MANAGEMENT BY

OBJECTIVES

Anshul Kushwaha Nakshatra Gautam Divyanshu Tamta

(191553) (191570) (191559)
 INTRODUCTION

 Management by objectives (MBO), also

known as management by results (MBR)
 Management by objectives is the process of
defining specific objectives within an
organization that management can convey to
organization members, then deciding how to
achieve each objective in sequence
 It refers to the process of setting goals for the
employees so that they know what they are
supposed to do at the workplace.
 HISTORY

 Peter Drucker first used the term "management

by objectives" in his 1954 book The Practice of
Management.
 The idea draws on the many ideas presented in
Mary Parker Follett's 1926 essay, "The Giving of
Orders".
 MBO was popularized by companies like Hewlett-
Packard, who claimed it led to their success.
 Many other corporations praise the effectiveness
of MBO, including Xerox, DuPont, Intel.
ASSUMPTION OF MANAGEMENT BY OBJECTIVES

 MBO relies on the premise that people tend to

perform better when they are known about
what is expected from them and when they can
associate their personal goals with that of the
objectives of the organization.
 It also proposes that people have interest in
establishing goals and comparing the
performance against the set target.
CONCEPTUAL MODEL
 FIVE STEP PROCESS

 Review organizational goal

 Set worker objective

 Monitor progress

 Evaluation

 Give reward
NEED FOR MANAGEMENT BY OBJECTIVES (MBO)

 Motivation – Involving employees in the whole

process of goal setting and increasing
employee empowerment.
 Management by Objectives ensures effective
communication amongst the employees. It
leads to a positive ambience at the workplace.
 KRAs are designed for each employee as per
their interest, specialization and educational
qualification.
 Clarity of goals
NEED FOR MANAGEMENT BY OBJECTIVES (MBO)

 Management by Objectives process leads to

satisfied employees. It avoids job mismatch and
unnecessary confusions later on.
 It leads to well defined hierarchies at the
workplace. It ensures transparency at all levels.
 Managers can ensure that objectives of the
subordinates are linked to the organization's
objectives.
 Common goal for whole organization means it is
a unifying, directive principle of management.
 SMART OBJECTIVES

 Specific - Target a specific area for

improvement.
 Measurable - Quantify or suggest an indicator of
progress.
 Assignable - Specify who will do it.
 Realistic - State what results can realistically be
achieved, given available resources.
 Time bound - Specify when the result(s) can be
achieved
The aphorism "what gets measured gets done", is
aligned with the MBO philosophy
 VARIATIONS IN PRACTICE

 MBO approach varies widely, in regard to how

formalized and structured it is in a given
organization and to what degree subordinates
are allowed to set their own goals.
 MBO can take the form of formal objective
setting and appraisal meetings held on a regular
basis.
 While MBO can also very formal management
system with precise review scheduling, and
specific formats in which objectives and
measures must be presented for review and
discussion.
CONTD.

 It can also vary as the degree to which a

subordinate is allowed to set his or her own
goals.
 In some organizations a subordinate is almost
told what he or she needs to do and is simply
asked if he or she will commit to achieve that
goal.
 While in others the subordinate is given great
latitude and room for innovation.
 LIMITATIONS OF MBO

 It sometimes ignores the prevailing culture and

working conditions of the organization.
 It over-emphasizes the setting of goals over the
working of a plan as a driver of outcomes.
 MBO can only succeed if it has the complete
support of the top management.
 The emphasis is more on short-term goals.
 It is not realistic for the R&D department of on
organization to set a goal
 Group goal achievement is more difficult.
SUGGESTIONS FOR IMPROVING THE EFFECTIVENESS OF
MBO

 It is important to secure top management

support and commitment. Without this
commitment, MBO con never really be a
success.
 MBO is a major undertaking and should replace
old systems rather than just being added to it.
 The goals must be continuously reviewed and
modified, as the changed conditions require.
 All personnel involved should be given formal
training in understanding the basics as well as
the contents of the programme.