Management by Objectives

Dr. Anshuman Bhattacharya

Dr. Anshuman Bhattacharya

Management by objectives refers to the system of
strategic management wherein an employee decides her
individual target to be achieved within a given time span.
- The Practice of
Management (1954)

Management by Objectives (MBO)

- F. Drucker
Dr. Anshuman Bhattacharya
 First step – Either determine or revise organizational
objectives for the entire company. This broad overview
should be derived from the firm's mission and vision.
 Second step – Translate the organizational objectives to
employees. In 1981, George T. Doran used the acronym
SMART (specific, measurable, acceptable, realistic, time-
bound) to express the concept.

Steps to Implement MBO

Dr. Anshuman Bhattacharya
 Third step – Stimulate the participation of employees in setting
individual objectives. After the organization's objectives are shared
with employees, from the top to the bottom, employees should be
encouraged to help set their own objectives to achieve these larger
organizational objectives. This gives employees greater motivation
since they have greater empowerment.
 Fourth step – Involves monitoring the progress of employees. The
objectives are measurable for employees and managers to
determine how well they are met.
 Fifth step – Evaluate and reward employee progress. This step
includes honest feedback on what was achieved and not achieved
for each employee.

Steps to Implement MBO

Dr. Anshuman Bhattacharya
 MBO uses a set of quantifiable or objective standards against
which to measure the performance of a company and its
employees.
 By comparing actual productivity to a given set of standards,
managers can identify problem areas and improve efficiency.
 Both management and workers know and agree to these
standards and their objectives.
 Employees take pride in their work with goals that they know
they can achieve.
 It also aligns employees with their strengths, skills, and
educational experiences.

Advantages of MBO
Dr. Anshuman Bhattacharya
 MBO also leads to increased communication between
management and employees.
 Assigning tailored goals brings a sense of importance to
employees, bringing loyalty to the firm.
 Management can create goals that lead to the success of
the company.

Advantages of MBO
Dr. Anshuman Bhattacharya
 MBO focuses on goals and targets, it often ignores the
culture of conduct, work ethos, and areas for
involvement and contribution.
 MBO puts increased strain on employees to meet the
goals in a specified time frame.
 If management solely relies on MBO for all management
responsibilities, it can be problematic for areas that don't
fit under MBO.

Disadvantages
Dr. Anshuman Bhattacharya