Management by Objectives (MBO) is a process where long-term goals are set collaboratively for the business and then cascaded down to each division. These goals typically range from 12 months to 3 years. MBO is used to define performance standards for non-routine tasks like management or projects. The manager and employee agree on goals and how they will be measured, meeting regularly to discuss progress. Goals can be revised based on new inputs. At the end of the period, the manager reviews performance against goals. MBO also assesses how goals were achieved, like following processes and engaging stakeholders appropriately. MBO is often used with other appraisal systems to fully evaluate job performance.

1. Management by Objectives (MBO):
Management by objectives is a process where longer term goals are set, normally
collaboratively, for the business as a whole. These goals are then cascaded down to each
division or sub-unit of the business.
These goals tend to be longer term, ranging from 12 month to three years. However, some
shorter term objectives can also be set.
You will find MBO is generally used to define the performance standards of people
completing non routine tasks such as management tasks or short-term projects.
How it works
 The manager and employee (the employee is normally a manager too) agree on the
employee’s goals and how they will be measured.
 Once the goals are set they meet regularly to discuss progress towards these
goals. It is also a good idea to discuss the method by which the goals will be
achieved. During the discussions the manager provides feedback on progress
towards interim goals.
The manager and employee need to be open to removing goals that become inappropriate
when new inputs are received and to add new goals that become required.
 At the end of the agreed period the manager completes a review of the employee’s
performance against the new and revised goals.
In MBO Programs there also needs to be an assessment of the way in which the goals were
achieved, for example
 Did the project manager follow the business project management processes?
 Were stakeholders engaged appropriately?
 Did the manager meet objectives in an ethical manner?
 Was the brand or long term future of the business placed at risk?
In your employee performance evaluations, you will find that MBO programs tend to be used
in conjunction with other appraisal systems to get a complete view of job performance.

2. Behaviourally Anchored Rating Scale (BARS):
Measuring and rewarding performance is a critical function of the Human Resource
department. The measurement should be conducted in a free and fair manner in which both
the management and the employee have confidence. There are a number of measurement
scales proposed by management pundits. All of them have their own advantages and
disadvantages. BARS or Behaviourally anchored rating scales is one of them. BARS involves
measuring the critical areas of performance in any job profile. The rating scales are designed
to identify the areas of performance. The person who evaluates the employee during appraisal
is expected to closely monitor the employee in his workplace. He later compares the
performance of the employee vis-à-vis the rating scales.
There are different ways in effectively structuring a BARS system. They are:
1. Identification of Critical Incidents: This step involves supervisors and other in authority
identifying specific incidents of effective and unsatisfactory behaviour. These incidents
should be related to the job performance.
2. Selection of performance dimensions: These incidents are further dissected into
performance dimensions. An average of 5 to 7 performance dimensions is ideal. This
classification is based primarily on the Critical incidents selected.
3. Retranslation of the incidents: Another group of participants who are familiar with the
job are asked to reclassify the critical incidents initially selected. This is done to safeguard
against individual bias. There needs to be an agreement of 75% of the panel for the incident
to be included in the rating procedure.
4. Assignment of values to the incidents: The individual incidents are now rated based on
the performance dimensions. The rating scale usually ranges from 1 to 7. A rating of 1
indicates an ineffective and unsatisfactory performance, while a rating of 7 indicates an
effective or satisfactory performance. The ratings thus arrived at are then subjected to mean
and standard deviations. Incidents which have standard deviations of 1.5 or less find a place
in the final scales.
5. Developing the Final rating document: The behavioural anchor for the ultimate
performance dimensions is the subset of the incidents selected. The BARS in its final form is
composed of a set of vertical scales and the corresponding incidents which endorse them.
While this system appears to be logical and with inherent safeguards against the effects of
bias and preconception, it has its own share of advantages and disadvantages.
The advantages are that since the ratings are by people who are familiar with the working
environment they have a greater chance of being accurate. This also involves participation by
the workers to a considerable degree. It is also specific to the particular job function and rates
behaviour that can be observed easily.
However, critics point out that despite its intuitive appearance, the system has some inherent

3. downsides. The designing of effective BARS is time-consuming in the first place. The
behaviours used for rating are more activity oriented rather than result oriented. This leads to
a situation where the supervisors will have to give a higher rating to employees who are just
involved in an activity, but do not show results.