This document provides an overview of management by objectives (MBO). It discusses MBO as a comprehensive managerial system introduced by Peter Drucker in 1954. The document outlines the key elements of MBO, including goal setting, participation, autonomy, and performance review. It also discusses the advantages of MBO in improving planning and performance evaluation. Some weaknesses are noted, such as the time and effort required and difficulties setting measurable goals. The document then provides examples of where MBO can be effectively used.
1. Important Note
Please note that all material discussed in the class is in
your book so please refer it accordingly .
Only those material is in the notes forms which is referred
from other text book
Chap-1-4
2. Management by Objective
MBO (Peter Drucker 1954)
• A comprehensive
managerial system
that integrates many
key managerial
activities in a
systematic manner
and is consiciously
directed toward the
effective and efficient
achievement of
individual objective
3. • It is a control tool
• It is motivational tool
• It is used to appraise people
• It is the tool of EMPOWERMENT
• Link between top management strategic
thinking and strategy implementation
Management by Objective
MBO (Peter Drucker 1954)
4. 6 Elements of Management by
Objective
1. Commitment to the program
2. Top level goal setting
3. Individual goals
4. Participation
5. Autonomy in implementation of plans
6. Performance review.
• Reward system (subsystem)
5. Management by Objective
ADVANTAGES
• Improvement of managing through result oriented
planning
• Greater commitment and satisfaction on the part of
subordinates.
• Enforced planning and prioritizing of future activities
on the part of superiors and subordinates
• More rationale method of performance evaluation
based on contribution to organizational objectives
• Individual outshine others by self
controlling,personnel development,and creativity
6. Management by Objective
• WEAKNESS:
• The time and paper work involved
• Failure to teach the philosophy of MBO
• Difficulty in setting verifiable goal with
flexibility
• Emphasis on short run goals at the
expense of long term
• Overuse of quantitative goals
• Non-ethical ways adopt to achieve
objectives
7. Where to use MBO
• Used in Private,public and non profit-
sector and armed forces.
• Knowledge based enterprises where
staff is competent
• Company’s like intel
8. Strategy
Determination of the mission and the basic long term
objective of an enterprise followed by adoption of
courses of action and allocation of resources necessary
to achieve them
Types of plan
9. STRATEGIC : Look ahead several years or even decades (time horizons)
Wide range of organizational activities (scope)
Look simplistic and generic (Degree of detail)
Deals with the relationship between people at an organization
and people acting at other organization
OPERATIONAL : A Year is often relevant (time horizons)
Narrow and limited scope (scope)
More detail (Degree of detail)
Deals with people within organization
Strategic Plans vs Operational Plan
11. Main elements of Strategic
Planning Process
1. Inputs to the organization
2. Industry Analysis (Porter 5 forces)
3. Enterprise Profile,
4. Present and Future External Environment (threats and
opportunity)
5. Internal Environment
6. Development of Alternative Strategies
7. Evaluation and Choice of Strategies
8. Consistency testing
9. Contingency plans
12. Inputs to the organization(claimants)
People,capital,managerial,technical skills,In addition
Employees wanted higher pay,more benefits,job security
Consumers demands safe and reliable products at reasonable price
Suppliers wants variance that their products are purchased.
Stockholders want only high return on their investment but as security
of the money.
Federal and local governments depends on tax paid by enterprise
Community demands that enterprise be good citizen providing jobs
and emit a minimum of pollutants.
Financial institution/labor union,even competitors have a legitimate for
fair play
It is managerial job to integrate legitimate objective of the claimants
1
13. 2
Searching for other products tat
can perform the same function as
the product of the industry.Differentiation
1
2
3
45
Govt policy,Retaliation by the companies
Supply is dominated by a few suppliers
tyre manufacturer/medicines
Brand identity
16. TOWS Matrix:RATIONALE
• Mostly companies identify their strength
weaknesses,opportunities and the threats
by using SWOT analysis.
• But what overlooked is that combining
these factors may require distinct strategic
choices.To systematize these choices
TOWS matrix was proposed
17. TOWS Matrix:
It is a modern tool to analyze the situation of the
company and to develop strategies, tactics and
action for the effective and efficient attainment of
the organizational objectives and mission,
TOWS Matrix has been proposed, where T
stands for threats, O stands for opportunities, W
stands for weaknesses, and S for strengths.
6
18. S W
O SO WO
T ST WT
S W
O SO WO
T ST WT
S W
O SO WO
T ST WT
DYNAMICS OF THE TOWS MATRIX
PRESENT
PAST
PRESENT+ TI….
TIME
19. Four Alternative Strategies
1. The WT strategy aims to minimize both
weaknesses and threats(mini-mini). (try to avoid)
2. The WO strategy attempts to minimize the
weaknesses and maximize the opportunities.
(mini-maxi)
3. The ST strategy is based on using the
organization’s strengths to deal with threats in
the environment. (maxi-mini)
4. The SO strategy, which capitalizes on a
company’s strengths to take advantage of
opportunities (maxi-maxi). ((is the most desirable.)
7
20. Value of Forecasting
• To compel thinking ahead
• Disclose areas where control is lacking
• Helps coordinates plan
21. Premising and Forecasting
Planning premises The
anticipated environment in which
plans are expected to operate.
(Sales volume,political
environment)
Prerequisite of planning
Fore casting with the Delphi
technique
Forecast that are translated into
future expectancies (cost and
revenue)
Result of planning
22. STAR high growth, high market
share
QUESTION MARK
high growth, low market share
CASH COW
low growth, high market share
DOG
low growth, low market share
HIGH
HIGH LOW
LOW
Relative market share
Market Growth
£ $$
PORTFOLIO (BCG)MATRIX
Boston consulting group
23. Three level of strategy
CORPORATE STRATEGY
FUNCTIONAL LEVEL STRATEGY
BUSINESS UNIT STRATEGY
OPERATING PLANS
What kind of businesses,goals/expectations/resources
Marketing/Production
Sales of a particular businesses
Day to day activities
24. Value of Forecasting
• To compel thinking ahead
• Disclose areas where control is lacking
• Helps coordinates plan
25. Premising and Forecasting
Planning premises The
anticipated environment in which
plans are expected to operate.
(Sales volume,political
environment)
Prerequisite of planning
Fore casting with the Delphi
technique
Forecast that are translated into
future expectancies (cost and
revenue)
Result of planning
