most 360 degree feedback tools are also responded to by
each individual in self-assessment.

360 degree feedback allows each individual to understand how his effectiveness as an employee,
co-worker, or staff member is viewed by others.

The most effective processes provide feedback that is based on behaviours that other employees
can see.
The feedback provides insight about the skills and behaviours desired in the organisation to
accomplish the mission, vision, and goals and values.

The purpose of the 360 degree feedback is to assist each individual to understand his strengths
and weaknesses, and to contribute insights into aspects of his work for professional
development.

hindu
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Delay in land acquisition and non-performance of a contractor are said to be the major
reasons for the Chennai Metro Rail missing its deadline.

Answering a question in the Lok Sabha, the Union Minister for Urban Development Venkaiah
Naidu said the original date of completion was March 2015, but due to land acquisition delays
and non-performance of a contractor leading to re-tendering, the project missed this deadline.

But the reply itself presented two different deadlines for the project. It stated that the
expected schedule of completion as December 2016 and the approved date of completion
as December 2017.

The re-tendering work here refers to the termination of the contract of Gammon India by
Chennai Metro Rail after its partner, Russian firm Mosmetrostroy, abandoned the project.

The contract was terminated due to tardy progress of work. Soon after the termination,
Chennai Metro Rail Limited (CMRL) floated fresh tenders for the work.

Chennai Metro Rail, estimated to cost Rs. 14,600 crore, sprawls over 45 km of the city. Of this,
24 km will be underground and the remaining 21 km elevated.
So far, Rs. 6,597 crore has been released over three years for this project.

The phase I extension of Chennai Metro Rail from Washermanpet to Wimco Nagar was
granted sanction only recently.

The extension, expected to cost around Rs. 3,700 crore, is a 9-km stretch that runs partly
underground and is partly elevated. CMRL is in the process of finalising consultants for this
stretch.

mbo techiques==============================================================

6 Stages of MBO (Management by Objectives) Process

MBO or management by objectives is defined as a comprehensive managerial system that

integrates many key managerial activities in a systematic process and that is consciously
directed toward the effective and efficient achievement of organizational and individual
objectives.

The practical importance of objectives in management can best be seen by summarizing how
successful managing by objectives works in practice.

The six steps of MBO process are shown below graphically;

6 Stages of MBO (Management by Objectives) Process

Define organizational goals

Define employees objectives

Continuous monitoring performance and progress

Performance evaluation
 Providing feedback

Performance appraisal

Lets briefly look at each of these;

Define Organizational Goals

Goals are critical issues to organizational effectiveness, and they serve a number of
purposes. Organizations can also have several different kinds of goals, all of which must be
appropriately managed.

And a number of different kinds of managers must be involved in setting goals. The goals set
by the superiors are preliminary, based on an analysis and judgment as to what can and what
should be accomplished by the organization within a certain period.

Define Employees Objectives

six steps of MBO process

After making sure that employees managers have informed of pertinent general objectives,
strategies and planning premises, the manager can then proceed to work with employees in
setting their objectives.

The manager asks what goals the employees believe they can accomplish in what time
period, and with what resources. They will then discuss some preliminary thoughts about
what goals seem feasible for the company or department.

Also, Read Four Common Ingredients that makes up an MBO Program.

Continuous Monitoring Performance and Progress

 MBO process is not only essential for making line managers in business organizations more
effective but also equally important for monitoring the performance and progress of
employees.

For monitoring performance and progress the followings are required;

Identifying ineffective programs by comparing performance with pre-established

objectives,

Using zero-based budgeting,

Applying MBO concepts for measuring individual and plans,

Preparing long and short range objectives and plans,

Installing effective controls, and

Designing sound organizational structure with clear, responsibilities and decision-

making authority at the appropriate level.

Performance Evaluation

Under this MBO process performance review are made by the participation of the
concerned managers.

Providing Feedback

The filial ingredients in an MBO program are continuous feedback on performance and goals
that allow individuals to monitor and correct their own actions.

This continuous feedback is supplemented by periodic formal appraisal meetings which

superiors and subordinates can review progress toward goals, which lead to further feedback.

Performance Appraisal

Performance appraisals are a regular review of employee performance within organizations.

It is done at the last stage of MBO process.
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Chennai is the fourth largest city in India with a population of about 8 million. Phase 1 of the
Chennai Metro Rail project, currently in progress, comprises two corridors of about 47km long
and 32 stations. Chennai Central Metro station, located in the middle of the city, is an
underground-interchange station between the two corridors and also a terminal station for one
of the corridors. Due to its unique crossover arrangement, the platforms of the two corridors will
be staggered, and the station is about 300m long and constrained between a canal (c.1882) on
one side and a busy road junction on the other side. Strategically located on one of the busy
arterial roads EVR Periyar Salai and in front of the Chennai Central long-route railway station,
the upcoming metro station will provide traffic integration with existing transport modes.
Diversion of dense pedestrian and vehicular traffic continuously flowing through this location
during construction plays a major role in the design and construction sequencing. The proposed
metro station is also surrounded by at least four declared heritage buildings. The architectural
and structural design of the above-ground metro structures will strike a commonality among the
adjoining heritage buildings of different architectural styles, as well as exhibit a contemporary
look.