Chapter5 Management By Objective

School of Traffic and Transportation

Prof. of Management Fang, Xiaoping
 E.g. PETS (Public English Tests)
• 1. Objective: 3-4-5 levels
• 2. Key areas:
– (1)vocabulary: 2000-4000-6000
– (2)Grammar
– (3)Reading comprehension: correct rate and speed
– (4)Listening and speaking

• 3. Plan: one year for level 4

– at least 3hs spending on English study everyday
– daily task: vocabulary memory, reading articles chosen,doing
exercise on grammar,listenning
– with check sheet of daily,weekly, monthly
– note: flexible— 5 or 6 day task a week,
Contents

 Introduction: Management by
Objective (MBO)
 Process of MBO
 Implementation of MBO
 Performance Measurement based
on MBO
 Section 1 ： Introduction
Reference: The practice of management
1. Is the goal important?
AAteam
teamininHarvard
HarvardUniversity
Universityconducted
conductedaaresearch
researchabout
aboutthe
theimpact
impactofof
goals
goalson
onpersonal
personalsuccess.They
success.Theysurveyed
surveyedaagroup
groupofofcollege
collegestudents
studentswho
who
were
wereabout
abouttotograduate,
graduate,and
andwhether
whetherthey
theyhadhadaagoal
goalinintheir
theirminds.
minds.
20
20years
yearslater,
later,the
theresults
resultsofofaareturn
returnvisit
visitare
areasasfollows
follows. .

The achievements of the

proportion The target state
state
27% No target Social bottom or lower middle

60% Fuzzy target Social middle and lower level

10% Clear but relatively short term goals In the upper society

3% Clear and long term goals Successful people

Today's
Today'sliving
livingcondition
conditionisisnot
notdetermined
determinedbybytoday,
today,ititisis
the
theresult
resultof
ofour
ourpast
pastlife
lifegoals!
goals!So
Sodoes
doesaacompany.
company.
Goal is very important to the individual, as wel
l as to the organization.

• Goal is the direction help to focus all

resources and efford.
• Goal is the milestone to evaluate
performance and self-motivate.
• Goal is the driver to push forward
• Goal can distinguishes responsibility.
 2. Definition and implication of objective management

The difference between objective management

and project management?
definition
(1)
(1)Leaders
Leadersand
andsubordinate
subordinatesetting
settinggoals
goalstogether
together
(2)
(2)Self-control
Self-control
(3)Management
(3)Managementby
byobjective
objective

Three meanings
（（11）） Agreed
Agreedtargets （ Participate
targets （ Participate in
in ）
）
（（22）） Target
Targetdecomposition
decomposition (Target System)
(Target System)
（ 33 ）
（ ） Self
Self control
control (Authorization
(Authorization management
management and
and
self
self evaluation)
evaluation)
3.Theory of MBO based on

• X-Y Theory of Douglas M· Mc Gregor

– Behind every decision maker or manager,

there is a kind of human nature hypothesis,
which influences and even decides the
development and effect of management
decision and measure.
 Hypothesis of human nature:X-theory vs Y-theory

Usually employees are: Usually, employees are:

Born lazy Natural diligence
Work is to live Enjoy his/her work
Evasion of responsibility Self constraint
No ambition Be brave to take responsibility
Seek security With creative ability
There is a high level of demand
 Management mode: X-theory
 Managers are concerned about the efficiency of work and
the completion of the task
 Management functions are planning, organizing, directing
and supervising.
 Managers rely on formal authority to manage.
 Do not consider the emotional and moral respect for
people
 Emphasize strict organization, rule, system
 Use money to buy the subordinate's effect and obedience,
typical carrot and whip strategy.
 Management mode: Y-theory
 Management's mission is to create a working environment
that enables people to play their talents.
 Managers are not in charge the regulator or supervisor, but
the helper, supporter.
 Allow subordinates to assume more responsibility, to make
their achievements, to meet the needs of their self-
actualization
 Give more autonomy, the implementation of self control,
participation in management and decision-making

