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Presented To
Hemani Avasthi

Presented By

Dilip Kumar
Management by
• Management by Objectives (MBO) is a
process of agreeing upon objectives
within an organization so that
management and employees agree to
the objectives and understand what
they are in the organization.

• The term "management by objectives"

was introduced in 1954 by Peter
Drucker in his book 'The Practice of
What is MBO?
• We set goals and then
performance is judged based on
how well we accomplish these

• Intellectually – this seems like the

way to go.
Management by Objectives
• Goal Setting theory has an impressive base of research
support. But as a manager, how do you apply this theory in
the work place? Install a MBO program.

• MBO emphasizes participatively set goals that are

tangible, verifiable, and measurable.

• It enables managers to use goals to motivate people not

control them.

• MBO devices a process by which objectives flow down

through the organization. The organization’s overall
objectives are translated into specific objectives for each
succeeding level.
Management by
The goals must be:
• Mutually agreeable to employee
and supervisor
• Demanding (stretching) but
• Within the control of the employee
• Reviewed periodically for
modifications based on events
The goals must also be:

• Clearly defined
• Simple to understand
• Written
Management by
Objectives (MBO)
1. Goal Specific
Objectives used in MBO should be specific,
measurable, attainable and clear. Example,
“cutting costs by 7% in the coming 5 months”

5. Participative Decision Making

The objectives in MBO are not unilaterally set by
the boss and then assigned to employees. MBO
replaces imposed goals with participative goals
setting. Together the manager and the
employee choose the goals and agree on how
they will be measured.
Management by
Objectives (MBO)
3. Explicit Time Period
Each objective has a specific time period in
which it is to be completed.

7. Performance Feedback
Continuous feedback on progress towards goals
so that individuals can monitor and correct their
own actions.
Problems with MBO
• Employees get systematically
more credit or blame than

• unfairness still exist in rating.

Domains and levels
• Objectives can be set in all
domains of activities (production,
services, sales, R&D, human
resources, finance, information
systems etc.).

• Some objectives are collective, for

a whole department or the whole
company, others can be
Management by objective –
harvested class
MbO Record
Name Job/Role Date
Key Job Objective/Target to be Data for Training/Learning
Area Achieved Monitorin Needs




Progress Review Dates

Notes on Achievements/Progress

Signed: (Post- Signed:

holder) (Manager)
Goal-Setting Theory
• Many believe that everyone
already sets goals.

• But this is not true

• When groups do set goals, output

always increases.
Goal setting and
• Incentives improve performance.

• Only if they cause individuals to set and commit to

attaining specific goals
Why does goal setting effect
• Goals focus activity
• Goals regulate expenditure of
• Difficult goals lead to more
persistent effort than do easy

These 3 are critical to the MBO

Performance Appraisal
• Employees can be monitored in
respect to many types of MBOs, for
example, Quality MBOs, Quantity
MBOs, Cost MBOs, or Time based
Management by Objectives
• MBO is heavily used in many businesses.

• MBO’s popularity should not be constructed to

mean that it always works.

• MBO fails in a lot of cases but not because of

problems in the basic components of the
program but because of problems in
implementations : lack of top management
commitment, unrealistic expectations, an
inability or unwillingness to allocate rewards.

• MBO provides management with a medium for

the implementation Goal-Setting theory.