(i) The main disadvantage of MBE is, only managers have the power over really important decisions, which can be demotivating for employees at a lower level
(ii) Furthermore, it takes time to pass the issues to managers.
(iii) Managing employees who deviate from the normal procedures.
(iv) Because of compliance failures are considered difficult to manage and typically find themselves with limited job duties and ultimately dismissed / terminated.

The disadvantages of MBO are:
(i) MBO fails to explain the philosophy; most of the executives do not know how MBO works? What is MBO? and why is MBO necessary? and how participants can benefit by MBO?
(ii) MBO is a time consuming process. Much time is needed by senior people for framing the MBO.
(iii) Next, it leads to heavy expenditure. Sometimes, managers are frustrated over MBO. MBO requires heavy paper work.
(iv) MBO emphasises only on short-term objectives and does not consider the long-term objective
(v) The status of sub-ordinates is necessary for proper objectives setting. But, this is not possible in the process ofMBO.
(vi) MBO is rigid one. Objectives should be changed according to the changed circumstances, external or internal.
(vii) If it is not done, the planned results cannot be obtained.
(viii) The objectives are set without considering the available resources.

Management by exception provides the following
advantages.
(i) It saves the time of managers because they deal only with exceptional matters. Routine problems are left to subordinates.
(ii) It focuses managerial attention on major problems. As a result, there is better utilisation of managerial talents and energy.
(iii) It facilitates delegation of authority. Top management concentrates on strategic decisions and operational decisions are left to the lower levels.
(iv) It is a technique of separating important information from unimportant one. It forces managers to review past history and study related business data for identifying deviations.
(v) MBE keeps management alert to opportunities and threats by identifying critical problems. It can avoid uninformed and impulsive action.
(vi) Management by exception provides better yardsticks for judging results. It is helpful in objective performance appraisal.

The advantages of MBO are explained below:
(i) Managers are involved in objectives setting at various levels of management under MBO and this commitment ensures hard work to achieve them.
(ii) MBO process helps the managers to understand their role in the total organisation.
(iii) Manager recognises the need for planning and appreciates the planning.
(iv) MBO provides a foundation for participative management. Subordinates are also involved in goal setting.
(v) A department does not work at cross purpose with another department.