MBO methods of performance appraisal can give employees a satisfying sense of autonomy and achievement. But on the downside, they can lead to unrealistic expectations about what can and cannot be reasonably accomplished.
The disadvantage is that MBO is very time consuming. The organization and the department have to be on the same page with respect to the goals that both are trying to achieve. It is also a very time-consuming process to come up with goals for each individual employee. MBO also doesn’t work well for employees who have little discretion over how their jobs are performed.
Supervisors and subordinates must have very good "reality checking" skills to use MBO appraisal methods. They will need these skills during the initial stage of objective setting, and for the purposes of self-auditing and self-monitoring.
Unfortunately, research studies have shown repeatedly that human beings tend to lack the skills needed to do their own "reality checking". Nor are these skills easily conveyed by training. Reality itself is an intensely personal experience, prone to all forms of perceptual bias.
One of the strengths of the MBO method is the clarity of purpose that flows from a set of well-articulated objectives. But this can be a source of weakness also. It has become very apparent that the modern organization must be flexible to survive. Objectives, by their very nature, tend to impose a certain rigidity.
Of course, the obvious answer is to make the objectives more fluid and yielding. But the penalty for fluidity is loss of clarity. Variable objectives may cause employee confusion. It is also possible that fluid objectives may be distorted to disguise or justify failures in performance.
Critics of the method say that it makes managers penalize a good, but not great employee who’s part of a superstar team, but a mediocre employee on a struggling team can come out looking great. “In many cases, the lowest performer might not be that much lower than the highest,” says Paul Spector, a professor of industrial psychology at the University of South Florida.2 “Intel has been targeting the weakest performers for so long now that there are no weak performers left—only good solid workers who are now being given unattainable goals and therefore being terminated,” says Ken Hamidi, spokesman for FaceIntel, a pressure group made up of current and former Intel employees.
Another criticism is that the method is a way for companies rationalize firings. “Good managers should have the capability to make these difficult decisions without a system forcing it on them,” says Chris Michalak, who designs appraisal systems at Towers Perrin. Jack Welch, CEO of GE, in his latest message to stockholders said that “Not removing that bottom 10%…is not only a management failure but false kindness as well.” This year Sun Microsystems will use a forced—ranking system to identify its worst performing 10%, who will be given 90 days to shape up, find another job inside Sun, or be fired.