CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
The imperative of attaining organizational performance objectives constitute a fundamental phenomenon for the management of modern organization. Therefore strategic measures are constantly formulated and implemented bottom-line to achieve key results. Management by objective is one type of management philosophy adopted to ensure that organizational programme objectives or results are attainable. Peter Drucker (19454) defined management by objective as a dynamic system which seeks to integrate the company need to clarify and achieve its profit and growth goals with the managers need to contribute and develop him.
Drucker first publicized these ideas in the practice of management in 1954 subsequently, MBO has been canvassed by other writers notably, McGregor and Humble. McGreor in the Human side of enterprise supported MBO on the grounds that it gave subordinate the opportunity to participate in good setting and performance appraisal and based on a theory Y philosophy. Humble in Improving Management Performance suggests that MBO focus on the key results areas where improved performance is likely to have a dramatic impact on organization performance. However, all writes are careful to emphasize two points first that MBO is not a management technique but a philosophy which if accepted requires a shift of managerial attitudes and perspective; second that MBO needs to be integrated with other organizational procedure and notably the budgeting process, performance appraisal, management development and management reward. Management by objective (MBO) also known as management by results (MBR) is a process of defining objectives within an organization so that management and employees agree to the objectives and understand what they need to do in the organization in order to achieve them.
The term, management by objective was first popularized by Peter Drucker in his 1954 book, the practice of management. The essence of MBO is participative goal setting, choosing course of actions and decision making. An important part of MBO is the measurement and the comparison of the employee actual performance with the standards set. Ideally when the employees themselves have been involved with the goal setting and choosing the course of action to be followed by them, they are more likely to fulfill their responsibilities. According to George S. Odiorne, the system of management by objectives can be described as a process where the superior and subordinate jointly identify its common goals, define each individuals major areas of responsibility in-terms of the results expected of him and use these measures as guides for operating the unit and assessing the contribution of each of its members. Objectives can be set in all domain of activities (production, marketing, services, sales, human resources, finance, information system etc). Some objectives are collected for a whole department in the whole company, other can be individualized. Managers must determine the mission and the strategy goals of the enterprise.
The goal set by top level managers are based on the analysis of what can and should be accomplished by the organization within a specific period of time. The functions of these managers can be centralized by appointing a project manager who can monitor and control activities of the various departments. If this cannot be done or is not desirable each manager’s contributions to the organizational goal should be clearly spelled out. Objective need quantifying and monitoring. Reliable management information systems are needed to establish relevant objectives and monitor their reach ratio in an objective way. Pay incentive (bonuses) are often linked to results in reaching the objectives. The case study analysis shall aim to determine the impact of MBO on organizational performance of UBA Plc.
Historical management perspective has been on achieving organizational performance objectives reflected on profit, growth and market value. In spite of developments in various sector of the economy as technology advancement, industrial revolution, advance in production and commercial activities, the complex nature of Trade Union and industrial relation, the fact remains that organization are constantly seeking new ways and ideology to ensure that resources are maximally utilized and that set goals and objectives are achieved. MBO was first published by Peter Drucker in 1954 in the practice of management. One of the core ideas in MBO was where managers should focus their time and energy.
According to Drucker effective MBO managers focus on result not the activity. They delegate tasks by negotiating a contract of objectives with their subordinates and by refraining from dictating a detailed road map for implementation. MBO is about setting roles and their breaking these down into more specific objectives or key result MBO involves (1) Setting company – mid goals derived from corporate strategy (2) Determining team and department level goals (3) Collaboratively setting individual – level goals that are aligned with corporate strategy (4) Developing an action plan and
(5) Periodically reviewing performance and revising goals. Greenwood R. G. (1981), Management by objectives Pg. 225 – 230. The broader principle behind MBO is to make sure that everybody within the organization has a clear understanding of the organization’s goal as well as awareness of their own roles and responsibilities in achieving objectives that will help to attain those goals. The complete MBO system aims to get managers and empower employees acting to implement and achieve that plans which automatically achieves the organizations goal. In-view of the result oriented nature of MBO as a management philosophy. It spurs the researcher to conduct a study of this nature to determine the impact of management by objective on organizational performance using UBA as a case study.
1.2 STATEMENT OF THE PROBLEM
There has been an increasing challenge in many organization to achieve corporate organization objective due to mobility to maximally utilize its human resources. Many firms have focused on central management with total neglect and lack of integration of low level employees in the corporate plans and objectives. The resultants effect as been that of lack of understanding, interpretation and implementation of such plans and objective loading to poor organizational performance. The research therefore is confronted with the problem of determining the impact of management by objective (MBO) in organizational performance with a case study on UBA Plc.
1.3 RESEARCH QUESTIONS
The research Questions include;
1. What is the nature of management by objective and what is the nature of MBO in UBA
2. What constitute organizational performance and organizational performance in UBA Plc
3. What is the impact of management by objective on organizational performance and what is the impact of MBO in organizational performance in UBA Plc.
1.4 OBJECTIVES OF THE STUDY
The objectives of the study consist of;
1. To provide a detail analysis of the concept of management by objectives and organizational performance
2. To determine the structure and process of management by objectives
3. To determine the nature of organizational performance measure
4. To determine the impact of MBO in organizational performance
5. To determine the nature of MBO in UBA Plc
6. To determine the organizational performance standards in UBA Plc
7. To determine the impact of MBO in organizational performance in UBA Plc.
1.5 SIGNIFICANCE OF THE STUDY
The significance of the study includes;
1. To show the importance of employee involvement in the planning process and objective setting in the organization
2. To provide a study framework upon which managers could build upon to derive maximum employee performance in achieving objectives.
3. To provide a detailed analysis of the concept of MBO as it could be applied in situation of organizations employee poor performance.
4. To provide information source for administration, consultants as well as Human Resources Personnel.
1.6 STATEMENT OF HYPOTHESIS
1. Ho There is no organizational performance standard in UBA Plc
H1 There is organizational performance standard in UBA Plc
2. Ho (MBO) Management by objectives is not given significant attention in UBA Plc
H1 (MBO) Management by objectives is given significant attention in UBA Plc
3. Ho Management by objective has no significant impact on organizational performance in UBA Plc
H1 Management by objective has significant impact on organizational performance in UBA Plc
1.7 SCOPE OF THE STUDY
The study provides detail analysis of the concept of MBO, its process and significance. It also expands on the nature of organizational performance with a view of determining the impact of MBO on organizational performance using UBA Plc as a case study.
1.8 DEFINITION OF TERMS
1. Definition of MBO: Management by objective is a process of defining objectives within an organization so that management and employees agree to the objective and understand what they need to do in the organization in order to achieve them Peter Ducker (1954) The practice of management Pg.
2. Organizational performance: Organizational performance comprises the actual output or results of an organization as measured against its intended output (or goals and objectives). According to Richard et al (2009) organizational performance encompasses three specific areas of firm outcomes
(a) Financial performance
(b) product market performance
(c) Shareholder return.