 MBO is based on Y-theory

 Management style on different human nature hypothesis

X-theory
Values ： Most people are lazy
Attitude to work ： Work is dis
gusting, be forced .
management ： People work o
nly under external force.
Money ： is the only motivation
Management style ：
carrot+whip
Y-theory
Values ： Most people are willing to real
ize self value by hard work
Attitude to work : Work,as well as
money, can bring people a kind of satisfa
ction.
Money: is not the only motivation
People are willing to carry out self-manag
ement and self-control to accomplish the g
oals that should be accomplished
Management style ： self-management
Management mode based on Y-theory
 Management's mission is to create a working environment
that enables people to play their talents.
 Managers are not in charge the regulator or supervisor, but
the helper, supporter.
 Allow subordinates to take more responsibility, to make
their achievements, to meet the needs of their self-
actualization
 Give more autonomy, the implementation of self control,
participation in management and decision-making

 MBO is more based on Y-theory than on X-theory

 There is no one of the best leadership style, there is no one
management style that adapting to all situation , only the
most appropriate.
 4 Important factors of MBO

essential factor content For example

1. What is the goal ？ Achievements sales volume, gross profit

goals
Storage satisfaction rate
quality, quantity, state,
2. To what extent ？ sales volume 50 million
Qualified rate
gross profit 20million
1. Build a new warehouse ；
Measures, means and metho 2. Improve customer satisfaction
3. How to do ？
ds 3. Increase sales through service q
plan uality

4.When to finish the

schedule
goal ？
performance 5. Whether or not to
appraisal achieve the established Rewards and punishment p
objectives ？ olicy
performance evaluation
5. The essence of object management

•• Attach
Attachimportance
importanceto
tohuman
humanfactors
factors
•• The
Thecombination
combinationofofbehavioral
behavioralscience
scienceand
andManage
Manage
ment
mentScience,
Science,do
doaagood
goodjob
jobof
ofself-management;
self-management;
•• The
Thecombination
combinationof
ofmotivation—behavior—goal.
motivation—behavior—goal.
•• Set
Setup
uptarget
targethierarchy
hierarchy
•• Through
Throughthe
thelayers
layersof
ofdecomposition
decomposition
•• Through
Throughthe
thegoal
goalto
toachieve
achievethe
themanagement
managementof
ofpeop
peop
lele
6. Relation between the enterprise and its profit ？

• Not only from the profit point of view to define the

enterprise
• An enterprise must make profit,but profit is not the
only purpose of enterprise, it is to test the effectiven
ess of enterprises.
• We serve the customer as a goal, and when the
performance is good, the profit is naturally formed.
– Profit is not the reason, it is the result ！ The
primary objective of the enterprise is to
survive.
6. To determine the key areas of enterprise

Organization objectives: that is, the key areas should

be done in the following five points:

1. All the business phenomenon can be described briefly and

easy to understand
2. Every plan should be inspected in practice.
3. Having the ability to predict behavior.
4. Assessment be used in the decision-making process.
5. Operators allowed to analyze their own practice.
7. Where is the key area ？
1. Market position ：
—Who is your customer? where are they? What needs are you
satisfied with?Where do they buy your service? What are their
willingness to pay?
2. Innovation ： for new characteristics,lower
cost, higher service quality,more convenience
3. Productivity (cost) and contribution
4. Management performance &Train managers
7. Employee performance and attitude
8. Social responsibility
Section 2 ： Process of MBO
1. Process——Three stages

performance
performance
evaluationand
evaluation andfeedback
feedback

achievinggoals
achieving goals

settinggoals
setting goals
2. Process—— Three together

MBO

superior subordinate
make plans together
as goals,standards,choose action plan

Mutual feedback between

the upper and lower levels

control the process together

check the situation,
decide to involve next cycle
3. Objective management and evaluation chart

no bias
do 2.evaluate
performance

3. bias
analysis

deviation
There is
Improved working method

Make plans 1.Determine control

and goals standards
Modify plan Modify
standard
4. action
Correct deviation
4 、 Program

To decide the organization

Set goals structure and the division To determine the
of responsibilities Lower objectives

