Management by objectives


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Management by objectives

  2. 2. The term Management by objectives was first popularized by Peter Drucker in his 1954 book, “The Practice of Management”. MBO relies on the defining of objectives for each employee and then to compare and to direct their performance against the objectives which have been set. It aims to increase the performance of the organization by matching goals with the objectives. It focuses attention on individual achievement, motivates individual to accomplishment, and measures performance in terms of results.
  3. 3. MBO is a managerial method whereby the manager and employees identify major areas in which the employee will work, set standards for performance, and measure results against those standards. The results need to be achieved in a given time frame. The employee should first review the mission and objectives by analyzing what she does or what she thinks she should do, describing her job and clarifies its purpose. This helps to identify major job responsibilities.
  4. 4. The Five-Step MBO Process
  5. 5. GUIDELINES FOR SETTING OBJECTIVES: SMART Criteria - Specific, Measurable, Achievable, Relevant, Time-Specific Clear and Realistic Results oriented Established before the fact Verifiable Agreed both by managers and the associates Written Consistent with focus
  6. 6. COMMON ERRORS TO AVOID WHEN DEVELOPING OBJECTIVES: Too many objectives Too complex objectives Too high or too low standards Too long or too short time period Objectives that are not measurable Objectives for which the cost is too high
  7. 7. MANAGEMENT BY OBJECTIVES PRINCIPLES: Cascading of goals and objectives Specific objectives for each member Participative decision making Explicit time period Performance evaluation and feedback
  8. 8. ADVANTAGES OF MBO TO THE MANAGER: It includes a reservoir of personnel data and performance information for updating their files An indicator of personnel development needs within the organization A basis for promotion and compensation Better managerial planning and use of employee
  9. 9. ADVANTAGES OF MBO TO THE EMPLOYEE: The standard of evaluation is based in the characteristic of the person and the job He has as input and some control over his future He knows the standards by which he will be judged
  10. 10. The employee has knowledge of the manager’s goals, priorities and deadline He has a greater understanding of where he stands with the manager in relation to relative progress There is a basis for better evaluation than personality It stimulates higher individual performance and morale
  11. 11. WEAKNESSES OF MBO: Development of objectives can be time consuming, leaving both the managers and the employees less time in which to do their actual work The elaborate written goals, careful communication of goals, and detailed performance evaluation required in an MBO program increase the volume of paperwork in an organization.
  12. 12. Difficulty in setting agreed, harmonized goals Danger of inflexibility Individual over collective effort It underemphasizes the importance of the environment in which the goals are set It did not address the importance of successfully responding to obstacles and constraints as essential to reaching the goal
  13. 13. 8 Key Result Areas Where Managers Must Pursue Clear Objectives  Marketing  Innovation  Human organization  Financial resources  Physical resources  Productivity  Social responsibility  Profit requirements
  14. 14. 14 Making MBO Effective Top Management Training for MBO Formulating Clear Objectives Effective Feedback Encouraging the Subordinates
  15. 15. 15 ‘Management by Evaluation’ MBO is effective in public and private sectors because of 3 components – 1. Goal Setting 2. Participation 3. Feedback Each component contributes to gains in productivity.