Management By Objectives


Management By Objectives (MBO) is defined as a program that encompasses specific goals , participatively set ,for an explicit time period, with feedback on goal progress. A comprehensive management system based on measurable anticipatively set objectives that leverages the motivational power of objectives.

Management By Objectives (MBO)

MBO is a motivational program based on goal setting. The goal(s) should:
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be mutually agreed upon. be difficult, but achievable (realistic). have a defined time frame be measurable (objective and budgeted). provide means for feedback.

Management By Objectives (MBO)

In an MBO program, good goals are SMART goals:
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Specific Measurable Attainable Results-oriented Time-related

Management by objectives (MBO).
 Subordinates work with their supervisor to

establish specific task-related objectives.  MBO is the most individualized appraisal method .  MBO works well with counseling, provided the goals focus on important activities.  MBO is not highly subjective to rating errors.

Key elements of MBO
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Goal specificity participative decision making an explicit performance/evaluation period feedback

Management By Objectives (MBO)
Is a four-step process in which

2. 3.


Managers and employees jointly set objectives for the employee Managers develop action plans Managers and employees periodically review the employee’s performance The manager makes a performance appraisal and rewards the employee according to the results

Three Types of Objectives Used in MBO

Improvement Objective
“Increase sport-utility sales by 10%”

Personal Development Objective
“Attend five days of leadership training”

Maintenance Objective
“Continue to meet the increased sales goals specified last quarter”

MBO Requirements
For MBO to be successful, three things have to happen:

2. 3.

The Commitment of Top Management is Essential It Must Be Applied Organization-wide Objectives Must “Cascade”—MBO works by cascading objectives down through the
organization; that is, objectives are structured in a unified hierarchy, becoming more specific at lower levels of the organization

Steps in a Typical MBO Program
1. 2. 3. 4. 5. 6. 7. 8.

The organization’s overall objectives and strategies are formulated. Major objectives are allocated among divisional and departmental units. Unit managers collaboratively set specific objectives for their units with their managers. Specific objectives are collaboratively set with all department members. Action plans, defining how objectives are to be achieved, are specified and agreed upon by managers and employees. The action plans are implemented. Progress toward objectives is periodically reviewed, and feedback is provided. Successful achievement of objectives is reinforced by performance-based rewards.

The Strengths & Limitations of MBO
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It can improve performance at all levels It emphasizes getting results It motivates employees to do better Top management commitment and involvement

It can take too much time and energy MBO requires considerable training of managers It won’t work in rigid, authoritarian organizations Specific objectives can distract from strategic goals MBO can be misused by zealous or punitive managers Not as effective in dynamic environments that require constant resetting of goals Overemphasis on individual accomplishment may create problems with teamwork Allowing the MBO program to become an annual paperwork shuffle.

Overall organizational objectives


Divisional objectives

Consumer products division

Industrial products division

Departmental objectives



Customer marketing research development service

Individual objectives

Management by Walking Around

Management By Walking Around
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Develop a broad network & sources of information, both formal & informal Formal channels
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Talk with key subordinates Read written reports Glean statistics from latest operating results Get feedback from customers Watch competitive reactions of rivals Visit the “field” regularly, talking with many people at all levels

Informal channels rely heavily on MBWA


Problems addressed - Main managerial productivity problem of many companies is that managers are remote from the detail, out of touch with their people and their customers. As W. Edwards Deming, an American who introduced the idea of quality management to the Japanese, put it: "If you wait for people to come to you, you'll only get small problems. You must go and find them. The big problems are where people don't realize they have one in the first place."

MBWA Practices

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Managers consistently reserving time to walk through their departments and/or to be available for impromptu discussions. Individuals forming networks of acquaintances throughout their organizations Lots of opportunities for chatting over coffee or lunch, or in the corridors. Managers getting away from their desks and starting to talk to individual employees. The idea is that they should learn about problems and concerns at first hand. At the same time they should teach employees new methods to manage particular problems. The communication goes both ways.

Seven MBWA Principles-by Tom Peters
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Publicize the fact that you are out wandering 50% of the time, and that your colleagues are as well (if you and they are). Be meticulous in having meetings in others' offices/spaces rather than yours. Evaluate managers in part - and directly - on the basis of their people's assessment of how well/how frequently they are in touch. Fire a supervisor who doesn't know all his people's first and last names. Hold meetings and reviews in the field. Start randomly popping into offices and asking the inhabitants why they aren't out. If you are a manufacturing, or an R&D boss, etc., make sure you have a second office in the workplace.

Main Benefits

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MBWA is a hyperactive, out-of-the office, interventionist top management practice. open-door management policy. made leadership more effective in many wellrun organizations. MBWA has been found to be particularly helpful when an organization is under exceptional stress;

What Leaders and Managers Should Do

As leaders and managers wander around, at least three things should be going on: They should be listening to what people are saying. They should be using the opportunity to transmit the company's values face to face. They should be prepared and able to give people on-the-spot help.

Ways in which you could improve MBWA
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Appear relaxed as you make your rounds. Employees will reflect your feelings and actions. Remain open and responsive to questions and concerns. Observe and listen and let everyone see you do it. Make certain your visits are spontaneous and unplanned. Talk with employees about their passions—whether family, hobbies, vacations, or sports. Ask for suggestions to improve operations, products, service, sales, etc. Try to spend an equal amount of time in all areas of your organization. Catch your employees doing something right and recognize them publicly. Convey the image of a coach—not an inspector. Encourage your employees to show you how the real work of the company gets done.

20 Ways to Communicate With Your Employees
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Include affected employees in goal setting. Give frequent and meaningful recognition for a job well done. Interact with employees on an informal basis. Go to staff's work area. Meet them on their own turf. Ask for staff's opinions and listen with an open mind. Try to understand their point of view. Share non-confidential information with staff, and ask for their input and response on issues. Offset demoralizing actions and events by emphasizing what went well, and use the experience as a learning opportunity. Listen 80% of the time and talk 20%. Ask staff what rumors they have heard, and address them. . Get into the "trenches" with staff. Look for opportunities to understand employees' jobs better. . Give information to staff after management meetings. . Ask staff. "Have I made our vision, mission, and goals clear and understandable? . Ask staff, "What can I do to help you with your job, and what am I doing that gets in your way?" . Ask staff "What is making our clients/customers the most and/or the least satisfied?" . Praise in public and give feedback in private. . Find something to like about each staff member with whom you work. . Actively make a point of speaking to all employees seen each day. . Build bridges with people with whom you are uncomfortable. . Set goals each month on ways to accomplish "Managing by Walking Around." . Occasionally have lunch with staff members. Use this as an opportunity to build trust.

Management by Exception

Management By Exception(MBE)

Management by exception is the practice of focusing on important variances so that managers can direct their attention to areas that need improvement. Performance reports show differences between budgeted and actual amounts

Management By Exception(MBE)

Source for Management by Exception-The 80/20 Principle (Pareto Analysis)

A majority of causes, inputs, or efforts tend to produce a majority of results, outputs, or reward

Review only exceptions from expected results that are of a certain size or type to save time

Management By Exception(MBE)
Northern California District Manager

San Francisco Branch Manager

San Jose Branch Manager

Oakland Branch Manager

Sacramento Branch Manager

Geary Store Manager

Beale Store Manager

Wharf Store Manager

Other Managers

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