Management by Objectives (MBO) is a strategic approach to enhance the performance of an organization. It is a process where the goals of the organization are defined and conveyed by the management to the members of the organization with the intention to achieve each objective. Management by exception is a business management strategy that states that managers and supervisors should examine, investigate and develop solutions for only those issues where there is a deviation from set standards, norms, business practices, or any other financial goals like profits deviation, quality issues, infrastructure issues, etc. instead of examining and dealing with each routine business activities.

1. MANAGEMENT BY OBJECTIVES
• MEANING
• OBJECTIVE
• PROCESS

2. MBO: MEANING
• Management by Objectives (MBO) is a strategic approach to
enhance the performance of an organization.
• It is a process where the goals of the organization are defined
and conveyed by the management to the members of
the organization with the intention to achieve each objective.

3. CONT…
• An important step in the MBO approach is the monitoring and
evaluation of the performance and progress of each
employee against the established objectives.
• Ideally, if the employees themselves are involved in setting
goals and deciding their course of action, they are more likely
to fulfil their obligations.

4. STEPS IN MANAGEMENT BY OBJECTIVES PROCESS
• Define organization goals
• Define employee objectives
• Continuous monitoring performance and progress
• Performance evaluation
• Providing feedback
• Performance appraisal

5. DEFINE ORGANIZATIONAL GOAL
• Setting objectives is not only critical to the success of any
company, but it also serves a variety of purposes.
• It needs to include several different types of managers in
setting goals.
• The objectives set by the supervisors are provisional, based
on an interpretation and evaluation of what the company can
and should achieve within a specified time.

6. DEFINE EMPLOYEE OBJECTIVES
• Once the employees are briefed about the general objectives,
plan, and the strategies to follow, the managers can start
working with their subordinates on establishing their personal
objectives.
• This will be a one-on-one discussion where the subordinates
will let the managers know about their targets and which
goals they can accomplish within a specific time and with
what resources.
• They can then share some tentative thoughts about which
goals the organization or department can find feasible.

7. CONTINUOUS MONITORING PERFORMANCE AND PROGRESS
• Though the management by objectives approach is necessary
for increasing the effectiveness of managers.
• It is equally essential for monitoring the performance and
progress of each employee in the organization.

8. PERFORMANCE EVALUATION & FEEDBACK
• Within the MBO framework, the performance review is
achieved by the participation of the managers concerned.
• In the management by objectives approach, the most
essential step is the continuous feedback on the results and
objectives, as it enables the employees to track and make
corrections to their actions.
• The ongoing feedback is complemented by frequent formal
evaluation meetings in which superiors and subordinates may
discuss progress towards objectives, leading to more
feedback.

9. BENEFITS OF MBO
 Management by objectives helps employees appreciate their
on-the-job roles and responsibilities.
 The key Result Areas planned are specific to each employee,
depending on their interest, educational qualification, and
specialization.
 The MBO approach usually results in better teamwork and
communication.

10. CONT…
 It provides the employees with a clear understanding of what
is expected of them. The supervisors set goals for every
member of the team, and every employee is provided with a
list of unique tasks.
 Every employee is assigned unique goals. Hence, each
employee feels indispensable to the organization and
eventually develops a sense of loyalty to the organization.
 Managers help ensure that subordinates’ goals are related to
the objectives of the organization.

11. LIMITATIONS OF MBO
 Management by objectives often ignores the organization’s
existing ethos and working conditions.
 More emphasis is given on goals and targets. The managers
put constant pressure on the employees to accomplish their
goals and forget about the use of MBO for involvement,
willingness to contribute, and growth of management.
 The managers sometimes over-emphasize the target setting,
as compared to operational issues, as a generator of success.

12. CONT…
 The MBO approach does not emphasize the significance of
the context wherein the goals are set. The context
encompasses everything from resource availability and
efficiency to relative buy-in from the leadership and
stakeholders.
 Finally, there is a tendency for many managers to see
management by objectives as a total system that can handle
all management issues once installed. The overdependence
may impose problems on the MBO system that it is not
prepared to tackle, and that frustrates any potentially positive
effects on the issues it is supposed to deal with.

13. MANAGEMENT BY EXCEPTION (MBE)
• Management by exception is a business management strategy
that states that managers and supervisors should examine,
investigate and develop solutions for only those issues where
there is a deviation from
• set standards,
• norms,
• business practices,
• or any other financial goals like profits deviation, quality
issues, infrastructure issues, etc. instead of examining and
dealing with each routine business activities.

14. CONT…
• This concept is a practice followed in the workplace where the
employees are free to take certain decisions on their own
which does not require the involvement of managers or
seniors at higher levels.
• This provides more workplace flexibility and creates a sense of
belonging and accountability.
• There are fixed standards based on which this process can be
followed.

15. PRINCIPLES
 Delegation of authority – The concept is based on the
approach of authority delegation to a certain level of
employees so that they can handle them independently and
take their own decisions. This leads to division of
responsibility and increase accountability.
 Systematic approach – The method or approach followed in
the process should be based on certain steps and there must
be methods to keep track of deviations. The persons
responsible to take decisions should be able to identify
problems and devise solutions for the same.

16. CONT…
 Professionalism – For the purpose of delegation of work
suitable training is provided to the concerned people so that
they are able to handle the problems efficiently. This ensures
increase in productivity and professional enhancement. This
also leads to setting higher standards with increased potential
to achieve them.
 Sense of leadership – This kind of workplace practice
promotes a sense of leadership and responsibility towards the
organization. The higher level professionals can concentrate
of complex business issues while others can concentrate of
achieving daily objectives.

17. CONT…
 Teamwork – It also helps in teamwork and partnership where
the employees of all levels learn to adjust with each other
while solving problems. This increases the professional
standards and promotes peace and cooperation.
 Analysis – Since the process requires the decision makers to
analyse and identify problems and devise solutions, it requires
skill, experience and knowledge to do so. The capability to do
such analysis is extremely important to achieve the objective
of the business.

18. LIMITATIONS
• Less focus on preventative measures
Because management by exception relies on reacting to a
problem, it can neglect to put preventative measures in place.
This means that a company may be more prepared to handle a
problem instead of keeping it from happening in the first place.
However, many companies keep this in mind while using
management by exception practices and take extra care to both
react to and prevent problems.

19. REQUIRES CLOSE MONITORING
In order to work efficiently, companies that implement management by
exception need to establish close monitoring practices ensuring professionals
alert the managers when a problem arises. Because these managers do not
focus on daily operations, they rely on other professionals to keep them
informed about any issues.
However, most companies that use management by exception train their
employees to use strong observation skills and hire responsible professionals
to keep the management system efficient and accurate.

20. REQUIRES ADVANCED PROBLEM-SOLVING SKILLS
Management by exception also requires all leaders within a
company to have exceptional problem-solving skills. This helps
them quickly address issues and find creative solutions. While
this is an advanced skill, most management professionals are
trained in problem-solving regardless of the company's
management method.