An Approach To Setting Goals In Which Top Managers Set Goals That Then Flow Down Through The Organization And Become Subgoals For Each Organizational Area Called Management By Objectives (MBO)

The statement is “False”, as this is called tradition goal setting approach and not management by objective approach.

Answer And Explanation of True or False Question

Approaches To Setting Goals In Management

There are two approaches to goals setting which are explained below:

1. Traditional Goal Setting Approach (TGSA)

Under such approach, top management set the goals which flow down to the next level of hierarchy of management and then finally flow to the bottom level of management where these goals set at top-level become subgoals or small goals, which must become the means in achieving the main goals set at upper-level, at each organizational level.

Advantages of This Approach

(i) Better Results

The top managers can set better targets as they can see big picture of the organization i.e., they are more responsible and look for long-term targets of the organization and as a result better and desired outcomes are possible.

(ii) Provide Direction And Guidance

Each middle-level and lower-level get direction and guidance in achieving organizational objectives. All employees know what are desired outcomes to be achieved.

(iii) Improve Performance

As the defined outcomes are provided so actions are taken at individual level to achieve results which ultimately increases the performance.

Disadvantages of TGSA

(i) Difficult Process

It is very difficult to convert strategic goals into more small and specific goals at different organizational levels from middle to lower levels as every person uses his own experience and perception to reach the desired outcome.

(ii) Lack of Mutual Understanding

Goal set top-level is not mutually agreed upon all of the team members, so someone may disagree with it which affects the working performance and it becomes difficult to reach the set targets due to lack of willingness.

How To Improve TGSA

In order to make this approach effective, the hierarchy of organization is simple and clearly defined so that the process of integrated network of goals is created where lower-level goals (means) become the means to achieve higher goals (ends) set at the next upper level and so on in order to form means-ends chain in which higher goals are connected or linked with smaller goals or lower goals to achieve the desired results.

2. Management By Objectives (MBO)

In this approach, goals are set by mutual understanding of team members. They set specific goals to be met within the specified time period. Performance is measured by comparing actual results with the desired outcomes. On the successful achievements of targets, rewards are given to team members on the basis of performance to motivate them to continue their performances in future.

Advantages of MBO

(i) Mutual Understanding & Participation

In this method of goal setting, all the team members are encouraged to take participation in setting desired outcomes. The specific goals are set by the mutual agreement of all of the team members.

(ii) Better Results

As there is a mutual agreement among team members to form objectives of the organization, so each member contributes his share of efforts to get the desired outcome.

(iii) Performance-Based System

When the members achieved the specified targets set by mutual agreement, they are rewarded with bonuses, allowances, incentives, etc., on the basis of their performances in order to encourage them to work well and continue their performances in future.

Disadvantages of MBO

(i) Conflicts & Disputes

There may be conflicts and disputes among team members in setting goals in order to achieve desired outcomes. Due to such reasons, the performance of the organization is negatively affected.

(ii) Time Consuming

As there is a need to make consensuses in developing overall objectives and strategies of the organization, so this process of developing goals takes time before making them functional.

Steps In Goal Setting

There are five stages in developing or setting goals of the organization.

(a) Review The Mission Of The Organization

The managers should review mission of the organization written in the mission statement. The goal must follow that mission or purpose of the organization for which it is existed.

(b) Evaluate Available Resources

The managers should evaluate the available resources required to meet those set targets. For example, if the company has not enough financial resources to complete the project, then the company is unable to pursue such target.

(c) Determine The Goals

The set goals should show the desired outcomes. These should reflect mission and other organizational areas. These should be measurable, specific and may include a time frame within which these are achievable. For example, if the company’s target is to increase sales upto 50% within a year and lowering the prices of products without losing quality of products in order to attract new and existing customers in the market, then this goal must reflect the company’s mission statement i.e., “To Satisfy Customers Without Compromising Quality”.

(d) Write Down And Communicate To Concerned Persons

The managers should write down goals which the organization need to be pursued in future. They should also communicate these written goals to those persons who need to know about them. The sharing of these written goals to them is helpful in achieving desired outcomes.

(e) Evaluate The Results

At the end of the process, the managers should evaluate the actual results by comparing them with set targets. If successfully achieved, then no need to change them unless changes are required. If targets are not met, then change them as required before developing the plans in pursuing these goals.