Impact Of Management By Objective On The Organizational Performance

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The research work was carried out to examine and evaluate the impact of MBO on the organizational performance using Nestle Nigeria Plc as the case study, Lagos. The study aimed at investigating the extent of employees’ participation in decision making process in the management of Nestle Nigeria Plc. Lagos and to analyze the possible effect of this on the performance of the organization. In carrying out this research, the survey research method was adopted in which data was collected by the use of questionnaire, a sample size of 91 was drawn from a population of 118 staff of Nestle Nigeria Plc. A total of 80 was used for the analysis based on returned and valid copies of the questionnaire. The analysis was done based on frequency distribution tables and percentages. Formulated hypothesis were tested using chi-square test statistical tool. The study revealed that implementing MBO will help Nestle Nigeria Plc improve its operations and as well increase its productivity and profitability levels. Based on this and other findings, a number of recommendations were made. Thus providing meaningful information, better management skills, better organization of roles and structure, allowing employees to participate in decision making processes regarding their day-to-day work operations which if implemented would help increase organizational performance.


Title page                                                                                                                   i

Certification                                                                                                               ii

Dedication                                                                                                                 iii

Acknowledgement                                                                                                    iv

Abstract                                                                                                                      v

Table of contents                                                                                                       vi


CHAPTER ONE                                                                                          

1.1       Background of the study                                                                                           1

1.2       Statement of the problem                                                                                         4

1.3       Objective of the study                                                                                               5

1.4       Research Questions                                                                                     5

1.5       Research Hypothesis                                                                                               6

1.6       Significance of the Study                                                                                         7

1.7       Scope of the Study                                                                                                   8

1.8       Limitations of the Study                                                                                            9

1.9       Definition of Terms                                                                                                   9

References                                                                                                                          13



2.1       Meaning and Definition of Management by Objectives                                        14

2.2       Theoretical Framework of the Study                                                                       15

2.3       Conceptual Framework of the Study                                                                      16

2.4       Historical Background of the Company                                                                  19

            2.4.1   Financial Performance                                                                                 20

            2.4.2   Strengths and Challenges                                                                            22

            2.4.3   Stock Market Performance                                                                          23

            2.4.4   Outlook                                                                                                           24

            2.4.5   Valuation                                                                                                        25

2.5       Review According to the Objectives of the Study                                      26

2.5.1   Objectives of Workers’ Participation in Management                              27

2.5.2   Benefits of Management by Objectives                                                      28

2.5.3   Limitations of Management by Objectives                                     30

Reference                                                                                                                             34



3.0       Research Methodology                                                                                            36

3.1       Research Design                                                                                                      36

3.2       Sources of Data                                                                                                        36

            3.2.1   Primary Sources of Data                                                                             37

            3.2.2   Secondary Sources of Data                                                                        37

3.3       Population of the Study                                                                                            37

3.4       Determination of Sample Size                                                                                38

            3.4.1   Sample Size Proportional Allocation                                                          39

3.5       Instrument of Data Collection                                                                                   40

3.6       Validity of the Instrument                                                                                          40

3.7       Reliability of the Instrument                                                                          41

3.8       Method of Data Analysis                                                                                          41

3.9       Method of Data Presentation and Analysis                                                           42

References                                                                                                                          43


CHAPTER FOUR                                                                                       

4.0       Data Presentation and Analysis                                                                              44

4.1       Data Presentation                                                                                                     44

4.2       Data Analysis                                                                                                            45

4.3       Hypothesis Testing                                                                                                   58

            4.3.1   Test of Hypothesis 1                                                                         60

            4.3.2   Test of Hypothesis 2                                                                         61

            4.3.3   Test of Hypothesis 3                                                                         62


CHAPTER FIVE                                                                                         

5.0       Summary, Conclusion and Recommendation                                                       64

5.1       Summary                                                                                                                    64

5.2       Conclusion                                                                                                                 66

5.3       Recommendations                                                                                                   67

Bibliography                                                                                                                        68

Appendix I                                                                                                                            70

Appendix II                                                                                                                           71

Appendix III                                                                                                                          74

Appendix IV                                                                                                                         76

Appendix V                                                                                                                          78




One of the many problems facing the business community has been the problem of integrating the objectives of the employees with that of the organization for the achievement of the organization objectives.

Even when such integration has been made there should be a clear method or system of measurement of the contribution of employees to the organizational achievement. Organizations that practice management by objectives seem to be on the positive threshold of solving this problem.

Management by objective (MBO) is a systematic approach to managing an organization practicing the basic management functions of planning, organizing, staffing, leading and controlling.

Management by objective is a result oriented concept for all functional area of (Nestle Nig PLC). The distinguishing characteristic of management by objective (MBO) is its emphasis on results achievement of objectives.  It is based on a concept of human motivation.  Accordingly it places emphases on the involvement of the employee in planning directing and controlling aspects of the job that will be done, when it will be done and how it will be done?

