Understanding the Difference Between MBO and MBE: A Detailed Comparison

Think of the ways teachers assess students. There is the formative way and the summative way. 

Formative evaluation offers feedback while you're still learning, so you can adjust and improve as you go. Summative evaluation, on the other hand, tells you how you did only after the learning is finished.

This concept isn’t just limited to classrooms. 

It also shows up in how managers assess their employee performance. 

While MBO works like formative in its approach, MBE can be compared to summative. 

Let us understand these two performance management approaches by comparing them across several key areas.

1️⃣Difference Between MBO and MBE based on the definition

Management by Objectives. 

Think of Management by Objective as a team planning to win a match. The coach, the captain, and the team members are all on the same page, agreeing on the game plan and working towards it. 

In MBO, managers and employees together set goals and work towards achieving them. Everyone is clear about their role, responsibilities, and expectations. 

In short, MBO is proactive in its performance assessment. Set the goal and track the progress. 

Management by Exception.

Management by exception works like a teacher who checks in only when the student's grade drops. Until then, the student is on their own, working towards a set goal. 

In MBE, Managers intervene only when something goes wrong- a deviation from expected results or set standards. Routine work is left to sub-ordinates and as long as things run smoothly, they don't interfere. 

MBE has a reactive approach where managers act only when performance falls. 

2️⃣Difference Between MBO and MB based on Employee Participation

Management by objective 

Under MBO, employee participation is really high. It is like planning a group trip where everyone has a say on where to go and what to do. 

Employees actively discuss and agree on goals with their managers. This participation has a huge impact on their motivation and performance. 

Management by exception

Employee participation is really low in MBE. Employees are left to get the work done on their own. The manager steps in only when something goes wrong.

It is more like a traffic control situation. Drivers are free to go about their way unless someone breaks the rule, and then the police steps in to manage the situation.  

3️⃣Difference Between MBO and MBE based on Decision Making

Management by Objectives

MBO takes a joint decision-making approach. Here, managers and employees work together, sharing ideas, planning the next move, setting goals, making decisions, and achieving them. 

It is a collaborative process where everyone involved has a say. 

Management by Exception 

Employees make decisions on their own on day-to-day work. Managers step in to make decisions only when something goes off or something unusual happens. 

It is a selective process where employees make routine decisions and managers step in when exceptions arise.

4️⃣Difference Between MBO and MBE based on Responsibility Ambiguity

Management by Objectives

There is little to no confusion when it comes to Management by Objectives. Each employee knows exactly what their responsibilities are and what is expected of them. 

This clarity comes from having discussed and agreed on it with their manager. 

Management by Exception

Since manager involvement happens in the last hour, there can be a lot of confusion about roles and responsibilities. Employees are left to work independently and no one takes accountability for mistakes or delays.  

Since the manager is absent at most times, it leads to unclear expectations, confusion, and a lack of ownership.

5️⃣Difference Between MBO and MBE based on Appropriate for Efficiency

Management by Objectives

MBO assures efficiency in collaborative work. Since everyone is clear about their part, it is good for tasks that require teamwork, planning, and long-term goal alignment.   

Management by Exception 

MBE is efficient in a routine and stable environment where employees are expected to complete their everyday routine tasks. It is ideal for day to day operations as it reduces managerial workload and saves time.  

Conclusion

Performance assessment is a necessary step at all stages, whether it's a school learning process or a work situation. 

That is the way you get promoted to the next stage.

However, the presence or absence of a mentor during a journey does have a huge impact on how far you reach.

If the mentor/manager is present, chances are you have better clarity on what to do and where to go. In the absence of one, you are left on your own to figure things out. 

Though tumultuous and confusing as it can be, the end result of managing and learning on your own will be more rewarding in the long run. 

MBO is a performance assessment based on teamwork and guidance, while MBE is focused on independence and ownership.  Both have their own perks and faults. In the end, it is up to the team and their dynamics to choose what's best for them. 

If your choice is guidance-based MBO or independent MBE, performance needs tracking and rewarding. 

And the best choice is the Kennect that helps you set goals, spot exceptions, and recognize achievements—your way. To know more, Book A Demo NOW!