Management By Objective

(MBO Process)
 Introduction

Definition

Objectives

MBO principles

Smart goal

The MBO process

Agenda
tools

Advantage

Disadvantage

Problem &
Limitation

Obsolete

Conclusion
 Introduction
 Popular Technique of Appraisal managerial
of
 performance.
Introduced by Peter Druker’s book, “THE PRACTICE
OF MANAGEMENT”, Published in 1954.
 Usually been design and used with the business &
Industries.
 It is the most widely accepted philosophy of
management today. It is a demanding and rewarding
style of management.
 A process whereby superiors & subordinates
jointly identify the common objectives to make
best of organizational resources.
DEFINATION
BY PETER DRUKER
DEFINITION OF MBO

Management Model based on Objectives that are agreed

on between Management and Employees

The aim is to reach overall Strategic Goals for the

Organization but also Individual Goals for the
Employees

This Model integrates Employees in the planning process

what leads to Participation, Motivation and
Commitment
DEFINITION OF MBO

Employees measure their daily Work on their individual

goals and act in best interest of the company

Sum of all individual goals forms the overall goal of the

company
Objectives

To Measure and judge

performance.
To relate individual performance to
organizational goals
To clarify both the job to be done and the
expectations of accomplishment.
To foster the increasing competence &
of the subordinates.
growth
To enhance communication between
& subordinates.
superior
To serve as a basis for judgment about
Promotion.
salary &
To stimulate the subordinate‘s motivation.

To serve as a device for organizational control

& Integration.
 Balance Between

The balance between management

and employee empowerment has to be
struck,
by thinkers,
not but by practicing
managers. Turning their aims
Management forces managers
intosuccessful to master four
actions,
operations:
basic
 setting objectives,
 organizing the group,
 motivating and communicating,
Employee  measuring performance, and
Empowerment developing people, including
yourself.
 MBO
PRINCIPLES
MBO
Principles
Setting Goals Together

Periodically Evaluation

Support from

Superior

Focus on Goals, not on

Methodologies
How to
Establish
go al
S?
 How to be a smart?
Specific

Measurabl
e

Achievable

Relevant
SMA GO A STEP
RT L -1

Get SPECIFIC and clear

about what you want
to achieve!

I want to be
rich
SMA GO A STEP
RT L -2

Make your goal

MEASURABLE-
quantify what you
want !

I want to have
One Billion
Dollars
SMA GO A STEP
RT L -3

Make your goal

ACHIEVABLE within
your resources!

I work hard
as hell
SMA GO A STEP- Make your goal
L
RT 4
RELEVANT–Is
it
worthwhile?

I want to
keep
her
happy
SMA GO A STEP-
RT L 5

Your goal needs to be

TIMED-Set a start and
a finish date!

One year till

the first
million
SMA GO A Finall
RT L y

S
Specific
U
Measurable
C
Work Achievable Have
E
Relevant
S
Time-based
S
The MBO’s Process
Central
Goal
Setting
Next MBO
Individual
Operatin Goal
g period Setting

The
MBO’s
Process
Achievers Progress
Rewarde Monitored
d

Performanc
e
appraisal
CENTRAL GOAL SETTING

Routine
Objective
s

Problem-
Solving
Objectives

Improveme
nt Objectives
INDIVIDUAL GOAL SETTING

Development of
Individual
Goals
Revision of Job
Description

Resource
Allocatio
n
PROGRESS MONITORED

- Objectives and key results

- Long and short term
- priorities Scope of assistance
- expected Standards of
performance
PROPERFORMANCE APPRAISAL

Self Evaluation

360-
Degree
Evaluation

Checklist
Evaluatio
n
ACHIEVERS REWARDED

Financial Non-
Motivator Financial
s Motivators
 Salaries  Job Enlargement
 Commission  Job Rotation
 Share  Job Enrichment
Ownership  Empowerment
TOOLS
KEY PERFORMANCE INDICATORS

Organizational Goals =
Organizational KPI
(e.g. number of complaints in the end of the
week)

Individual Goal =
Individual KPI
(e.g. weekly % difference in complaints handled that result in
satisfied customers vs. unsatisfied customers)
 8 Key Result Areas
Where Managers Must Pursue Clear
MarketingObjectives

Innovation
Human organization
Financial resources
Physical resources
productivity
Social responsibility
Profit requirement
ADVANTAGES OF MBO

• Improves employee motivation

• Improves communication in
the organization
• Flags up and highlights training
needs required to achieve objectives
• Improves overall performance and
efficiency
DISADVANTAGES OF MBO

 Requires the cooperation of all

employees to succeed
 Can be bureaucratic and time
consuming (meetings, feedback)
 Can encourage short-term rather a
more focused long-term growth
 Setting targets for certain
specialized employees may be
difficult
PROBLEMS AND LIMITATIONS OF MBO

Difficulty of setting goals

Failure to teach MBO philosophy
Problems in objective setting
Emphasis on short-term objectives
Inflexibility
Frustration
 Is MBO
OBSOL
ETE?
YES! BUT WHY?
 High Volatility in
Markets and Trends

 Conservative Individual
Goals

 Having
productivity
measured is hard

 Non Collaborative Goals

 Conclusio
n
• MBO is used for different purposes. Some organizations
use MBO to clarify the employee’s job , others use it to
motivate employees while still other organizations apply
MBO as a performance control mechanism to check
performance. In this way MBO process is directly related
to all the major functions of management. Thus, MBO
is a result-oriented and rational philosophy. It permits
management by results in place of management by
crisis. Many organizations both in the private sector
and the public sector have benefited a lot through the
application of MBO.
Lecture Video Link:
https://classroom.google.com/w/OTY2MTg4NTI1NTRa/tc/MTE1OTE5OTU5Mjk
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Demo Video Link:

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Quiz Link:
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xqJ8cTGXQFKPj0vtTD3MIarg/closedform

Assignment Link:
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