Briefly explain different approaches to goal formulation.

Approaches to Goal Formulation

The approach is the way of doing things. Organizational goals may be formulated with different approaches. The approaches to goal formulation are based on the degree of employee involvement in goal formulation process. There are three basic approaches to goal formulation.

Top-down Approach

This is the most traditional approach to goal formulation. Under this, the top level management sets organizational goals. While doing this, it does not seek the involvement of the middle and lower level employees. The top level believes that it has all the information required for goal setting. However, it may take the suggestions and advices from professional and experts.  Irrespective of this, the final decision is taken by itself. Hence, this approach is not a participative way of goal formulation. Nepalese organizations tend to follow this approach widely.

The top-down approach has several advantages. 

• The top-down approach ensures that the goals of the organization are directly tied to the mission statement.

•  The goals formulated under this approach are more ambitious and challenging.

The top-down approach of goal formulation has disadvantages too. 

• The top-level management may not be so familiar with the day-to-day activities of the organization and the goals may be overly ambitious and unrealistic.

• Goals may not be flexible enough to cope with the environment. The top-down approach does not involve employee participation in the goal-setting process. Hence, this approach does not enhance employee commitment towards goal achievement.

2. Bottom-up Approach

The bottom-up approach of goal formulation begins at the lower levels of the organization. The middle and lower level managers are authorized to set their departmental and unit goals. Hence, it is a participatory approach of goal formulation.

The bottom-up approach has several advantages. 

• The goals formulated under the bottom-up approach are likely to be more realistic than those set under top-down approach. 

• The goals are more flexible and reflect the current reality of the organization. The goals created with wider participation are more likely to enhance employee commitment.

There are disadvantages of bottom up approach to goal formulation. 

• The goals may not be in line with the organization's mission.

• They may lack clear direction and focus. 

• Likewise, the goals created by lower level may not always be challenging and ambitious enough to enhance organizational competitiveness.

3. Interactive/Mixed (MBO) Approach  

The interactive/mixed or management by objective (MBO) approach of goal formulation is a process by which employees at all levels of the organization participate in formulating organizational goals. First, the top level develops a mission statement. Second, the managers at different levels and departments come together and determine the strategic goals. Third, discussions regarding the tactical goals take place by including middle and lower level managers and supervisors. Finally, employees contribute to the process by defining their own operational goals. Hence, interactive approach to goal setting involves the participation and consensus of different levels of management and employees. It promotes cooperation between management and employees.

The interactive approach of goal setting has several advantages.

•  The goals are likely to be more realistic than in the top-down approach.

•  Due to wider participation, employee commitment towards the organization increases. 

• Input from top management helps to ensure that the goals are challenging and ambitious.

The interactive approach has some disadvantages too.

• It is a time consuming approach because of the discussion and consensus of all levels. 

• It also demands active involvement of the managers in the goal setting process. If not, it can turn into a top-down or bottom-up approach with the disadvantages of both.

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GOAL FORMULATION APPROACHES

Managers normally follow two basic approaches i.e. top-down approach and bottom-up approach to goal formulation. But modern organizations with modern management practices are using third approach i.e. Management by Objectives (MBO). A brief explanation of these three approaches is given below:

1. Top-Down approach: According to this approach, top level managers determine overall goals, departmental goals and goals for subordinates. They may formulate goals with the help of experts. Top level management formulates goals without participation of departmental and operating level managers. Formulated goals are approached and circulated downwards i.e. departmental and operating level managers for implementation. This approach assumes that organizations need direction and control over middle level and low level managers to formulate the goals. This approach facilitates for quick formulation of goals but goals may be less effective because of chances of wrong scanning of environment. Normally, small and traditional organizations follow this approach of setting goals.

2.Bottom-up approach: In this approach, lower level managers set goals for related units i.e. operational units and division. Goals formulated by lower level managers are submitted to the department level managers. Department level managers revise the goals formulated by operating level I managers in necessity. Revised goals are then, forwarded to the top level managers. Top level management finalizes the goal with some necessary amendments. This approach assumes that top level management needs help of subordinates to determine effective goals. Participation of employees encourages them to attain organizational goals effectively. But, because of lack of proper guidance and control to lower level managers and middle level managers, lack of managerial inefficiency and lack of experience of managers, goals may be less effective.

3.Management by objectives (MBO): MBO is a management technique developed by Peter Drucker. According to this approach, all level managers should be equally responsible to set effective goals. They should formulate goals jointly. Thus, this is a participative approach of goal setting. Participation of all level managers provides sense of ownership to employees on formulated goals. Each individual's responsibilities in term of expected results are defined and their performance is periodically evaluated in terms of goal achievement. Feedback on performance is provided to subordinates. Similarly, best employee or manager contributing to goal formulation is awarded on the basis of their performance and participation. Main focus of MBO approach of goal formulation is to provide its proper emphasis at the participation of employees.