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Management by Objectives (MBO) Management by objectives (MBO ) is a process of defining objectives,

within an organization, so that management and employees agree to the objectives and understand
what they need to do in order to achieve them. The term “Management by Objectives" was first
popularized by Peter Druker in his book The Practice of Management in 1954. Dr. Rakshit A S
(drrakshit.blogspot.in)

Terms - Aim, Goals and Objectives • Aim • Usually the long term vision. • Sometimes called ‘mission’. •
Goals: • Broad statements of intent, direction & purpose. • Objectives: • Statements that describe
specific things to Be accomplished to achieve the goals • Foundation of Management by Objectives Dr.
Rakshit A S (drrakshit.blogspot.in)

Concept of MBO • The KEY to MBO is that it • is a participative process, actively involving of members at
every organizational level. • When employees themselves are involved with the goal setting and
choosing the course of action to be followed by them, they are more likely to fulfil their responsibilities •
focuses on ‘What to achieve, not How to achieve’. • Other Names - • 'Management by Results' (MBR) •
'Goal Management' • 'Planning by Objectives' (PBO) • 'Results Management' • 'Joint Target Setting' •
'Work Planning and Review' Dr. Rakshit A S (drrakshit.blogspot.in)

Features of MBO • MBO is a Philosophy • Reflects a Proactive way of managing that is, • More than a
set of techniques • Results oriented • Emphasizes accomplishments rather than inputs • rests on a
concept of human action, behaviour, and motivation • MBO is an Approach • Approach refers to various
tools or techniques used in order to achieve the objectives. • So, it’s a sophisticated tool which works in
an integrated way. Dr. Rakshit A S (drrakshit.blogspot.in)

Four Basic Principles of MBO • Unity of management action is more likely to occur when there is pursuit
of a common objective. • The greater the focus on results on a time scale, the greater likelihood of
achieving them. • The greater the participation in setting meaningful work with accountable results, the
greater the motivation for completing it. • Progress can only be measured to evaluate and so there can
always be scope for improvement. Dr. Rakshit A S (drrakshit.blogspot.in)
MBO Process • A process consisting of a series of interdependent and interrelated steps: • Formation of
clear, concise statements of objectives • The development of realistic actionplans for their attainment •
The systematic monitoring and measuring of performance and achievement, and • The taking of
corrective actions necessary to achieve the planned results. • The employee is rewarded on the basis of
goal attainment. Dr. Rakshit A S (drrakshit.blogspot.in)

Dr. Rakshit A S (drrakshit.blogspot.in)

The SMART Objectives • Is it specific? Does it clearly talk about the thing that all the staff member and
the supervisor know exactly what output they are talking about? • Is it measurable? Can the output be
quantified? • Is it appropriate? Does the staff member have the power to accomplish the task? • Is it
realistic? Based upon experience & data, can the output be achieved in the allotted time with a given
amount of resources? • Is it time-bound? Is a specific, reasonable amount of time specified to
accomplish each objective? Dr. Rakshit A S (drrakshit.blogspot.in)

Progress, Evaluation & Reward • Preliminary evaluation may call for adjusting objectives. • Performance
evaluations focus on how well employees accomplish their specific unit objectives (not artificial criteria
such as appearance, being on time, cooperativeness). • Provide the basis for identifying more effective
job behaviour • The reasons for both success and failure are explored. • The employee is rewarded on
the basis of goal attainment. Dr. Rakshit A S (drrakshit.blogspot.in)

MBO Process Reward Dr. Rakshit A S (drrakshit.blogspot.in)

Advantages of the MBO Process • Clarity of goals and Organisational Action • Motivation – Involving
employees in the whole process of goal setting and increasing employee empowerment. This increases
employee job satisfaction and commitment. • Subordinates tend to have a higher commitment to
objectives they set for themselves than those imposed on them by another person. • Managers can
ensure that objectives of the subordinates are linked to the organization's objectives. • It instils the
result oriented attitude in employees Dr. Rakshit A S (drrakshit.blogspot.in)

Advantages of the MBO Process • Better communication and coordination – Frequent reviews and
interactions between superiors and subordinates helps to maintain harmonious relationships within the
organization and also to solve many problems. • It develops managerial self-control. • It’s a universal
tool for management & includes many sub-systems of management including; planning, budgeting,
resource allocation, design of organizational structure, performance appraisal. • It covers both economic
& human aspects of management to gather. • Periodic review and evaluation of progress helps to take
necessary remedial actions after preliminary evaluation. Dr. Rakshit A S (drrakshit.blogspot.in)

Limitations of MBO • Incomplete Understanding of MBO Philosophy • MBO appears to be simple to

teach but it is not so easy to put in practice. • Difficulty in Setting Objectives • Quantitative Bias • trying
to measure non quantifiable objectives and emphasizing numbers only leads to downgrade important
goals that are difficult to state in quantitative terms or end-results. • Poor Planning and Lack of
Guidelines • Inflexibility • goal that has been made obsolete by revised corporate objectives, changed
premises, or modified policies. Dr. Rakshit A S (drrakshit.blogspot.in)

Limitations of MBO • Increases Pressure and Frustration on the Subordinates • It leads to a tug-of-war in
which the subordinate tries to set the lowest possible targets and superior the highest • Short Term
Nature of Goals • Strategic goals are displaced by operational goals. • Time Consuming • Plenty of time
is required to carefully set objectives at all levels of the organization. • formal, periodic progress and
final review sessions also consume time • Increases Paperwork • circulars, instruction booklets, training
manuals, questionnaires, performance data, and reports. • Lack of Follow up • Timely follow-up is must.
Dr. Rakshit A S (drrakshit.blogspot.in)

Conclusion • MBO has achieved considerable acceptance, even though it requires a great deal of time
and energy, because it appears to result in improved performance and higher degree of morale. •
Today, MBO is used not only as a technique of goal setting but also as a total system of planning,
motivation, performance appraisal and self-control. Dr. Rakshit A S (drrakshit.blogspot.in)