MANAGEMENT BY OBJECTIVE

OBJECTIVE

Guidelines Roadmaps Goals Aim Provides the direction End results

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The goals must be:

Objective are goals, aims or purposes that organization wish over varying periods of time Mutually agreeable to employee and supervisor
Demanding (stretching) but achievable

Within the control of the employee

Reviewed periodically for modifications

based on events

The goals must also be:

Clearly defined
Simple to understand Written

OBJECTIVE - APPROACHES
Top- down approach
Top- level determines objectives for

subordinates

Bottom- up approach
Subordinates themselves attempt to

formulate objectives and present them to their superior for approval

Both the approaches are equally important

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MANAGEMENT BY OBJECTIVE
Begins with the setting of

subordinates objective jointly by the immediate superior and subordinates

Completes with the performance

appraisal of the subordinates

MANAGEMENT BY OBJECTIVE
Management by objectives (MBO) is a systematic and organized

approach that allows management to focus on achievable goals and to attain the best possible results from available resources.
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MANAGEMENT BY OBJECTIVE
Peter Drucker 1954 In his book The Practice of Management Self- directed and self- control
He said managers should participate in

formulating objectives as this would help them to know how their own specific objective relate to the overall company goal and also have a better understanding of the broader aims of the company
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Core Concepts of MBO

According to Drucker managers should "avoid the

activity trap", getting so involved in their day to day activities that they forget their main purpose or objective. Instead of just a few top-managers, all managers should: Participate in the strategic planning process, in order to improve the implementability of the plan, and Implement a range of performance systems, designed to help the organization stay on the right track.

MANAGEMENT BY OBJECTIVE
Peter Drucker himself decreased the

significance of this organization management method, when he said: "It's just another tool. It is not the great cure for management inefficiency... Management by Objectives works if you know the objectives, 90% of the time you don't.

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MANAGEMENT BY OBJECTIVE
MBO managers focus on the result, not

the activity.

Management by Objectives (MBO) is

about setting yourself objectives and then breaking these down into more specific goals or key results

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THE NATURE & PURPOSE OF MBO

MBO is concerned with goal setting and planning for individual managers and their units. The essence of MBO is a process of joint goal setting between a supervisor and a subordinate. Managers work with their subordinates to establish performance goals that are consistent with higher organizational objectives. MBO helps clarify the hierarchy of objectives as a series of well-defined means-ends chains.

BENEFITS
Better managing (resources, method,

evaluation) Clarity in Organizational action (key areas and envt., clear objectives) Encouragement of personal commitment (responsibility, ideas, involvement) Personal satisfaction (participation, no biases, better performance) Basis for organizational change Development of effective controls

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Other benefits
Coordination of goals and plans
Coordination of various departments Better understanding Improves relationship

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LIMITATIONS
Failure to teach MBO philosophy (understanding of the concept, process)
Failure to give guidelines to goal setters (org.

goals, planning premises, polices) Difficulty in goal- setting Inflexibility (less scope) Others
Time consuming Training of managers May leads to frustration (due to interdependence)
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Where to Use MBO

The MBO style is appropriate for knowledge-based

enterprises when your staff is competent. It is appropriate in situations where you wish to build employees' management and self-leadership skills and tap their creativity, tacit knowledge and initiative. Management by Objectives (MBO) is also used by chief executives of multinational corporations (MNCs) for their country managers abroad.

Why MBO?
For performance appraisal
For controlling Organization development Long- range planning Integration of individual and organizational

objectives

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Making MBO effective

Top management support
Training for MBO Formulation of clear objectives Effective feedback Encouraging participation

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PROCESS
Develop overall organizational goals Establish specific goals for various departments, subunits and individuals

Formulate action plans identifying the problem areas Implement and maintain selfcontrol Conduct periodic review
Appraise performance of the subordinate
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