ManagementBy Objectives (MBO)Management by objectives (MBO) is a process ofdefining objectives within an organization sothat management and employees agree to the objectives andunderstand what they need to do in the organization in order toachieve them.The term "management by objectives" was first popularizedby Peter Drucker in his 1954 book The Practice of Management.
ManagementBy Objectives (MBO)The concept of MBO is closely connected with the concept ofplanning. The process of planning implies the existence ofobjectives and is used as a tool/technique for achieving theobjectives.Modern managements are rightly described as Management byObjectives (MBO). It suggests that objectives should not beimposed on subordinates but should be decided collectively by aconcerned with the management. This gives popular support tothem and the achievement of such objectives becomes easy andquick.
ManagementBy Objectives (MBO)Management by Objectives (MBO) is the most widely acceptedphilosophy of management today. It is a demanding and rewardingstyle of management. It concentrates attention on theaccomplishment of objectives through participation of allconcerned persons, i.e., through team spirit.
ManagementBy Objectives (MBO)MBO is based on the assumption that people perform better whenthey know what is expected of them and can relate their personalgoals to organizational objectives. Superior subordinateparticipation, joint goal setting and support and encouragementfrom superior to subordinates are the basic features of MBO.It is a result-oriented philosophy and offers many advantages suchas employee motivation, high morale, effective and purposefulleadership and clear objectives before all concerned persons.
ManagementBy Objectives (MBO) DefinitionAccording to George Odiome, MBO is "a process whereby superiorand subordinate managers of an Organization jointly define itscommon goals, define each individuals major areas ofresponsibility in terms of results expected of him and use thesemeasures as guides for operating the unit and assessing thecontribution of each of its members."According to John Humble, MBO is "a dynamic system which seeksto integrate the companys needs to clarify and achieve its profitsand growth goals with the managers need to contribute anddevelop himself. It is a demanding and rewarding style of managinga business."
Features ofManagement By Objectives (MBO) :Superior-subordinate participation: MBO requires the superiorand the subordinate to recognize that the development ofobjectives is a joint project/activity. They must be jointly agree andwrite out their duties and areas of responsibility in their respectivejobs.Joint goal-setting: MBO emphasizes joint goal-setting that aretangible, verifiable and measurable. The subordinate inconsultation with his superior sets his own short-term goals.However, it is examined both by the superior and the subordinatethat goals are realistic and attainable. In brief, the goals are to bedecided jointly through the participation of all.
Features ofManagement By Objectives (MBO) :Joint decision on methodology: MBO focuses special attention onwhat must be accomplished (goals) rather than how it is to beaccomplished (methods). The superior and the subordinatemutually devise methodology to be followed in the attainment ofobjectives. They also mutually set standards and establish normsfor evaluating performance.Makes way to attain maximum result: MBO is a systematic andrational technique that allows management to attain maximumresults from available resources by focusing on attainable goals. Itpermits lot of freedom to subordinate to make creative decisionson his own. This motivates subordinates and ensures goodperformance from them.
Features ofManagement By Objectives (MBO) :Support from superior: When the subordinate makes efforts toachieve his goals, superiors helping hand is always available. Thesuperior acts as a coach and provides his valuable advice andguidance to the subordinate. This is how MBO facilitates effectivecommunication between superior and subordinates for achievingthe objectives/targets set.
Steps inManagement By Objectives Planning :Goal setting: The first phase in the MBO process is to define theorganizational objectives. These are determined by the topmanagement and usually in consultation with other managers.Once these goals are established, they should be made known toall the members. In setting objectives, it is necessary to identify"Key-Result Areas (KRA).Manager-Subordinate involvement: After the organizational goalsare defined, the subordinates work with the managers todetermine their individual goals. In this way, everyone getsinvolved in the goal setting.
Steps inManagement By Objectives Planning :Matching goals and resources: Management must ensure that thesubordinates are provided with necessary tools and materials toachieve these goals. Allocation of resources should also be done inconsultation with the subordinates.Implementation of plan: After objectives are established andresources are allocated, the subordinates can implement the plan.If any guidance or clarification is required, they can contact theirsuperiors.
Steps inManagement By Objectives Planning :Review and appraisal of performance: This step involves periodicreview of progress between manager and the subordinates. Suchreviews would determine if the progress is satisfactory or thesubordinate is facing some problems. Performance appraisal atthese reviews should be conducted, based on fair and measurablestandards.
Benefits orAdvantages of MBO Process:1. Better utilization of resources: In MBO, there is optimumutilization of physical, financial and human resources for achievingthe objectives.2. Development of personnel: MBO helps to train and develop thesubordinate managers. It improves their skills in planning, decisionmaking, controlling, directing, leadership, etc. So these managersare ready for promotion to higher posts.3. Makes planning effective: In MBO, the objectives are very clear.So, feasible plans can be made for achieving these objectives.Therefore, MBO makes planning effective.
Benefits orAdvantages of MBO Process:4. Better team work: The superior and subordinate managers worktogether for fixing objectives and monitoring the performance. Thisoverall improves their relationship, and they work as a team.5. Concentration on key result areas: In MBO, objectives are fixedfor the Key Result Areas (KRAs). All the plans are made for theKRAs. Therefore, wasteful activities are avoided.6. Objective evaluation: In MBO, the objectives are tangible andmeasurable. The actual performance of the subordinate can beaccurately compared with the objectives. So, an objectiveevaluation is possible without any favor to anyone.
Benefits orAdvantages of MBO Process:7. Result oriented: MBO is a result oriented. It gives moreimportance to the result i.e. achieving of objectives. It gives lessimportance to activities and methods. In fact, MBO is alsocalled Management By Results.8. Sound organizational structure: In MBO system,the organizational structure is very sound. This is because it isperiodically reviewed, and necessary changes are made to suit theneeds of the company.