CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Managers need a range of tools to administer an organisation effectively in its day-to-day operations, and management by objectives (MBO) is one of them. Popularised by Drucker (1954), MBO is a participative management technique in which superiors and subordinates in an organisation agree on the broad goals of the organisation, translate them into specific short-term goals, define each person's major area of responsibility in terms of the results expected, and use those results to review progress and assess contributions (Okoli et al., 2023). It is also called managing by objectives. Because it is an overall framework that guides an organisational unit and outlines its direction, MBO concentrates on the results the organisation expects, and it evaluates people by their contribution to those results. It is therefore a participative procedure that requires commitment and co-operation from managers and staff.

MBO can be used in organisations of any size, provided that its procedures are understood and managers are patient enough to allow the system to settle. It is a planning, control and development system, and a demanding but rewarding way of managing a business. It integrates the organisation's need to clarify and achieve its profit and growth goals with the manager's need to contribute and develop personally. It also gives employees an opportunity to take part in decision-making within agreed limits, and it assumes that employees have been properly selected and trained and know that they will be held responsible for the results expected of them.

The theory behind MBO is supported by goal-setting research. Locke and Latham (2019), reviewing a half century of work, report that goal-setting theory has shown generality across participants, tasks, nationalities, settings and levels of analysis, including individual, group, division and organisational levels. Empirical studies of MBO in Nigeria point in the same direction. Alaribe and Magaji (2023) found that MBO has a positive and significant effect on the organisational performance of selected cement manufacturing companies in Ogun State. Idoko et al. (2022), studying Union Bank Plc in Enugu, found that setting specific goals has a positive effect on employee punctuality. Okoli et al. (2023), in a survey of manufacturing firms in Anambra State, found that participation exerts a moderate influence on employee retention, that goal setting is positively correlated with job satisfaction (r = 0.859), and that feedback has a moderate influence on employee commitment. They concluded that manufacturing firms must set and manage objectives if they wish to improve employee performance.

Organisations exist because people design them to overcome individual limitations and to achieve together what they cannot achieve alone, and their survival depends on capable men and women who combine the organisation's resources (men, machines, materials and money) with the right techniques to achieve its goals. Management techniques, however, are often poorly understood, and are sometimes misused or not used at all, which leads to losses for the organisation. Okoli et al. (2023) note that many manufacturing firms struggle to meet their corporate goals, and that a common weakness is the failure to involve lower-level staff in goal development, with attention focused on top management alone. MBO is a technique that cuts across business, education, government, health care and non-profit organisations, so its prospects and problems deserve study. This study therefore examines MBO as an instrument for organisational performance in Nigeria, using Vitamalt Plc, one of the leading drink companies in the country, as the case.

1.2 Statement of the Problem

Many organisations in Nigeria do not use management techniques sufficiently, and when they do, the techniques are often not properly applied. MBO is an example. It is not only a managerial strategy for achieving well-coordinated performance, but also a widely used technique that cuts across business, education, government, health care and non-profit activities.

Many organisations nevertheless fail to adopt MBO in a way that secures the commitment and support of their staff. Those that do adopt it often give it lip service only, excluding staff from the setting of the standards and goals that affect them. Where this happens, control and the achievement of goals suffer. This weakness has been identified in Nigerian manufacturing firms, where the exclusion of lower-level staff from goal development is a recognised problem (Okoli et al., 2023). The study therefore investigates the problems affecting MBO as an instrument of organisational performance, using Vitamalt Plc as the case.

1.3 Objectives of the Study

The broad objective of the study is to find out the prospects and problems of MBO as an instrument for organisational performance in Nigeria. The specific objectives are to:

1. determine the problems affecting MBO as an instrument for organisational performance;
2. find out the level of participation of managers and employees in setting the goals to be achieved in the organisation; and
3. determine whether employees are given appropriate authority and responsibility for achieving the objectives set.

