The impact of management by objectives (MBO) on employee satisfaction and performance appraisal: An analysis using structural equation modeling (SEM)

Year 2025, Volume: 7 Issue: 1, 1 - 11

Sunjida Parven , Tusher Ghosh , Mahmoda Akter

https://doi.org/10.58251/ekonomi.1496304

Abstract

This study explores the impact of the Management by Objectives (MBO) method as a performance appraisal tool on employee satisfaction. By employing Structural Equation Modeling (SEM), we examine the relationships between various components of the MBO approach and their influence on employee satisfaction and effectiveness. The results emphasize the crucial role that different MBO components play in enhancing employee performance and contentment. The study reveals both direct and indirect connections between MBO factors and employee satisfaction and effectiveness. The significance of this research lies in providing valuable insights for organizations aiming to improve performance management practices and foster a more satisfied and productive workforce. It contributes to the existing body of knowledge on performance appraisal and offers practical implications for HR practitioners and organizational leaders. However, the study has limitations, such as its focus on a specific organizational context. Future research could investigate additional factors affecting employee satisfaction and productivity across diverse industries and cultural settings. This study highlights the importance of the MBO method in driving employee satisfaction and productivity and serves as a foundation for future research and organizational development efforts in the dynamic field of performance management.

Keywords

Management by objectives, Employee satisfaction, Effectiveness, SEM.