Conditions for achieving goals management summary and

Reward and punishment process assessm
5 、 Objective management level

Management level Object level data used

Board
Boardofofdirectors
directors technique
technique
oganization aim market
market
government
government
social
social
Head
HeadofofDepartment
Department strategy,program

department aim
Workshop factory&equipment
factory&equipment
WorkshopSupervisor
Supervisor action plan HR
HR
money
money
workshop aim
各小组、车间
method
method
staff action plan
staff
personal aim

The management level and goal level

6 Steps of MBO
• 1. Organization aim is decided
• 2. determine the goal of all key area
• 3. goal of department
• 4. action plan: Ways and means to achieve the goal,
Get the recognition of all managers and subordinates
• 5. Implementation of action plan
• 6. performance examinaion and feedback information
regularly.
• 7. system of rewards and punishment related to
performance
Section 3 ： objective setting and
decomposition
1. Objective setting ----10 steps

• 1. Establishment of informational net
organization 
• 2. Identify key objective areas
• 3. Capacity analysis
• 4. Basic hypothesis
• 5. Write effective goals
• 6. make plans
• 7. Distribution finance
• 8. coordinate
• 9. Determine the permissions
• 10. Set objective feedback
2. objective setting ——SMART

Exercises : Please use

the SMART principle
to review your job this
Specific: 具体的 month.

Measurable: 可测量

Achievable: 可实现

Relevant: 相关联的

Time bound: 时间
Topic 1: Job description

• What department were you working on before you came

here? What is the goal of your department?
• what job did you do? What are your job responsibilities?
– Please give the specific job description, the expected performance of your
job.

• What is the system to ensure the realization of departmenta

l goals?
– The system of performance evaluation and the system of rewards and
punishment.
1. Objective setting ----10 steps

• 1. Establishment of informational net
organization 
• 2. Identify key objective areas
• 3. Capacity analysis
• 4. Basic hypothesis
• 5. Write effective goals
• 6. make plans
• 7. Distribution finance
• 8. coordinate
• 9. Determine the permissions
• 10. Set objective feedback
4. Objective setting——deadline

•  Reasonable period

• considering marketing chance &competitor

• Set deadline for each critical period

• Draw Gantt chart

5. objective setting——program
Decision style: democracy or dictatorship
1. top-bottom down
2. bottom-top up

Top
management

middle manager

Supervisor
objective setting ----Form 1

The first kind of form: working process

draft final version

① ④
General objective

② ⑤
Departmental
objective

③ ⑥
Individual objective
1. objective setting ----Form2

The second kind of form: working process

draft final version

①
General objective decomposition ⑥

②
Departmental
objective decomposition ⑤

Individual objective ③ ④
1. objective setting ----Form3

The third kind of form: working process

draft final version

① ②
General objective

③ ④
Departmental
objective

⑤ ⑥
Individual objective
Goal Systems ： Strategic and Financial
Financial goals Strategic goals
revenue market share
Revenue growth shorter cycle of design-market
shareholder dividends Excellent quality
Profit margin Cost less than key competitor
Rate of return on investment product line wider than opponent
better EVA A more powerful image in customer
securities and credit evaluation remarkable customer service
cash flow recognized as a leader in technology an
d product innovation
Stock price
better MVA Customer satisfaction is higher than the
opponent's
Be recognized as the "Blue Ribbon Companies"

Income diversification
ability of anti economic depression
topic 2: If you are in charge of passenger t
ransport service center. Recently, some cu
stomers complaint that the complaint cha
nnel is not smooth. The superior believes t
hat your department should have a signific
ant improvement over the next 3 months,
please give a MBO plan.
There are three channels for
customer to give their opinion to your
company currently: letter, hotline, email
topic 3: If you are the executive director
of freight marketing department. What
is your MBO plan of next year?
topic 4: If you are in charge of the locomo
tive depot, your department's goal is to ens
ure safety in production, to complete the a
ssigned production task, saving fuel consu
mption. How can you get to it ? please
propose your MBO plan.
 Section 4
Performance evaluation of MBO
 1. The performance assessment
Q ： What is the ultimate purpose of
performance assessment?