1.4 Research Questions

The study is guided by the following research questions:

1. What are the problems militating against the use of MBO as an instrument for organisational performance?
2. To what extent do managers and employees participate in setting the goals to be achieved in the organisation?
3. To what extent are employees given appropriate authority and responsibility for the effective practice of MBO?

1.5 Research Hypotheses

The following hypotheses guide the study:

H₀₁: Managers and employees do not participate in setting the goals to be achieved in the organisation to increase performance.

H₁₁: Managers and employees participate in setting the goals to be achieved in the organisation to increase performance.

H₀₂: Non-commitment of top managers is not one of the problems militating against the use of MBO as an instrument for organisational performance.

H₁₂: Non-commitment of top managers is one of the problems militating against the use of MBO as an instrument for organisational performance.

H₀₃: Employees are not given appropriate authority and responsibility for achieving the objectives set.

H₁₃: Employees are given appropriate authority and responsibility for achieving the objectives set.

1.6 Significance of the Study

The firm (Vitamalt Plc). The study will show the firm the need to involve subordinates in setting objectives. Participation and goal setting are associated with employee satisfaction, commitment and performance (Okoli et al., 2023), and the firm can expect higher productivity, profitability, growth and sustainability, together with greater customer and employee satisfaction.

Future researchers. The study will be useful to those who carry out research in related areas. It will serve as reference material, and its findings can provide a basis for further studies.

1.7 Scope of the Study

The study focuses on the use of MBO as an instrument for organisational performance. It is restricted to Vitamalt Plc, Uyo, and covers the period from 2006 to 2011.

1.8 Limitations of the Study

Several factors constrained the researcher in carrying out this study. The most prominent were the following:

1. Time. The research is a large undertaking that requires considerable time and energy, which were limited.
2. Finance. Limited financial resources prevented the researcher from obtaining all the materials needed, and the cost of transport to and from Vitamalt Plc, Uyo, was high.
3. Limited access to information. Respondents and managers were sometimes reluctant to release information, because they feared that research might expose activities that were not meant for public view. This limited the amount of material available.

1.9 Definition of Relevant Concepts

Delegation of authority: The transfer of the authority and responsibility to act, from a manager to a subordinate, so that the subordinate can achieve the results expected.

Feedback: Information given to employees about their progress against agreed objectives, which allows them to correct their performance.

Goal setting: The process of establishing specific targets that individuals or units are expected to achieve within a defined period.

Management by objectives (MBO): A participative management technique in which managers and subordinates jointly set objectives, define each person's area of responsibility in terms of expected results, and use those results to guide the unit and to assess performance.

Organisational performance: The extent to which an organisation achieves its goals, commonly assessed through productivity, profitability, growth and employee and customer satisfaction.

Participation: The involvement of employees, together with managers, in setting goals and standards and in the decisions that affect their work.

PLC: Public limited company.

References

Alaribe, D. E., & Magaji, N. (2023). Management by objective and organisational performance of selected cement manufacturing companies in Ogun State, Nigeria. International Research Journal of Economics and Management Studies, 2(2), 491–497. https://doi.org/10.56472/25835238/IRJEMS-V2I2P154

Drucker, P. F. (1954). The practice of management. Harper & Brothers.

Idoko, E. A., Okolie, J. I., & Nnubuogu, P. (2022). Effect of management by objectives (MBO) on the employee performance of Union Bank Plc in Enugu metropolis. Advance Journal of Management, Accounting and Finance.

Locke, E. A., & Latham, G. P. (2019). The development of goal setting theory: A half century retrospective. Motivation Science, 5(2), 93–105. https://doi.org/10.1037/mot0000127

Okoli, I. E. N., Ewah, E. B., & Chukwu, C. U. (2023). Accelerating employee performance through management by objectives: Evidence from manufacturing firms. European Journal of Business and Management Research, 8(4), 216–222. https://doi.org/10.24018/ejbmr.2023.8.4.2063