Cascading of organizational vision, goals and objectivesSpecific objectives for each memberParticipative decision makingExplicit time periodPerformance evaluation and feedback
Management by objectives (MBO), also knownas management by results (MBR), is a processof defining objectives within an organization sothat management and employees agree to theobjectives and understand what they need to doin the organization in order to achieve them.MANAGEMENT BYOBJECTIVES
Main ConceptThe core aim of management by objectives is thealignment of company goals and subordinateobjectives properly, so everyone in the organizationworks towards achieving the same organizational goal.MBO reflects a proactive way of managing that is: result oriented emphasize accomplishments rather than inputs encourages participation at all levels of an organization
Essence of MBO: Participative goal setting choosing course of actions decision makingAn important part of the MBO is the measurement andthe comparison of the employee’s actual performancewith the standards set.
Routine objectives Innovation objectives Improvement objectivesThe objectives must be focused on result, noton activity.Types Of Objectives:
Smart ObjectivesEvery objective must meet these criteria:
Domains and levelsObjectives can be set in all domains of activitiesproduction services sales R&DHR financeinformationsystemsSome objectives are collective, for a whole department or thewhole company, others can be individualized
ADVANTAGES OF MBO Motivation – Involving employees in the whole process ofgoal setting increases employee empowerment, jobsatisfaction and commitment. The employees are clear as to what is expected from them. Better communication and Coordination – Frequentreviews and interactions between superiors andsubordinates helps to maintain harmonious relationshipswithin the enterprise and also solves many problems. The MBO Process sets a benchmark for every employee.
DISADVANTAGES OFMBO It over-emphasizes the outcomes over the procedure. It sometimes ignores the prevailing culture andworking conditions of the organization. It is difficult to appraise and identify potential. MBOonly deals with performance on the present job. MBO is a time consuming process.
Where to Use MBO The MBO process is appropriate for knowledge-based enterprises when your staff is competent. It is appropriate in situations where you wish tobuild employees management and self-leadershipskills and tap their creativity and initiative. Management by Objectives (MBO) is also used bychief executives of multinational corporations(MNCs) for their country managers abroad.
MBO at Hewlett-Packard MBO received a boost when it was declared an integralpart of “The HP Way”, the widely acclaimed managementstyle of Hewlett-Packard, a computer company. At every level within Hewlett-Packard, managers had todevelop objectives and integrate them with those of othermanagers and of the company as a whole. Written plans were produced that showed what peopleneeded to achieve if they were to reach those objectives. The plans were then shared with others in thecorporation and coordinated.
MBO urged that the planning process, traditionallydone by high-level managers, should be delegated toall members of the organization. The plan, when it finally emerged, would then have thecommitment of all of them. As the plan is implemented, MBO demands that theorganization monitor a range of performancemeasures, designed to help it stay on the right pathtowards its objectives. The plan must be modified when this monitoringsuggest that it’s no longer leading to desired objective.MBO at Hewlett-Packard
MBO at Hewlett-Packard Bill Packard, one of the two founders ofHewlett-Packard, said of MBO:“No operating policy has contributed moreto Hewlett-Packards success……Management by objectives refers to asystem in which overall objectives areclearly stated and agreed upon, and whichgives people the flexibility to work towardthose goals in ways they determine best fortheir own areas of responsibility.”