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Management by Objective

Management by Objective

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Published by baqa raza

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Published by: baqa raza on Aug 15, 2009
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In 1965, George S. Odiorne completed atextbook titled,
Management by Objective
.Just five years later, the same book wasundergoing its tenth reprinting. The factthat the term “management by objective” has now become common nomenclature tocompany executives around the countryattests to the success of Odiorne's literaryefforts.If the agribusiness manager devotes even anominal amount of time to professionalreading, he has no doubt encountered theterm “management by objective.” It issomewhat less likely, however, that heunderstands its meaning. Finally, it isextremely unlikely that the agribusinessmanager has studied the concept in detailand applied it in his own operations.Hopefully, this letter will correct thisapparent deficiency. The followingdiscussion is designed to: (1) summarizethe management related thoughts of Professor Odiorne, (2) review the basicelements of the management-by-objectivesystem, and (3) illustrate the practicalrelevance of each system element to thearea of agribusiness management.
The Underlying Premises
Odiorne's concept of management byobjective is based on an underlying premisethat any system of management is betterthan no system at all. A secondary premisestates that to be workable, anymanagement system must bridge the gapbetween the theoretical and the practical.A third important premise establishes thatthe appraisal of managerial performance isnot an activity autonomous from otheractivities of the firm. In other words, itregards the appraisal process as only one of several sub-systems operating within theconfines of a goal-oriented managementsystem.Before proceeding into a discussion of thebasic elements of the management-by-objective system several “statements of condition” seem warranted. Each of thefollowing statements relates to theenvironmental conditions with whichmanagers are confronted and establishesthe setting for later determining thepractical relevance of the management-by-objective system:
Because the economic environmentwithin which agribusiness firms operatehas changed so drastically in recentyears, a whole new set of requirementshas been placed on companies and theirmanagers.
The preliminary step in themanagement-by-objective systemdictates that managers identify, in somemanner, organizational goals designedto meet the new requirements noted inA, above.
Immediately following the identificationof company goals, management musthave available to it an orderly procedurefor distributing or allocatingresponsibilities which are directedtoward achieving those goals.
In the practical world of agribusinessmanagement, managerial behavior mustbecome predominant over managerialpersonality. Furthermore, in the finalanalysis, results of the behavior(measured against established goals)
become the basic criteria for goodperformance evaluation.
Total management staff participation ingoal-setting and decision-making isrecognized for its social and politicalvalue even though its impact onproduction levels may be negligible.
There exists no one best system of management. Moreover, sincemanagerial activity is dependent, to alarge degree, on each manager's viewof specific goals and the total economicsystem, his actions must bediscriminatory.By now you should note that each of theabove conditions appears consistent withbasic human intuition. For example, thenotion that management activity should bedirected towards the accomplishment of pre-established goals has considerableintuitive appeal. None of the conditions areat variance with acceptable managerconduct from either a social, legal, orcommon sense standpoint. Perhaps hereinlies the secret to the success of Odiorne'sconcept. Nevertheless, we have not yetprogressed beyond some generalphilosophical considerations. To do so,consider the basic elements of the proposedmanagement system.
The Basic Elements
In its briefest form, Odiorne's decision-making system of management byobjective contains the following basicelements: (1) Establish an objective beforeyou begin; (2) Collect and organize all of the pertinent facts; (3) Identify the problemand its causes; (4) Work out a solution andsome options; (5) Screen options throughsome decision criteria; (6) Establish somesecurity actions to enhance the probablesuccess of the solution; (7) Gainacceptance of the decision; (8) Implementthe decision; and (9) Measure the results.Each of the nine elements shall now beconsidered in more detail.
Setting objectives
: According to Odiorne,the first step in sound decision-making andsystematic problem-solving is to define anobjective. Why? In support of this firststep, I would offer the following evidence.In my contacts with the agribusinessindustry I meet with many disgruntledmanagers who feel they are not beingproperly rewarded for their efforts.Cooperative managers, for example, claimtheir Board of Directors do not trulyappreciate managerial performance. Inmany such cases, the manager, himself, ismost to blame because of his failure to setan objective prior to taking action. Lackingthe existence of an objective, the Board of Directors has no basis upon which to judgea manager's effectiveness as good or bad.Objectives are