The underlying belief is that this involvement of employee leads to commitment and if an employee is committed he can be directed to perform in manner that positively contributes to the achievement of organizational goals. The MBO afford both the superiors and subordinates the opportunity to sit together and jointly identify common goals of the enterprise, define individual major areas of responsibility, term of the results expected of them and use these measures as guides for operating the units and assessing their contribution.

Management by objective should guard against misdirection of common organizational goal by various functional managers.  The in- depth assumption is that the organization is well vested upon its managers.  By jointly setting objectives between the employer and the subordinate a mutual understanding results, the employee now accept the responsibility and works out action plan to meet performance standard set for the specific job.  MBO has psychological background.  In order to understand and benefit from MBO all employees who are included in it must understand the psychological principles on which it is based.  An employee’s need for job satisfaction is being met when MBO is introduced into an organization and a training course is given, which explains Maslow’s hierarchy of needs, Hertzberg’s theory of motivational emphasis and Mc Gregory’s theory X and Y. These theories emphasize an increase in employee’s job satisfaction when he feels a sense of achievement & involvement in his work.  Unless MBO is carried out in this spirit, it becomes merely another method by which subordinates can be controlled (Graham, 1985). The employee’s sense of responsibility serves as impetus for business growth.

Acceptance of responsibility removes fear and spur up employees with an internal self motivation for performance.  When employee are motivated productivity increases.

Through management by objectives (MBO) responsible workers emerge. According to Nwachukwu (1988), there is the contention that (MBO) bring about employee satisfaction.  Employees’ contributions are recognized and rewarded through job performance appraisal system which is an ingredient of management by objective (MBO).

Management by objective enables prudent utilization of resources setting of priorities and time. Druker (1977) posits that if only targets are defined, resources can be allocated to the attainment of priorities and someone can be placed in responsible position and held accountable for achievement of result. An employee can withdraw his services if he perceives that his contribution has not been equitably compensated, rewarded or recognized.

Coaching and counseling are used to guide subordinates to be on the objective track.

In summary management by objective in the recent years has been one of the most striking developments in the managerial cut of getting result in an organization.  Significant number of firms ranging from small enterprise to giant public corporation report accomplishment of a most astonishing and profitable nature when MBO is correctly applied. It enhances work simplification, equitable compensation, better utilization of equipment, starting a new business, inventory control and organization clarity (Mali 1972)

          It is clear from the vast body of information and knowledge developing around that MBO concept is a dynamic management way of life, which is steadily maturing and will remain so for some time to come.  This is informed by the fact that management practitioners themselves are increasingly concerned with improving their own effectiveness with the use of management by objective (MBO).  Based on the above, the researcher therefore, examined the impact of MBO on the organizational performance of Nestle Nig Plc.



Inspite of the contributions of the MBO to the achievement of organizational objectives, Nestle Nigeria Plc are yet to show visible evidence of improved performance. There has stiff challenges facing the company because of the scarce resources available to it, especially in the area of accessing raw materials locally, as most of their suppliers have gone out of business, companies like National Fertilizer Company of Nigeria (NAFCON) which has shut down its operations. There is also the challenge of an ever changing policies, unstable objectives and performance standards which have militated against the smooth running of the organization to steer it to success.



The broad objective of the study is to evaluate the effect of MBO on the performance of Nestle Nigeria Plc. The specific objectives are:

1)           To assess the influence of MBO on the sales turnover of Nestle Nig. Plc.

2)           To determine the impact of MBO on job turnover in Nestle Nig. Plc.

3)           To ascertain the extent of relationship between MBO and the profitability of Nestle Nig. Plc.



The research questions are as follows;

1)       How does Management by Objective (MBO) influence the sales turnover of Nestle Nigeria Plc?

2)       What is the impact of MBO on the job turnover in Nestle Nigeria Plc?

3)       What is the extent of relationship between Management by Objective (MBO) and the profitability of Nestle Nigeria Plc?



The hypothesis for the research work is formulated after thorough and careful   review of work that are directly or indirectly related to the subject matter.

The hypotheses for this research work are as follows

H0:     Management by objective (MBO) does not influence the sales turnover of Nestle Nigeria Plc

H1:     Management by objective (MBO) influences the sales turnover of Nestle Nigeria Plc

H0:     Management By Objective (MBO) does not impact on the job turnover in Nestle Nigeria Plc

H1:     Management By Objective (MBO) impacts on the job turnover in Nestle Nigeria Plc

H0:     There is no strong relationship between Management By Objective (MBO) and the profitability of Nestle Nigeria Plc

H1:     There is a strong relationship between Management By Objective (MBO) and the profitability of Nestle Nigeria Plc


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Impact Of Management By Objective On The Organizational Performance