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Approaches to Setting Goals

Goals provide the direction for all management decisions. These goals can be set through
1. Traditional goal setting
2. Management by objectives
Traditional goal setting An approach to setting goals in which top managers set goals that
then flow down through the organization and become sub goals for each organizational area.
Top manager set goals.
Top managers know whats best because they see the big picture
Goal passed down from top management to general manager and from general
manager to operational manager.
Employee just follows the instructions as we know that in traditional goal setting
employee has no role in making of goals.
Employees work to achieve those assigned goals.
Let us take an example of a manufacturing business the president of HONDA MOTORS tells the vice
president of production to reduce the manufacturing cost of a car from 1500000 to 1450000 for the
coming year and tells the marketing vice president to achieve target of selling 100,000 cars at the end of
the year. Now in this example we clearly see that president set goals and is directing orders to his
subordinates. At some later time, performance is evaluated to determine whether the assigned goals
have been achieved or not.
Means ends chain An integrated network of goals in which the accomplishment of goals at one level
serves as the means for achieving the goals, or ends, at the next level.
Management by objectives (MBO) A process of setting mutually agreed-upon goals and
using those goals to evaluate employee performance
If president of HONDA MOTORS use this approach, he would sit down with each member of his
team and set goals and periodically review whether progress was being made toward achieving
those goals. MBO programs have four following elements
1. Goal specificity,
2. Participative decision making,
3. An explicit time period,
4. Performance feedback
Steps in MBO
1. The organizations overall objectives and strategies are formulated.
2. Major objectives are allocated among divisional and departmental units.
3. Unit managers collaboratively set specific objectives for their units with their
4. Specific objectives are collaboratively set with all department members.
5. Action plans, defining how objectives are to be achieved, are specified and agreed
upon by managers and employees.
6. The action plans are implemented.
7. Progress toward objectives is periodically reviewed, and feedback is provided.
8. Successful achievement of objectives is reinforced by performance-based rewards.

Managers should follow five steps when setting goals
1. Review the organizations mission or purpose.
2. Evaluate available resources.
3. Determine the goals individually or with input from others.
4. Write down the goals and communicate them to all who need to know.
5. Review results and whether goals are being met.