Check
Checkandandmeasure
measurethetheperformance
performanceofofdepartment
departmentand and
individuals
individualsafter
afterthe
theend
endofofthe
theprocess,
process,compares
comparesthe theachie
achie
vements
vementswithwiththetheoriginal
originaltargets,
targets,ininorder
ordertotolight
lightthe
thesituat
situat
ions
ionsofofperformance
performanceofofthe theorganization
organizationand andits
itsmembers,
members,aa
nd
ndsummed
summedup upthe
theexperience
experienceand andlessons
lessonsofoftarget
targetmanage
manage
ment
mentactivities,
activities,andandthen
thenwith
withthis
thisasasthe
thebasis
basisforforthe
theappro
appro
priate
priatereward
rewardand andpunishment
punishmentfor forthe
themembers
membersofofthe theorgan
organ
ization
izationso,
so,atataahigher
higherstarting
startingpoint,
point,thethebeginning
beginningofofaanew new
round
roundofoftarget
targetmanagement
managementcycle.cycle.
1. Principle of achievement evaluation

 Target principle: Indicators must be consistent with company

objectives

 The principle of objectivity: Conducive to promote fair and

justice. Be strong binding, easy to be accepted.

 Incentive principle: award the diligent and punish the lazy,

Motivate employees to pursue excellence

 The principle of the combination of self examination and superior

evaluation.
2. Factors of assessment

personnel

time

content

method

focus

purpose
3. The starting point of achievement evaluation

1)Effective achievement evaluation index system: To ensure

System of evaluation indicators

Standardization of evaluation indicators
Specific of evaluation indicators

2) Appropriate achievement evaluation organization

Propose the index system and scheme of achievement evaluation

make evaluation according to the actual situation of the completion
Arbitration and adjustment

3) Standardization work
Standardization of evaluation procedures
Standardization of evaluation organization
Using standardized methods and means as far as possible

4) Do a good job in the daily record statistics work

4. Main contents of evaluation

1) Extent of the realization of the objectives

Quantitative calculation and qualitative evaluation of target value
The adjustment and establishment of the target value
Evaluation
Evaluationofoftarget
targetvalue
value==
original
originaltarget
targetvalue
value++target
targetadjustment
adjustmentvalue
value
2) Evaluation of the progress of the target implementation
Target completion rate =Actual completion/plan
Target schedule deviation = actual completion rate / plan compl
etion rate

3) Comparison of target difficulty

Characyeristic of the target
Objective conditions of the target object
External factors of target
 5 How to design the assessment system

Assessmentshould
Assessment shouldbebethe
themeans
meanstotoimprove
improveincentives,
incentives,assessment
assessmentcontent
content
mustbe
must berelated
relatedtotokey
keyperformance
performanceindicators
indicators(KPI).
(KPI).
Performance index should be:
Clear, specific, challenging and balance
d with short-term and long-term goals

Examination content should be:

Related to customer satisfaction and val
ue creation for the company; to motivate
staff construct relationships between
work and scope of authority

methods should be:

Performance index, is the main mana
gement tool for the company.
For employees, it is the tool to impro
ve their enthusiasm
Fair and conducted by the manager that
most understanding the business, with
senior leaders participate in regular. An
d the implementation of a full range of a
ssessment. 。
 6. Roles in the assessment system
HRdepartment
HR departmentshould
shouldrecommend
recommendthe
theprocess
processand
andconducted
conductedthe
thework
workin
inth
th
eeassessment
assessmentprocess.
process.

•Examination and approval process, content, ind

icators and review the results of the examination General
•Approval of salary, bonus, job change manager
•Propose KPI and decomposition
•Members of the decision management committ •Analysis and report on Performance
ee •Track KPI to ensure quality
•The assessment of cadres, cadres of the suggestions acc
HR
HR Management ording to the evaluation results, rewards and punishment,
•To assist the management com department promotion and transfer
mittee to assess the work. department committee
•Recommended assessment proc
ess and content
•Overall assessment work •Decomposition of assessment i
ndicators to individuals
•Check the supervisor / staff
•Suggest employee salary, bonu
manager
manager s and job change
•Assessment of the person being
assessed
•Feedback work performance
•Report on employee performan
Supervisor / s
Supervisor / sce
taff
taff
Case ： KPI

focus innovation marketing quality customer profit IT

Staffing service

  ↑ ↑ ↑ ↑ ↑ ↑ ↑

1.market share 1.quality 1 employee qua 1Integrated

1.Consistent with t 1 response 1 short-term ass2 information to pro
2.Sales network ef lity
KPIhe market strategy 2.cost 2 timeliness ets 2 long-term vide timeliness
fectiveness 2 employee sat
2. core technology 3.delivery 3 service qu assets 3 profit 3 internal customer
3 corporate brands isfaction
ality satisfaction
3 HR system

