• A comprehensive managerial system that
integrates many key managerial activities in a
systematic manner, consciously directed
towards the effective & efficient achievement
of organizational objectives. (Haro ld Ko o ntz )
• A result centered, non-specialist, operational
managerial process for the effective
utilization of material, physical & human
resources of the organization by integrating
the individual with the organization &
organization with the environment. (SK
• A process whereby the superior &
subordinate managers of an
organization jointly identify its
common goals, define each
individual's major areas of
responsibility in terms of the results
expected of him, and use these
measures as guides for operating
the unit and assessing the
contribution of each of its members.
( George S. Odiorne, 1965).
Objectives of MBO
1. To measure and judge performance
2. To relate individual performance to organizational goals
3. To clarify both the job to be done and the expectations
4. To foster the increasing competence & growth of the
5. To enhance communication between superior &
6. To serve as a basis for judgments about salary &
7. To stimulate the subordinates’ motivation
8. To serve as a device for organizational control &
Characteristics of MBO
1. MBO is an approach & philosophy for management &
not merely a technique.
2. MBO is likely to affect every management technique.
3. MBO employs several technique but it is not merely the
sum total of these techniques. It is a way of thinking
4. MBO is bound to have some relationship with every
management technique. Certain degree of overlapping
5. MBO provides stimulus for the introduction of new
techniques of management & enhances the relevance
& utility of the existing ones.
6. The basic emphasis of MBO is an objectives.
MBO is also concerned with determining what
these results & resources should be. Thus MBO
tries to match objectives & resources.
7. MBO is characterized by the participation
concerned managers in objective setting, the
performance reviews, & his performance.
8. Periodic review of performance is an important
feature of MBO.
9. Objectives in MBO provide guidelines for
appropriate systems procedures.
Concepts of MBO
– Form a network of desired results and events
1. Time strategy
– Time strategy is the timetable for blending the
activities and operation of individual managers
to achieve long and short range set of results
1. Total management
– A formalized effort to involve and coordinated
the contribution of each individual manger
towards a common goal.
1. Individual commitment
Aspects of MBO
• Key result areas KRA
– Priority areas which can help in directing the
limited resources towards significant
f) Financial and physical resources
g)Mangers performance and development
• Importance of KRA’s
1. Indicates the areas where results are
2. KRA’s are identified at first and then specific
objectives are set for each KRA’s
3. It provides guidelines for objectives &
strategies & facilitate the pursuit process
• Objectives: log term- short term
– Visio nary o bje ctive s-Very long term goals
towards which the organization proposes to
– Attainable o bje ctive s -achieved in 5-10 years
– O pe ratio nalo bje ctive s -Short period
objectives which can be achieved in a time
period ranging from a few months to 3years
• Keys in objective
– Quantity (How much)?
– Quality (How well)?
– Cost (with what resources)?
– Time (how soon)?
• Action planning
1.Decisions on appropriate strategies for
achieving the agreed objectives.
2.Assignment of responsibility for the
achievement of an objective.
3.Allocation of resources, people, materials,
facilities, funds, etc., required to achieve the
4.Programming of specific activities on the
basis of the best possible alternative for the
effective use of allocated resources towards
achievement of agreed objectives.
• Performance appraisal
1. Prepare commitments
2. Implement schedule activities
3. Progress reviews
4. Plan and schedule activities
5. Annual reviews
1. Focus on performance,
2. Emphasis on improvement
3. Future orientation
4. Frequent reviews
5. Self appraisal
Training & Development
Technical skill: Proficient use of knowledge in specific
Behavioural skill: Utilization of knowledge
&understanding of people as they conduct themselves
Conceptual skill: Ability to utilize existing knowledge in
order to perceive additional knowledge.
Implementing skill: Ability to get work done
Economic business skill: Utilization of knowledge &
understanding of the business enterprise.
Managerial skill: Effective utilization of planning,
directing & controlling enterprise towards profit &
Implementation of MBO
1. Establish clear, mutually understood and
agreed upon goals.
2. Establish a plan of action detailing how
the goals are to be achieved.
3. Set up specific rewards to be associated
with goal achievement
4. Set up and conduct periodic reviews
designed to discuss progress towards
• Stimulating the motivation of employees.
• Sharpened accountability
• Vehicle for delegation of authority
• Promote interpersonal relationship
• Welding technique that joins person-
centred management to result-centred
• Lack of support from top management.
• Resentful attitude of subordinates.
• Difficulties in quantifying the goals and
• Costly and time consuming.
• Emphasis on short term goals.
• Lack of adequate skill and training.
• Poor integration.
• Lack of follow up.
Ways to improve
• Top management, support and
• Clear goal setting.
• Participating in goal setting.
• Overall philosophy of management.
• Decentralization of authority.
• Measure & judge the performance of staffs
• Correlate individual performance to organizational
• Clarifies the job responsibilities expected frm the
• Fosters the increasing competencies & growth of
• Provides a data base for estimating the salary &
• Stimulate the subordinates motivations
• Helps in organization work control & integrating
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