Management by Objectives (MBO)

Management by Objectives (MBO)

Management by objectives (MBO ) is a process of defining objectives, within an organization, so that management and employees agree to the objectives and understand what they need to do in order to achieve them. The term “Management by Objectives" was first popularized by Peter Druker in his book The Practice of Management in 1954.

1Dr. Rakshit A S (drrakshit.blogspot.in)

http://en.wikipedia.org/wiki/Goal

http://en.wikipedia.org/wiki/Management

http://en.wikipedia.org/wiki/Employee

Terms - Aim, Goals and Objectives

• Aim– Usually the long term vision. – Sometimes called ‘mission’.

• Goals:– Broad statements of intent, direction & purpose.

• Objectives:– Statements that describe specific things to Be accomplished to achieve the goals

– Foundation of Management by Objectives


Concept of MBO• The KEY to MBO is that it

– is a participative process, actively involving of members at every organizational level.

• When employees themselves are involved with the goal setting and choosing the course of action to be followed by them, they are more likely to fulfil their responsibilities

– focuses on ‘What to achieve, not How to achieve’.• Other Names -

– 'Management by Results' (MBR)– 'Goal Management' – 'Planning by Objectives' (PBO)– 'Results Management'– 'Joint Target Setting'– 'Work Planning and Review'


Features of MBO• MBO is a Philosophy

– Reflects a Proactive way of managing that is,• More than a set of techniques• Results oriented• Emphasizes accomplishments rather than inputs• rests on a concept of human action, behaviour, and motivation

• MBO is an Approach– Approach refers to various tools or techniques used in order to

achieve the objectives. – So, it’s a sophisticated tool which works in an integrated way.


Four Basic Principles of MBO

• Unity of management action is more likely to occur when there is pursuit of a common objective.

• The greater the focus on results on a time scale, the greater likelihood of achieving them.

• The greater the participation in setting meaningful work with accountable results, the greater the motivation for completing it.

• Progress can only be measured to evaluate and so there can always be scope for improvement.


MBO Process A process consisting of a series of interdependent and interrelated steps:

• Formation of clear, concise statements of objectives

• The development of realistic action plans for their attainment

• The systematic monitoring and measuring of performance and achievement, and

• The taking of corrective actions necessary to achieve the planned results.

• The employee is rewarded on the basis of goal attainment.



The SMART Objectives• Is it specific? Does it clearly talk about the thing that

all the staff member and the supervisor know exactly what output they are talking about?

• Is it measurable? Can the output be quantified?• Is it appropriate? Does the staff member have the

power to accomplish the task?• Is it realistic? Based upon experience & data, can the

output be achieved in the allotted time with a given amount of resources?

• Is it time-bound? Is a specific, reasonable amount of time specified to accomplish each objective?


Progress, Evaluation & Reward

• Preliminary evaluation may call for adjusting objectives.• Performance evaluations focus on how well employees

accomplish their specific unit objectives (not artificial criteria such as appearance, being on time, cooperativeness).

• Provide the basis for identifying more effective job behaviour

• The reasons for both success and failure are explored.• The employee is rewarded on the basis of goal

attainment.


MBO Process

Sta rting theMB O

Program

Esta blishm ent ofO rga niza tiona l

G oa ls a ndPla ns

Collabora tiveG oa l Settinga nd P la nning

Resources

Counseling a ndCoa ching

Verif ia bleG oa ls a nd

Clea r P la ns

Meeting

Com m unictingO rga niza tiona l G oa ls

a nd P la ns

PeriodicReview

E va lua tion

RewardReward


Advantages of the MBO Process• Clarity of goals and Organisational Action• Motivation – Involving employees in the whole process of

goal setting and increasing employee empowerment. This increases employee job satisfaction and commitment.

• Subordinates tend to have a higher commitment to objectives they set for themselves than those imposed on them by another person.

• Managers can ensure that objectives of the subordinates are linked to the organization's objectives.

• It instils the result oriented attitude in employees


Advantages of the MBO Process• Better communication and coordination – Frequent reviews and

interactions between superiors and subordinates helps to maintain harmonious relationships within the organization and also to solve many problems.

• It develops managerial self-control.• It’s a universal tool for management & includes many sub-systems

of management including; planning, budgeting, resource allocation, design of organizational structure, performance appraisal.

• It covers both economic & human aspects of management to gather.

• Periodic review and evaluation of progress helps to take necessary remedial actions after preliminary evaluation.


Limitations of MBO• Incomplete Understanding of MBO Philosophy

– MBO appears to be simple to teach but it is not so easy to put in practice.

• Difficulty in Setting Objectives• Quantitative Bias

– trying to measure non quantifiable objectives and emphasizing numbers only leads to downgrade important goals that are difficult to state in quantitative terms or end-results.

• Poor Planning and Lack of Guidelines• Inflexibility

– goal that has been made obsolete by revised corporate objectives, changed premises, or modified policies.


Limitations of MBO• Increases Pressure and Frustration on the Subordinates

– It leads to a tug-of-war in which the subordinate tries to set the lowest possible targets and superior the highest

• Short Term Nature of Goals– Strategic goals are displaced by operational goals.

• Time Consuming– Plenty of time is required to carefully set objectives at all levels of

the organization.– formal, periodic progress and final review sessions also consume

time• Increases Paperwork

– circulars, instruction booklets, training manuals, questionnaires, performance data, and reports.

• Lack of Follow up – Timely follow-up is must.


Conclusion

• MBO has achieved considerable acceptance, even though it requires a great deal of time and energy, because it appears to result in improved performance and higher degree of morale.

• Today, MBO is used not only as a technique of goal setting but also as a total system of planning, motivation, performance appraisal and self-control.


Dr. Rakshit A S (drrakshit.blogspot.in) 16

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Management by Objectives (MBO)