Enterprise employee quality HRsystem

employee satisfactory
level KPI

1 the average level of job qual 1 employee satisfaction co 1 proactive manpower planning 2 recrui
department
ifications mprehensive index tment efficiency and effectiveness
KPI 2 learning ability 3 performance management system effe
2 excellent staff stability
3 performance improvement ctiveness 4 HR information system
Communication in performance evaluation
Interview
Interview Evaluationof
Evaluation of
preparation Interview
Interview
preparation interview
interview

• Determine the purpose of the interview

– The two sides on the performance of the evaluation of the
performance, to reach a consensus;
– Points out the advantages of the evaluation;
– An evaluation of the direction is insufficient and efforts;
– Work together to develop appropriate improvement plans f
or the person being assessed.

• Determine the interview time

• Determine the interview place
 Communication in performance evaluation

• Attention problems in the implementation of the interview

– To create a harmonious atmosphere;
– To specify the purpose of the interview;
– According to the evaluation criteria and objectives have been identified, the results of
the evaluation of the results and reasons;
– Make full use of the role of transposition and listening skills;
– To avoid the old account;
– Don't preach;
– To praise, to criticize, to praise;
– Let the evaluation of the development prospects of their own, to develop new work
objectives;
– The end of the time (such as evaluation of weariness or talk appeared stalled) should
immediately stop, end the conversation by encouraging tone. Determine the interview
time
 Communication in performance evaluation

• Interview effect evaluation should focus on answering such ques

tions
– Whether the interview has reached the expected purpose?
– How should we improve the interview in the next interview?
– What omissions are required to be supplemented? Which discussion is
redundant?
– What is the interview for the evaluation of the help?
– Is the person in the interview enough to speak? Does the interview en
hance mutual understanding between the two parties?
– What are the supplementary skills you have learned in this interview?
– Are you satisfied with the results of this interview?
– How is the overall evaluation of the interview?
CASE ： Process of MBO in some company

Stage of plan
Objectives
• To make a general goal 。
• to make department goal 。
• group goal and job plan
• Target system diagram
• Execute target tracking list 。
Implementation phase
Target execution and tracking.
Evaluation stage
Self evaluation of target performance
Effectiveness and reporting of target management
Comprehensive performance evaluation and reward

Objectives
1 ． Satisfactory investment
benefit
2 ． To maintain the existing
market share
3 ． Medium management pe
rsonnel training
4 ． Safe working conditions
5 ． Improve labor productiv
ity
6 ． Improve employee satisf
action
CASE
table 1 objectives and index of MBO
Sub-objectives
Get 16% of the investment benef
its
A. 80% from old customers
B. 20% from new customers
a.Propose the talent demand pla
n 5th
b.Build up reserve talent pool
c.Send 5 managers to the manag
er training course
a.Noise absorbing device installe
d in A workshop
b.Reduce injury and accident los
ses by 20%
Install a new machine to improv
e the productivity of 10%
Improve 10%
index
Net rate of return
ratio of purchase again
Submit a report in February 1
Built in February 28th to repo
rt
June 30th dispatch
Installation before March 31st
on year-on-year basis
installed before January 20th.
a.resignation rate
b.Employee satisfaction
Topic 1: Job description

• What department were you working on before you came

here? What is the goal of your department?
• what job do you do? What are your job responsibilities?
– Please give the specific job description, the expected performance of your
job.

• What is the system to ensure the realization of departmenta

l goals?
– The system of performance evaluation and the system of rewards and
punishment.
Continue topic 1

• Make a objectives and index of MBO table of your

department
Homework
• Make a MBO plan about you Chinese
study or tourism this year.
• With trace of execution at least 3 weeks.
• give it to the monitor and then to me 3
weeks later.