3. Management By Objective (MBO)
Management comprehensive by objectives" was first popularized objectives
“MBOtermby Objectives (MBO) is a process ofthat integrates many key
The is a "management managerial system agreeing upon by Peter
within an organization soinbook 'The Practice of Management. The term
managerial activities that management and employees agree to the
Drucker in his 1954 a systematic manner, consciously directed towards
objectives and understand what they are in the objectives.”
the effective achievement of organizational organization.
MBO was coined by Peter Drucker in 1954.
Business, that's easily defined - it's
other people's money.
4. Heinz n Koontz define MBO as
“ a systematic manner and that is consciously directed towards the
effective and efficient achievement of organizational and individual
objectives.”
HAROLD KOONTZ
MANAGEMENT
A Global Perspective
5. Need For MBO
STEP 1: SET GOALS STEP 2: DEVELOP PLANS
•Corporate Strategic goals
•Departmental goals Action Plans
•Individual goals
Review Progress
& Take Corrective
Action
Appraise
Performance STEP 3: REVIEW PROGRESS
STEP 4: APPRAISE
OVERALL PERFORMANCE
6. Management By Objective PRINCIPLES of MBO
1. Cascading of organizational goals and
objectives
2. Specific objectives for each team member
3. Participative decision making
4. Explicit time period
5. Performance evaluation & feedback
7. OBJECTIVE SETTING
Setting the Objective
S
Specific U
Measurable C
WORK Achievable HAVE C
Result Oriented E
Time Related S
S
8. Strategy of MBO MBO Strategy : Three Basic Parts
All individuals within an organization are assigned a special set
of objectives that they try to reach during a normal operating
Performancegiven to individuals on the basis of how close they
Rewards are reviews are conducted periodically to determine
period. These individuals are mutually settheir agreed upon by
how close objectives goals.
come to reaching their to attaining and objectives.
individuals and their managers.
9. Guidelines for writing objectives
1. Commitment to action
Guidelines
2. Specify a single key result
3. Specify a target date
4. Should be measureable and verifiable
5. Individual objectives related to higher objective of organization
6. Understandable
7. Should be consistent with organizational resources
8. Should be mutually acceptable by both supervisor and
subordinates.
10. Steps in the MBO process
Establish specific goals
Develop overall Formulate action plan
for various
organizational by identifying problem
departments, subunits
objectives areas
and individuals
Appraise performance Conduct periodic Implement and
of the employees review of the plans maintain self control
feedback
11. Advantages of MBO
1. Improves employee motivation
2. Improves communication in the organisation
3. Flags up and highlights training needs required to achieve objectives
4. Improves overall performance and efficiency
5. Attainment of goals can lead to the satisfaction of Maslow’s higher
order needs
13. Better Managing
Mbo helps managers to allocate organizational resources
and plan activities effectively
14. Clarity in Organizational
Action
Mbo identifies the key result areas where organizational efforts are needed. A
clear definition of the objectives in the key result areas helps in relate the
organization with its environment organizational objectives are always influenced
by the external environment organizational functions.
15. Encouragement of Personal
Environment
The biggest advantage of mbo is that it encourages personal commitment
to goals by employees. The mbo programs gives employees the
responsibility of setting their own objectives.
16. Personal Satisfaction
MBO brings about personal satisfaction by allowing employees
to participate in setting their objectives and by appraising
their performance in a rational manner.
18. DISADVANTAGES OF MBO
1. May demotivate staff if targets are too high and unrealistic, also if imposed
rather than agreed
2. Requires the cooperation of all employees to succeed
3. Can be bureaucratic and time consuming (meetings, feedback)
4. Can encourage short-term rather a more focused long-term growth
5. Objectives may go out of date and can restrict staff initiative and creativity
6. Setting targets for certain specialised employees may be difficult
19. SOURCES of MBO FAILURES
1. Lack of top management commitment and follow through
on MBO.
2. Employees’ negative beliefs about management’s sincerity
in its efforts to include them in the decision-making process.
