Solution:

Definition of Management by Objectives (MBO) and Management by Exception (MBE):

Definition

• Management by objectives:

  • Management by objectives can be defined as a management model that attempts to devise a common objective that is acceptable for both the management and employees, which will improve the overall performance of the organization.

• Management by exception:

  • Management by exception can be defined as a management mode that provides the objectives for employees and only concentrate on significant deviations from the set objectives or task which will reduce the energy and time lost on unnecessary monitoring and evaluation procedures.

Employee Participation

• Management by objectives:

  • Employee participation is essential for an MBO model as it needs a common objective acceptable for management and employees. Management by exception: Employee participation in objective setting and decision making is minimal in an MBE model as that responsibility is rested with senior management.

Role Ambiguity

• Management by objectives:

  • In MBO, the clarity of personal responsibility towards organizational goals is better communicated and understood by the employee.

• Management by exception:

  • In MBE, the clarity will be lacking, and employees will perform a generic responsibility without understanding his role in the overall objective achievement.

Dependency

• Management by objectives:

  • In MBO, the dependency on one department or group is less as operations are handled with organizational wide participations.

• Management by exception:

  • In MBE, the dependency on one department especially of financial analysis / account is high as they are responsible for forecasting, budgeting and monitoring. Further, they are responsible for communicating significant deviations.

Efficiency

• Management by objectives:

  • In MBO, the active involvement of whole organization in decision making can lead to delays and complex procedures which can reduce efficiency.

• Management by exception:

  • In MBE, as only a certain group makes important decisions and investigations are performed only in instances of significant deviation the time devoted to daily work is more which can result in better efficiency.