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IMPACT OF MANAGEMENT BY OBJECTIVE (MBO) ON EMPLOYEE PERFORMANCE IN NIGERIA BANKING INDUSTRY

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Apr 12, 2020 No Comments ›› Sunday

ABSTRACT

Human resources are the most important and dynamic among all the resources an organisation owns. To retain efficient and experienced workforce in an organisation is very crucial in the overall performance of an organisation. A satisfied employee can help make an organisation more profitable and competitively.  The present study is an attempt to evaluate the impact of management by objective method on employee performance in the banking industry. The data collected from employees of First Bank Nig. Plc, First City Monument Bank Plc and Guarantee Trust Bank Plc in Ado Ekiti, in all 80 self-administered questionnaires were successfully completed. Based on the findings the study reveals that in hypothesis one there is a there is significant relationship between management by objective and employee performance, since F calculated as 4.000 is less than F- tabulated as 6.613 and for hypothesis two, there is there is no significant relationship between management by objective and productivity in an organisation, since the F calculated is also 4.000 less than F- tabulated as 2862.

  

CHAPTER ONE

INTRODUCTION

1.1       Background to the study

          Management needs a lot of tools to be able to administer effectively in the day running of the business. Management by objective is one of the tools. It is a way of getting improved results in managerial action. Management boy objective can be described as managerial method whereby the superior and the subordinate in an organisation identify major areas of responsibility, in which they will work, set some standards for the good or bad performance and the measurement of results against those standards Derek (2005).;

Management by objective is also called management by objectives. However, there have been certain individuals who have long placed emphasis on management by objectives and by so doing have given impetus to its development as a system. Management by objective referred to a structured management technique of setting goals for any organisational unit.

George S. Odiorne(1981) in his book of management by objective defined this concept as “a system of management whereby the superior and the subordinate jointly identify objectives, define individuals major areas of responsibility in terms of results expected, and the use these objectives and expected results as guide for separating the units and assessing the contribution of each member. Besides, Odiorne points out that management by objective is a system of management and   overall framework used to guide the organisation units and outline its direction. He went further to point that the superior and the subordinate jointly identify objectives. In other words, it is a participative management procedure that requires commitment and cooperation. The definition deals with identifying the results that are expected. Thus, management by objectives concentrates on the output of the organisation evaluating people by   assessing their contribution to this output.

Management by objectives is a strategy wherein the management sets specific goals for the employees to accomplish within a fixed time period. Management by objective is a dynamic system which seeks to integrate the company’s need to clarify and achieve the profit and growth with the managers needs to contribute and develop him. It is a demanding and rewarding style of managing a business.

Management by objective can work in any size of the organisation if the procedures are understood and managers are patient in letting the system set in first. Management by objective is an effective planning, controlling and development system. Management by objective was defined by Koontz and O’Donnell (1968) as a technique system or method of management whereby the superior and subordinate managers of an organisation agreed on its broad goals, translate these goals, defined each expected individuals major areas of responsibility in terms of results expected, continually reviewing the accomplishment as the sole basis of assessing and rewarding them. Management by objective gives the employee the opportunity to participate in decision making. It assumes that the employee has been properly selected and trained and will be responsible for achieving the desired results in the organisation.

The underlying belief is that this involvement of employee leads to commitment and if an employee is committed, he can be directed to perform in a manner that positively contributes to the achievement of the organisational objectives. The MBO afford both the superior and the subordinate the opportunity to sit together and jointly identify common goals of enterprise to define individual’s areas of responsibility term of the results expected of him and use these measures as guide for operating the unit and assessing the contribution and each of its misers. This leads to the four basic components of the Management by objectives system: 

*          Setting performance objectives and standards for their accomplishment

*          Developing action plans

*          Coaching and counseling

*          Annual performance appraisal

Organisations are ubiquitous. According to Mullins (2005), organisations are designed by people to overcome individual limitations and achieve individually. Hence, organisations become a means of survival for the people and exert an important daily influence on the life of the people and the way they live. The major decider for the survival of any organisation is the presence of capable men and women with the right technique to combine the organisation resource man, machine, money and material) to achieve organisational goals.

It is appropriate to note that management of companies in Nigeria lack sufficient techniques to make them manage effectively. Some of the tools are used and when used are not properly utilized. Management by objective is not only a managerial strategy to achieve a well-coordinated managerial goal, but it is also a popular management technique that pervades or cut across all human activities namely business areas, education, health, government and non-profit organisation. Most of the technique, system, and tools of management are hardly understood resulting in losses and changes to the organisation. Besides, it is the wrong use of technique and unwillingness of top management to utilize the right tool to solve the management problems. It is on these trends that the researcher intends to find out the impact of MBO method on employees performance in Nigeria Banking Industry. In order to investigate the above impact, one of the leading financial institutions in the country, First Bank of Nigeria, First City Monument Bank and Guarantee Trust Bank in Ado-Ekiti has been chosen.