References

• Alo, O., (1999), Human Resource Management in Nigeria, Business and Institutional Support Associates Limited, Lagos.
• Aggarwal, A., & Thakur, G. S. M. (2013). Techniques of performance appraisal-a review. International Journal of Engineering and Advanced Technology (IJEAT), 2249–8958.
• Atiomo A.C. (2000), Human Resource Management; MalthouseManagement Science Books, Lagos.
• Armstrong, M. (2012). Armstrong´s handbook of human resource management practice. London: KoganPag.
• Armstrong, M., & Taylor, S. (2014). Armstrong's handbook of human resource management practice. London, United Kingdom: Kogan Page.
• Bagul, D. B. (2014). Study of Employee’s Performance Appraisal System. Journal for Humanity Science & English Language.
• Bhatti, K., & Qureshi, T. (2007). Impact of employee participation on job satisfaction, employee commitment and employee productivity. International Review of Business Research Papers, 3(2), 54 – 68.
• Bieniok, H. (2004). Metodysprawnegozarządzania. Warszawa: Placet.
• Cetin, M. et al. (2023). The impact of natural resources, economic growth, savings, and current account balance on financial sector development: Theory and empirical evidence. Resources Policy, 81, 103300.
• Das, N. et al. (2023). Do volatilities in tourism arrivals and foreign aids matter for GDP volatility in Cambodia? Partial and vector coherence wavelet models. Tourism Economics, 13548166231208471.
• Dogru, T. et al. (2019). The balance of trade and exchange rates: Theory and contemporary evidence from tourism. Tourism Management, 74, 12-23.
• Dogru, T. et al. (2023). Employee turnover dynamics in the hospitality industry vs. the overall economy. Tourism Management, 99, 104783.
• Dogru, T. et al. (2024). The impact of business models and state regulations on the accommodation sector: theory and empirical evidence from the recent pandemic. International Journal of Contemporary Hospitality Management, 36(6), 1713-1743.
• Drucker, P. F. (1954). The practice of management: A study of the most important function in America society. Harper & Brothers.
• Fajana Sola (1997), Human Resources Management; Labofin and Company, Lagos. Han, J. et al. (2024). Sustainable development pathways: Exploring the impact of green finance on urban metabolic efficiency. Sustainable Development. https://doi.org/10.1002/sd.3081
• Hasan, M. R., Rahman, K., Sakina, K., & Billah, N. B. (2019). Estimating Country Risk Premium and its Significance in Context of Bangladesh. The Proceedings of the 2nd International Conference on Business and Management (ICBM 2019).
• Işik, C. (2015). Foreign direct investment in tourism: Panel data analysis of D7 countries. Athens Journal of Tourism, 2(2), 93-103.
• Işik, C., Kasımatı, E., & Ongan, S. (2017). Analyzing the causalities between economic growth, financial development, international trade, tourism expenditure and/on the CO2 emissions in Greece. Energy Sources, Part B: Economics, Planning, and Policy, 12(7), 665-673. https://doi.org/10.1080/15567249.2016.1263251
• Isik, C., Dogru, T., & Turk, E. S. (2018). A nexus of linear and non‐linear relationships between tourism demand, renewable energy consumption, and economic growth: Theory and evidence. International Journal of Tourism Research, 20(1), 38-49. https://doi.org/10.1002/jtr.2151
• Işık, C., Sirakaya-Turk, E., & Ongan, S. (2020). Testing the efficacy of the economic policy uncertainty index on tourism demand in USMCA: Theory and evidence. Tourism Economics, 26(8), 1344-1357.
• Işık, C. et al. (2021). The nexus between team culture, innovative work behaviour and tacit knowledge sharing: Theory and evidence. Sustainability, 13(8), 4333.
• Işık, C. et al.(2022). Innovation research in tourism and hospitality field: A bibliometric and visualization analysis. Sustainability, 14(13), 7889.
• Işik, C, Ongan, S., & Islam, H. (2024a). A new pathway to sustainability: Integrating economic dimension (ECON) into ESG factors as (ECON-ESG) and aligned with sustainable development goals (SDGs). Journal of Ekonomi, 34–39. https://doi.org/10.58251/ekonomi.1450860
• Işık, C., Ongan, S., Islam, H., & Menegaki, A. N. (2024b). A roadmap for sustainable global supply chain distribution: Exploring the interplay of ECON-ESG factors, technological advancement and SDGs on natural resources. Resources Policy, 95, 105114. https://doi.org/10.1016/j.resourpol.2024.105114
• Işık, C., Bulut, U., Ongan, S., Islam, H., & Irfan, M. (2024c). Exploring how economic growth, renewable energy, internet usage, and mineral rents influence CO2 emissions: A panel quantile regression analysis for 27 OECD countries. Resources Policy, 92, 105025. https://doi.org/10.1016/j.resourpol.2024.105025
• Işık, C., Ongan, S., Islam, H., Jabeen, G., & Pinzon, S. (2024d). Is economic growth in East Asia pacific and South Asia ESG factors based and aligned growth? Sustainable Development. https://doi.org/10.1002/sd.2910
• Işık, C., Ongan, S., Islam, H., Pinzon, S., & Jabeen, G. (2024e). Navigating sustainability: Unveiling the interconnected dynamics of ESG factors and SDGs in BRICS‐11. Sustainable Development. https://doi.org/10.1002/sd.2977
• Işık, C., Ongan, S., Islam, H., Sharif, A., & Balsalobre-Lorente, D. (2024f). Evaluating the effects of ECON-ESG on load capacity factor in G7 countries. Journal of Environmental Management, 360, 121177. https://doi.org/10.1016/j.jenvman.2024.121177
• Işık, C. et al., (2024g). Renewable energy, climate policy uncertainty, industrial production, domestic exports/re-exports, and CO2 emissions in the USA: a SVAR approach. Gondwana Res. https://doi.org/10.1016/j.gr.2023.08.019
• Işık, C., Ongan, S., Ozdemir, D., Yan, J., & Demir, O. (2024h). The sustainable development goals: Theory and a holistic evidence from the USA. Gondwana Research. https://doi.org/10.1016/j.gr.2024.04.014
• Işık, C., Ongan, S., Islam, H., Balsalobre-Lorente, D. & Sharif, A. (2024i). ECON-ESG factors on energy efficiency: fostering sustainable development in ECON-growth-paradox countries. Gondwana Research. 135, 103-115. https://doi.org/10.1016/j.gr.2024.07.020
• Islam, H., Islam, M. S., Saha, S., Tarin, T. I., Soumia, L., Parven, S., & Rahman, K. (2024a). Impact of Macroeconomic Factors on Performance of Banks in Bangladesh. Journal of Ekonomi. https://doi.org/10.58251/ekonomi.1467784
