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Management by Objective versus Management by Project (MBO vs MBP)

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Management by Objective versus Management by Project (MBO vs MBP)

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Much has been said and written on MBO since Drucker’s first references in practices of management in 1954. Some firms say it is very successful while for other it was not that propitious. Methods and approaches used by managers differ greatly resulting in great variation in the results of MBO itself. Some use it for the organization as a whole; others prepare sub units of the organization and imply MBO on the smaller unit, whereas few others like to go for MBP instead.
 
MBP or Management by Project is relatively a newer concept. It could also be seen as an invigorating improvement over MBO. If given a serious thought and strong foundation, MBP could be the next great frontier of exemplary leadership and management. 
 
According to Kevin Forsberg, “Management by Objectives is a technique used to manage people based on documented work statements mutually agreed to by manager and worker. Progress is periodically reviewed, and in a proper implementation, the worker's remuneration is tied to performance". While the MBP approach efficiently converts any organisation into a number of small franchises and gives the authority to the senior executives of the organisation for effective distribution of the projects across a range of project management practitioners. 
 
Thus, Management by projects is an organizational philosophy which helps an organisation in moving beyond ad hoc projects and portfolios of projects to deliver its strategic objectives by a matrix (cross functional) approach. Although, for a definite success, senior executives have to use trained and accountable project teams in MBP. 
 
As we all now, change is the only constant phenomena. So it is not very surprising to monitor a huge increase in the number of corporations worldwide which achieve their strategic objectives using the 'Management by Projects' or MBP approach. Also, few organizations following MBO reported some sever problems among their employees like unhealthy internal competition, unethical behavior, and a work environment of fear and greed which, ultimately, is not in the best interest of clients or the employees or the organization as a whole. This situation could be explained using an example.
 
Let’s assume two graduate students are working for a leading company that offers loan. Employees are given monthly targets that decided their monthly emoluments and promotions as well. These targets contribute to an environment of intense competition among the loan officers. Fear for one's job in case the target is not achieved also existed because if an employee did not make his/her numbers, it will be viewed solely as the loan officer's fault. In this unhealthy competition scenario, the loan officers did not reveal their secrets to the other loan officers. 
 
This could damage the very basics of a healthy management style which includes knowledge sharing and coordinated teamwork. But Employees working under MBO may resort to self-centered conduct which could harm the best interest of the organization. 
 
The Princeton office of Albert Einstein had a sign that stated "Not everything that counts can be counted, and not everything that can be counted counts". Maybe that’s why; the shared purpose of the Walt Disney Company is "to make people happy”, it isn't "to make people 5% happier this quarter".
 
MBO tends to focus attention on internal supervisor-subordinate relationships and morphs into internal gamesmanship while MBP focuses on shared performance, not individual performers. Thus, a crucial difference between MBO and MBP is that in MBP, objectives are defined in terms of project-focused outcomes, not by numerical targets for organizational functions and individuals, like in MBO.
 
But ultimately, the decision lies in the hands of the senior management of the organization because just like every individual, every organization is also unique and distinctive in itself. So are the issues and challenges in front of these institutions. So, whichever philosophy the organization follows, it should always remember that in this world of fierce competition, it’s the survival of the fittest. 
 
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