According to GEORGE ODIORN “ MBO is a process whereby the
superior and subordinate managers of an organisation jointly
identify its common goals , define each individuals major areas of
responsibility in terms of results expected of him , and use these
measures as guides for operating the unit and assessing the
contribution of each of its members ”
CHARACTERISTICS OF MBO
1) Goal Orientation
3) Key Result Area (KRAs)
4) Systems Approach
5) Optimum Utilisation
6) Dynamic Concept
8) Multiplicity of Accountability
9) Total Approach
TYPES OF OBJECTIVES
1) External Objectives
2) Internal Objectives
3) Qualitative objectives
d) Social Objectives
e) Personal Objectives
4) Quantitative Objectives
a) Profit Objective
b) Market share
BENEFITS OF MBO
1) Improved Planning
3) Motivation and Commitment
4) Accurate Appraisals
6) Organizational change and Development
ADVANTAGES OF MBO
Since Management by objectives (MBO) is a result-oriented process and focuses on setting and controlling
goals, if encourages managers to do detailed planning.
2. Both the manager and the subordinates know what is expected of them and hence there is no role
ambiguity or confusion.
3. The managers are required to establish measurable targets and standards of performance and priorities
for these targets. In addition, the responsibilities and authority of the personnel is clearly established.
4. It makes individuals more aware of the company goals. Most often the subordinates are concerned with
their own objectives and the environment surrounding them. But with MBO, the subordinates feel proud
of being involved in the organizational goals. This improves their morale and commitment.
5. Management by objectives (MBO) often highlights the area in which the employees need further
training, leading to career development.
6. The system of periodic evaluation lets the subordinates know how well they are doing. Since MBO puts
strong emphasis on quantifiable objectives , the measurement and appraisal can be more objective,
specific and equitable.
7. It improves communication between management and subordinates.
DISADVANTAGES OF MBO
1. MBO can only succeed if it has the complete support of the top management.
2. Management by Objectives (MBO) may be resented by subordinates. They may be under pressure to
get along with the management when setting goals and objectives and these goals may be set
unrealistically high. This may lower their morale and they may become suspicious about the philosophy
They may seriously believe that MBO is just another of the management’s ploys to make the subordinates
work harder and become more dedicated and involved. The emphasis in the MBO system is on quantifying
the goals and objectives. It does not leave any ground for subjective goals. Some areas are difficult to
quantify and even more difficult to evaluate.
3. There is considerable paperwork involved and it takes too much of the manager’s time. Too many
meetings and too many reports add to the manager’s responsibility and burden. Some managers may
resist the program because of this increased paperwork
DISADVANTAGES ( CONTD )
4. The emphasis is more on short-term goals. Since the goals are mostly quantitative in nature, it is difficult
to do long-range planning because all the variables affecting the process of planning cannot be accurately
forecast due to the constantly changing socio-economic and technological environment which affect the
stability of goals.
5. Most managers may not be sufficiently skilled in interpersonal interaction such as coaching and
counseling, which is extensively required.
6. The integration of MBO system with other systems such as forecasting and budgeting etc., is very poor.
This makes the overall functioning of all systems mare difficult.
7. Group goal achievement is more difficult. When the goals of one deportment depend on the goals of
another department, cohesion is more difficult to obtain. For example, the production department cannot
produce a set quota if it is not sufficiently supplied with raw materials and personne
SUGGESTIONS FOR IMPROVING THE
EFFECTIVENESS OF MBO
1. It is important to secure top management support and commitment. Without this commitment, MBO
con never really be a success. The top managers and their subordinates should all consider themselves as
players of the some team. This means that the superiors must be willing to relinquish and shore the
necessary authority with subordinates.
2. The objectives should be clearly formulated, should be realistic and achievable. For example, it is not
realistic for the R&D department of on organization to set a goal of, say, 10 inventions per year. These goals
should be set with the participation of the subordinates. They must be properly communicated, clearly
understood and accepted by all. MBO works best when goals are accepted.
3. MBO should be on overall philosophy of management and the entire organization, rather than simply a
divisional process or a performance appraisal technique. MBO is a major undertaking and should replace
old systems rather than just being added to it. Felix M.Lopex has observed, when an organization is
managed by objectives, it becomes performance oriented. It grows and it develops and it becomes socially
• 4. The goals must be continuously reviewed and modified, as the changed conditions require. The
review technique should be such that any deviations are caught early and corrected.
• 5. All personnel involved should be given formal training in understanding the basics as well as the
contents of the programme. Such education should include as to how to set goals, the methods to
achieve these goals, methods of reviews and evaluation of performance and provisions to include any
feedback that may be given.
• 6. Management by Objectives (MBO) system is a major undertaking based upon sound organizational
and psychological principles. Hence it should be totally accepted as a style of managing and should be
totally synthesized with the organizational climate. All personnel involved must have a clear
understanding of their role authority and their expectations. The system should be absorbed totally by
all members of the organization.