INTRODUCTION TO

BUSINESS MANAGEMENT –
OBJECTIVES & MBO
Goals and Objectives
• Goals denote what an organisation hopes to
accomplish in a future period of time. A broad category
of financial and non-financial issues are addressed by
the goals that a firm sets for itself.
• Objectives are the ends that state specifically how the
goals should be achieved. They are concrete and
specific in contrast to goals which are generalised.
objectives make goals operational. While goals may
be qualitative, objectives tend to be mainly quantitative
in specification.
Establishing Objectives

Two Approaches:
• Goal Setting Process: Traditional View –
goals are set by top management and it is
one way process
• Goal Setting Process: Modern View (MBO)
Management by Objectives (MBO)
• A process through which specific goals are set collaboratively
for the organisation as whole and every unit and individual with
in it; the goals are then used as a basis for planning, managing
organisational activities and assessing and rewarding
contributions.
• Structural approach to organisation-wide participative goal
setting that aims to serve as a basis for (A) greater efficiency
through systematic procedures, (B) greater employee
motivation and commitment through participation in the
planning process, and © planning for results instead planning
for just work
Management by Objectives (MBO) -
Features
• MBO emphasises participation in setting goals that
are tangible, and measurable
• MBO focuses attention on what must be
accomplished (key result areas-KRAs) rather than
how it is to be accomplished (method). Allows
innovation and creativity
• Establishment of Periodic Review System
• MBO is a systematic and rational technique from
available resources that allows management to attain
maximum results
 Management by Objectives (MBO) -
Process
• Goal setting
• Know your own goals
• Meeting with your subordinates
• Climate for goal setting
• Second meeting with sub ordinates to finalise mutually agreed
objectives
• Action Plan
• Choosing strategies which are appropriate to the objectives
• Assigning responsibility for achieving the objectives
• Allocating resources for achieving the objectives
• Scheduling specific activities to achieve maximum utilisation of
resources.
Management by Objectives (MBO) -
Process

• Appraising performance (Final Review)

• Performance
• Improvement
• future corrective action
• frequency of reviews
• self-appraisal
Management by Objectives (MBO) –
MBO benefits

1. Clear & measurable goals

2. Better planning
3. Facilitates control
4. Objective appraisal
5. Motivational Force
6. Result Oriented philosophy
Management by Objectives (MBO) –
MBO Limitations

1. Pressure oriented
2. Time consuming
3. Increase paper work
4. Goal-setting problems
5. Organisational problems