This document provides information about management by objectives (MBO) performance appraisals. It begins by defining MBO appraisals as a method that evaluates how well an employee's goals align with organizational goals. It then discusses that MBO appraisals are typically used to evaluate high-level employees like managers. The document also explains that in an MBO appraisal, goals are established through collaboration between the employee and their supervisor. Finally, it notes that MBO appraisals differ from other methods in that goals are tied to organizational success and have interim checkpoints to measure progress toward annual objectives.

1. Management by objectives performance appraisal
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I. Contents of getting management by objectives performance appraisal
==================
Management by objectives – commonly referred to as MBO – is a performance appraisal method
that determines how closely aligned an employee’s goals are to organizational goals. MBO
appraisals are suitable for measuring quantitative and qualitative output of high-level employees.
High-level employees such as managers generally report to directors, according to hierarchy and
the chain of authority present in many organizations. Therefore, managers and the directors or
executives they report to often work together to establish MBO goals for this type of appraisal
method.
Performance Appraisals
Employers use performance appraisals to measure both the quantity and quality of production.
An MBO appraisal is just one method among several types of performance measurement tools.
Others include graphic ratings scales, narrative evaluations, 360-degree appraisals, peer
evaluations, and forced ranking or differentiation appraisals. Performance appraisals typically are
conducted annually, and employers often base decisions about salary raises, wage increases and
year-end bonuses on employee performance.
Position
MBO appraisal methods differ significantly from other performance evaluation methods because
MBO appraisals are typically used for employees in leadership roles. The reason is because
MBO goals are expressly tied to organizational success. Employees with leadership
responsibilities -- managers, directors and above -- usually have duties that have direct

2. correlation to their company’s success. Therefore, the objectives identified in a manager’s MBO
appraisal typically reflect department goals that will substantially affect the organization.
Collaboration
In employee evaluation methods such as narrative performance appraisals, graphic rating scales,
and peer evaluations, the supervisor or manager provides insight on goals the leader wants
employees to attain throughout the evaluation year. By contrast, MBO appraisals are constructed
with equal input from both the manager and the person who supervises the manager, such as an
executive employee or a director. There’s greater collaboration in constructing MBO goals than
there is in identifying goals for a production worker or for administrative support personnel.
MBO goals usually meet the standards of well-constructed goals according to the SMART
principles: specific, measurable, attainable, relevant and time-specific.
Timing
MBO appraisals differ significantly from other types of appraisal methods concerning milestones
and timing. There generally are two types of time-specific MBO goals: annual goals and
intermediate goals. When a manager and director discuss the manager's MBO goals, they define
all of the company's available resources and the time it will take the manager to attain each goal.
For example, if a manager’s goal is to reduce legal expenses for employment claims by 10
percent annually, the resources available might be employee relations specialists in the HR
department who are qualified to respond to employee claims instead of immediately sending
claims to the company’s lawyer. The first-quarter measurement of the MBO appraisal would,
therefore, assess whether there have been any claims, and which claims have been handled by
employee relations specialists instead of lawyers. At the end of the year, the total number of
claims and legal expenses factor into the manager’s annual performance according to MBO
measurements.
==================
III. Performance appraisal methods

3. 1.Ranking Method
The ranking system requires the rater to rank his
subordinates on overall performance. This consists in
simply putting a man in a rank order. Under this method,
the ranking of an employee in a work group is done
against that of another employee. The relative position of
each employee is tested in terms of his numerical rank. It
may also be done by ranking a person on his job
performance against another member of the competitive
group.
Advantages of Ranking Method
i. Employees are ranked according to their performance
levels.
ii. It is easier to rank the best and the worst employee.
Limitations of Ranking Method
i. The “whole man” is compared with another “whole man”
in this method. In practice, it is very difficult to compare
individuals possessing various individual traits.
ii. This method speaks only of the position where an
employee stands in his group. It does not test anything
about how much better or how much worse an employee
is when compared to another employee.
iii. When a large number of employees are working, ranking
of individuals become a difficult issue.
iv. There is no systematic procedure for ranking individuals
in the organization. The ranking system does not eliminate
the possibility of snap judgements.
2. Rating Scale
Rating scales consists of several numerical scales
representing job related performance criterions such as
dependability, initiative, output, attendance, attitude etc.
Each scales ranges from excellent to poor. The total
numerical scores are computed and final conclusions are
derived. Advantages – Adaptability, easy to use, low cost,
every type of job can be evaluated, large number of
employees covered, no formal training required.
Disadvantages – Rater’s biases

4. 3. Checklist method
Under this method, checklist of statements of traits of
employee in the form of Yes or No based questions is
prepared. Here the rater only does the reporting or
checking and HR department does the actual evaluation.
Advantages – economy, ease of administration, limited
training required, standardization. Disadvantages – Raters
biases, use of improper weighs by HR, does not allow
rater to give relative ratings
4. Critical Incidents Method
The approach is focused on certain critical behaviors of
employee that makes all the difference in the
performance. Supervisors as and when they occur record
such incidents. Advantages – Evaluations are based on
actual job behaviors, ratings are supported by
descriptions, feedback is easy, reduces recency biases,
chances of subordinate improvement are high.
Disadvantages – Negative incidents can be prioritized,
forgetting incidents, overly close supervision; feedback
may be too much and may appear to be punishment.
5. Essay Method

5. In this method the rater writes down the employee
description in detail within a number of broad categories
like, overall impression of performance, promoteability
of employee, existing capabilities and qualifications of
performing jobs, strengths and weaknesses and training
needs of the employee. Advantage – It is extremely
useful in filing information gaps about the employees
that often occur in a better-structured checklist.
Disadvantages – It its highly dependent upon the writing
skills of rater and most of them are not good writers.
They may get confused success depends on the memory
power of raters.
6. Behaviorally Anchored Rating Scales
statements of effective and ineffective behaviors
determine the points. They are said to be
behaviorally anchored. The rater is supposed to
say, which behavior describes the employee
performance. Advantages – helps overcome rating
errors. Disadvantages – Suffers from distortions
inherent in most rating techniques.
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