statements of expected outputs
; they should be defined beforeinputs are released, and they should beused by management to determine whatinputs are to be used. Once established, anobjective becomes a convenient measuringstick for judging (and then rewarding)managerial proficiency. Superiorperformance should no longer go withoutreward.Odiorne performs a modest taxonomy onthis initial step by classifying and ratingobjectives as (1) Regular or routine, (2)Problem-solving, and (3) Innovative orimprovement. The regular or routineobjectives are those described as relating today-to-day chores which are necessary forthe firm's survival and stability. In theagribusiness industry, for example, aregular or routine objective may be toobtain a monthly inventory report, file ayearly tax statement, or conduct weeklymaintenance checks on all plant equipment.The end result of achieving the regularobjective is that the firm maintains thestatus quo, i.e., no expansion orimprovement in the
modus operandi 
results.Problem-solving objectives are granted asomewhat higher rating. These are relatedto those problems which arise as a result of 
the natural tendency for matters to getworse if left alone. For example, a foodprocessor may discover an increasingincidence of product contamination ordefectiveness. Management's objective inthis case may be to uncover the reason forthe contamination or reduce defects to aspecified level. Such objectives call formanagerial problem-solving skills of ahigher order than routine objectives.Innovative or improvement objectives areawarded top priority in our hierarchy.These are the objectives which make thingshappen and rest on the assumption that theperfect completion of routine activities andthe rapid solution of unexpected problems just isn't good enough. Innovativeobjectives specify quantum changes ratherthan rely on maintenance or restoration.Examples of such objectives within theagribusiness industry might include:capture 25 percent of the total market by1972; convert to computer processing of allcustomer accounts by next spring; orinitiate and conduct a management trainingprogram. In short, this third categorydiffers from the first two in that innovativeobjectives connote action decisions ratherthan reaction decisions.To summarize this first step in themanagement-by-objective system,therefore,
the superior manager is one whodoes all of his regular duties, solves hisoperational problems, and, in addition, addsnew ideas through the establishment of innovative objectives
.Gather the facts: Facts should be verifiableand agreed-upon data. They should besupported by some hard evidence to whichall management staff should agree. Acommon management deficiency is theinability to separate facts from opinions.This distinction is made most difficultbecause of a characteristic of humannature, i.e., we all tend to attach to a factour own personal biases or hunches. Forexample, this headline appeared in thenewspaper, “Master Sergeant Charged withTreason.” Immediately upon reading thisheadline, several biased assumptions beganto develop in my own mind. First, Iassumed the sergeant was spying for acommunist nation. Second, I assumed themilitary was, no doubt, totally infiltrated byspies who will never be uncovered. Yet,upon closer reading of the headline, Idiscovered only two facts: (1) the personcharged was a master sergeant; and (2)the sergeant has only been charged withtreason and not yet found to be guilty orinnocent. This illustration is really not asabsurd as it may first appear. Everyworking day, managers confuse facts withopinions, facts with personalities, facts withwishful fantasies, and facts with fear of theunknown. The end result of this inability toseparate fact from fiction is a systemwhereby
management by emotion precludes any system of management by objective
Identify the problem
: The differencebetween that which currently exists andthat which you hoped would exist now or inthe future comprises a problem.Assuming all of the routine functions of your firm are being accomplished, the onlyremaining managerial function formaintaining operations at a given level is to
recognize problems when they arise and implement the appropriate solutions
.Problems, however, do not always arise asa result of something gone wrong. Theyare sometimes created in the mind of adecision maker, e.g., the manager mayexpress an inward restlessness with presentlevels of operations. In such situations themanager conceives a gap between thatwhich now exists and that which he wishedwould exist. This gap represents a problemwhich is often overlooked in theagribusiness industry. Managers findthemselves totally occupied by the so-calledbrush-fire problems arising from dailyoperational failures. Acting as firemen, themanagers have no time and little desire tobe concerned about innovative problems.
Innovative problems arise as a result of management's attempt to alter (not maintain) a static environment or competein a dynamic one
. They often grow out of 

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