1.2      Statement of the Problem

Management by objective is not an instant solution for organisational problems.  Quite often many organisations see MBO as an instant solution to their problems. They fail to recognise that MBO demands careful planning and proper implementation. Many organisations have been overwhelmed by problems of MBO and Management by objective as a concept itself has a problem of wrong implementation like incomplete understanding of MBO philosophy in personal, poor planning and lack of guidelines for implementation, practical difficulty in setting objectives, increased pressure and frustration on subordinates, quantitative bias and lack of follow up.

MBO is a time consuming process. Objectives, at all levels of the organisation, are set carefully after considering pros and cons which consumes lots of time. The superior are required to hold frequent meetings in order to acquaint subordinates to the new system. The formal, periodic progress and final review sessions also consumes time.

It is pertinent to note that MBO is based on reward and punishment approach. It tries to discriminately force improvement on employees. At times it may penalize the people whose performance remains below the goals. Reward is provided only for the superior performance. Often MBO operates more problems than it can solve. An incident of tug of war is not uncommon. The subordinates try to set the lowest possible targets and the superior the highest. When objectives cannot be restricted in number, it leads to obscure priorities and create a sense of fear among subordinates. Added to this, the programme is used as a whip to control employee performance.

A well-conceived MBO programme requires three to five years of operation before it provides fruitful results. Managers and subordinates should be oriented so that they do not look forward to MBO for instant solution. Proper time and resources should be allocated and people should also be properly trained in the philosophy of MBO. There has been an interrupted information feedback which has caused a gap between goal setting and goal performance. Following the above, this study will examine the relatedness of proper planning, adequate time for measuring the benefit of the system, follow up, the exclusion of reward and punishment approach to the successful implementation of MBO.            

1.3      Research Questions

In review of the problems associated with this topic, the following research questions are vital to in-depth analysis of this topic. This are:

  1. Is there any factor militating against effective implementation of management by objective in an organisation?
  2. To what extent are employees given the appropriate authority and responsibility for effective management by objective?
  • Does MBO have effect on productivity in an organisation?
  1. To what extent does MBO determines employee’s performance towards achieving the objectives of the organisation?

1.4     Objectives of the Study

The general objective of the study is to find out the impact of the MBO method on employees performance in the Nigeria Banking Industry. The specific objective of the study includes this:-

  1. To examine the factors mitigating against the effective utilization of Management by Objective
  2. To measure the extent to which employees are given authority and responsibilities for effective Management by Objective
  • To measure the relationship between employees’ performance and Management by Objective
  1. To measure the effect of Management by Objective in an organisation

1.5    Research Hypotheses                                                                                        

The following null hypotheses have been formulated for the study;

H0- There is no significant relationship between MBO and employee performance.

H0- There is no significant relationship between MBO and productivity in an organisation.

1.6        Significance of the Study

Practicing management by objective will make the management of First Bank of Nigeria, First City Monument Bank and Guarantee Trust Bank to be more assertive in their decision making. It will assist the subordinate in the above-mentioned banks to be able to identify themselves with the objective of the company and the role they will play. Management of First Bank plc.in particular would find the result of this research very rewarding and variable when applying management by objective.

From this result, they would know the particular problem jeopardizing the correct application of management by objective, and thereby take remedial action. Consequently, the acceptance of this study and adoption of the research’s recommendation could assist the management of First Bank plc. and other organisation and public sectors in making sound and strategic decision to improve employee performance and productivity through careful result measurement, appraisal rating and commensurate reward system.

1.7     Scope of the Study

This research work is limited to First Bank plc. , First City Monument Bank and Guarantee Trust Bank in Ado-Ekiti, Ekiti state, Nigeria and how different organisation can be managed better by the managers setting the goals and all the company members working towards achieving the goals.

1.8    Operational definition terms

  1. Management by objective (MBO): It is the process of defining objectives within an organisation so that management and employees agree to the objectives and understand what they need to do in the organisation in order to achieve them.
  2. Management: The organisation and coordination of the activities of a business in order to achieve defined objectives.
  3. Manager: A manager is a person who oversees employees or department in a business.
  4. Employees: An individual who works part-time or full-time under a contract of employment, whether oral or written, express or implied, and has recognised rights and duty.
  5. Employers: An employer’s is a person or institution that hires employees or workers.
  6. PLC (Public Limited Company): It is limited liability Company whose shares may be freely sold and traded to the public with a minimum share capital of 500,000 and the letters plc after its name.
  7. Subordinate: A person under the authority or control of another within an organisation.
  8. Superior: Something which is higher in a hierarchical structure of any kind.
  9. Objective: A specific result that a person or system aims to achieve within a time frame and with available resources.
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