Subject Name : Management Concepts &

Applications

MANAGEMENT BY OBJECTIVE

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Subject Name : Management Concepts &
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SETTING OBJECTIVES

Objective Setting refers to the activity of setting objectives for the

organization. They are the end result that state specifically how
the goals set by the organization are accomplished in near future
period of time.
So, they are stated to be quantitative in nature.

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Subject Name : Management Concepts &
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There are five factors identified which must be considered while

setting objective.
Forces of the environment,
realities of an enterprise’s
resources and internal power relations,
values of the top executives,
awareness of past objectives by the management.

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Subject Name : Management Concepts &
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Need for setting objectives

 It provides a yardstick to measure performance.
 It serves as a motivating force – people work to achieve objectives.
 It helps to pursue organization‟s vision and mission
 It defines the relationship between the firms internal and external
environment.
 It provides basis for decision making – all decisions are aimed
towards accomplishment
of objectives.
 It provides standards for performance appraisal.
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Subject Name : Management Concepts &
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MANAGEMENT BY OBJECTIVES (MBO)

Concept of MBO
Management by objectives (MBO) was first outlined by
Peter Drucker in 1954 in his book The Practice of Management‟.
MBO works if you know the objectives, 90% of the time you
don‟t.
MBO harmonizes the goal of an individual with the organizations
goal.

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Subject Name : Management Concepts &
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“MBO is a system wherein the superior and the

subordinate managers of an organization jointly identify its
common goal, define each individual‟s major area of responsibility
in terms of the result expected of him and use these measures
guide for operating the unit and assessing the contribution of each
of its members”.

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Features of MBO
1. MBO focuses on the results not the activity.
2. MBO system is to get managers and empowered employees to
achieve plan.
3. It increases organizational capability.
4. Constantly refining, modifying and improving goals.
5. High degree of motivation to employees.
6. Recognizing goal setting participation by employees.
7. Encourage a climate of trust and goodwill to perform.

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Subject Name : Management Concepts &
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Process of MBO
The MBO process is characterized by balance of objectives of organization
and individual.
The process of MBO is explained below:
1. Defining Corporate Objectives: Framing of corporate objectives by all level of
management. The objectives may be short-term or long-term according to the
feasibility.
2. Allocation of Sub goals: Allocating sub goals to each department, division,
subdivision with responsibilities and decisions to individual managers. Period
within which these objectives should be achieved is also fixed.

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Subject Name : Management Concepts &
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3. Fixing Key Result Areas (KRA): KRA fixation is on the basis of objectives
premises, priorities, e.g. profitability.
4. Set Performance Standard: Setting of qualitative and quantitative
performance standard of each member, each level, and each activity with
the consent of all.
5. Matching Resources with Objectives: Objectives are framed on the
basis of availability, adequacy of resources. And available resources
should be properly allocated and utilized.

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Establish Management Information System (MIS): Establishing MIS to

monitor
achievements against standards. It can be possible through following ways:
(a) Periodical review meeting.
(b) Appraisal or activities.
(c) Reappraisal of activities.
The superior subordinate should periodically discuss on the
accomplishment of objectives and the superior should take the corrective
action, for failure or problems in the objective‟s achievement. Also need to
modify the objectives or the standard of performance according to changing
conditions.
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Principles of MBO
Integration of organizational goals and objectives.
Specific objectives for each member.
Participative decision-making.
Explicit time period.
Performance, evaluation and feedback.

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Management by objectives also introduced the SMART

method for checking the validity of the objectives, which should be
SMART:

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The SMART goals were first outlined in 1981 by George T.

Doran in volume 70, issue 11 of Management Review. In his
article, titled "There's a S.M.A.R.T. Way to Write Management's
Goals and Objectives," he described how business goals should
have a meaningful effect on an organization by being measurable
and achievable.

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Specific refers to being as specific as possible with the desired goal. Generally,
the narrower and more specific a goal is, the clearer the steps to achieving it
will be.
Measurable refers to ensuring there will be evidence that can be tracked to
monitor progress.
Achievable refers to ensuring the set goal is realistic and possible to complete
or maintain within the set time frame.
Relevant refers to making sure the goal itself aligns with values and long-term
goals and objectives.
Time-bound refers to making sure the goal is set within an appropriate time
frame.
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Examples of S.M.A.R.T. Goals

Professional Goal: “I’m going to increase sales”
Specific: “I am going to learn about social media marketing and invest in a social media
management platform to start growing an online audience of potential customers.”
Measurable: “The goal is to increase sales by 30% within the next quarter.”
Achievable: “I can afford a subscription to Zoho Social, and I have a moderately
successful business that can handle a large increase in customer demand.”
Relevant: “I want to grow my sales volume so that I can buy a new vehicle for my
business.”
Time-bound: “I will subscribe to Zoho Social tomorrow and go through all of their
instructional material to learn how the platform works. I will build a social media
strategy and deploy it in two weeks.”

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Personal Goal: “I’m going to get in shape.”
Specific: “I am going to get at least 30 minutes of exercise three days a week
and cut my caloric intake by 25%.”
Measurable: “My goal is to lose 15 pounds within the next three months.”
Achievable: “I already have a rowing machine and can afford to buy fresh,
nutritious food for myself and my family.”
Relevant: “I want to live a healthier lifestyle so that I feel better physically and
mentally in my daily life”
Time-bound: “I will go to the grocery store tomorrow after work and buy
healthy food for the week. I will use my rowing machine for 30 minutes before
cooking dinner. I will use the rower three times per week.”

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