• Islam, H., Johora, F., Abbasy, A., Rana, M., & Antoine, N. (2021). The perceived impact of COVID-19 pandemic on healthcare cost in Bangladesh. Journal of Global Business Insights, 6(2), 172–185. https://doi.org/10.5038/2640-6489.6.2.1173
• Islam, H., Madavarapu, J. B., Sarker, N. K., & Rahman, A. (2022). The Effects of Cyber Threats and Technical Problems on Customer’s Attitude Towards E-Banking Services. Oblik I Finansi, 2(96), 58–67. https://doi.org/10.33146/2307-9878-2022-2(96)-58-67
• Islam, H., Rana, M., Saha, S., Khatun, T., Ritu, M. R., & Islam, M. R. (2023). Factors influencing the adoption of cryptocurrency in Bangladesh: an investigation using the technology acceptance model (TAM). Technological Sustainability, 2(4), 423–443. https://doi.org/10.1108/techs-07-2023-0025
• Islam, H., Rana, M., Sarker, N. K., & Siddique, M. a. B. (2020a). Does Bangladesh Need to be Established Derivatives Markets? Journal of Economics and Business, 3(2). https://doi.org/10.31014/aior.1992.03.02.226
• Islam, H., Soumia, L., Rana, M., Madavarapu, J. B., & Saha, S. (2024b). Nexus between perception, purpose of use, technical challenges and satisfaction for mobile financial services: theory and empirical evidence from Bangladesh. Technological Sustainability. https://doi.org/10.1108/techs-10-2023-0040
• Hu, L., Bentler, PM. (1999). Cutoff criteria for fit indexes in covariance structure analysis: Conventional criteria versus new alternatives. Structural equation modeling: a multidisciplinary journal 6, 1–55. https://doi.org/10.1080/10705519909540118
• Hoffmann-Burdzińska, K., & Flak, O. (2016). Management by objectives as a method of measuring teams' effectiveness. Journal of Positive Management, 6(3), 67–82.
• Jafari, M., Bourouni, A., & Amiri, R. H. (2009). A new framework for selection of the best performance appraisal method. European Journal of Social Sciences, 7(3), 92–100.
• Karagöz, D. et al. (2021). Solo female travel risks, anxiety and travel intentions: Examining the moderating role of online psychological-social support. Current Issues in Tourism, 24(11), 1595-1612.
• Karagöz, D. et al. (2023). Event motivation, subjective well-being, and revisit intentions during the second wave of the pandemic: moderating effect of affective risk about COVID-19 and perceived trust. Current Issues in Tourism, 26(24), 4069-4086.
• Koontz, H., & O'donnell, C. (1976). Management: A systems and contingency analysis of managerial functions. Book World Promotions.
• Koščak, M. et al. (2023). Exploring the neglected voices of children in sustainable tourism development: A comparative study in six European tourist destinations. In Methodological Advancements in Social Impacts of Tourism Research (pp. 163-182). Routledge.
• Kline RB (2015) Principles and Practice of Structural Equation Modeling, Fourth Edition. Guilford Publications Locke, E. A., Shaw, K. N., Saari, L. M., & Latham, G. P. (1981). Goal setting and task performance: 1969–1980(July) Psychological Bulletin, 90, 125–152.
• Long, T. et al. (2024). Promoting the sustainable development of traditional villages: exploring the comprehensive assessment, spatial and temporal evolution, and internal and external impacts of traditional village human settlements in Hunan province. Heliyon. 10(11), e32439. https://doi.org/10.1016/j.heliyon.2024.e32439
• Mulolli, E., Islami, X., & Skenderi, N. (2015). Human resource management practices and SMEs performance: Study based in [27] Kosovo. International Review of Management and Business Research, 4(4), 1171.
• Mura, L., Zsigmond, T., & Machová, R. (2021). The effects of emotional intelligence and ethics of SME employees on knowledge sharing in Central-European countries. OeconomiaCopernicana, 12(4), 907–934. doi: 10.24136/oc.2021.030
• Miles, J. A. (2012). Management and organization theory: A Jossey-Bass reader. 9. New Jersey, United States: John Wiley & Sons.
• Moser, K. (1997). Commitment in organizations. Zeitschriftfu? rArbeits-und Organizations psychologie, 41(4), 160-170.
• Mayo, E. (1933). The Human Problems of an Industrial Civilisation, London, Macmillan McClelland, D C (1961) The Achieving Society, New York, Van Nostrand.
• Ongan, S. et al. (2022). Retesting the EKC hypothesis through transmission of the ARMEY curve model: an alternative composite model approach with theory and policy implications for NAFTA countries. Environmental Science and Pollution Research, 29(31), 46587-46599.
• Rao, T.V. (1984), Performance Appraisal: Theory and Practice, Vikas Publishers Aima Management Series, New Delhi.
• Robbins, S., Bergman, R., Stagg, I., & Coulter, M. (2000). Management (2nd ed.). Australia, Sydney: Prentice-Hall.
• Roethlisberger, F., & Dickson, W. (1939). Management and the worker. Cambridge, MA: Harvard University Press.
• Rahman, K. (2019). Performance analysis of selective private commercial banks of Bangladesh through CAMEL rating. Brac University. Bangladesh: Brac University. Retrieved from https://dspace.bracu.ac.bd/xmlui/handle/10361/12830
• Rahman, A., Islam, H., Islam, R., & Sarker, N. K. (2020). The effect of management by objectives on performance appraisal and employee satisfaction in commercial banks. European Journal of Business and Management, 12(20), 15–25. doi: 10.7176/EJBM/12-20-02
• Steers, R. M., & Porter, L. W. (1974). The role of task-goal attributes in employee performance. Psychological bulletin, 81(7), 434.
• Stewart, R. (1993). The reality of organizations: A guide for managers. London, United Kingdom: Springer Shaout, A., & Yousif, M. K. (2014). Performance evaluation—Methods and techniques survey. International Journal of Computer and Information Technology, 3(05), (2279-0764).
• Walker, R.M., Damanpour, F., & Devece, C. A. (2011). Management innovation and organizational performance: The mediating effect of performance management. Journal of PublicAdministration Research and Theory, (21) 2, 367-386.
• Yan, J. et al. (2024a). Analysis of green total factorproductivity in China's forestry industry: Technological, organizational, and environmental framework for sustainableeconomic development. Sustainable Development, 1–14. https://doi.org/10.1002/sd.308014
• Yan, J. et al. (2024b). The nexus between natural resource development, trade policy uncertainty, financial technology and poverty in China: Contributing to the realization of SDG 1. Resources Policy, 95, 105154. https://doi.org/10.1016/j.resourpol.2024.105154