Management By Objectives(MBO)PRESENTED BY :JYOTI BISHTROLL NO.:22
• In many organizations, its hard to remember a time whennon-managerial employees were kept in the dark aboutstrategy.• Were often reminded about the corporate missionstatement, we have strategy meetings where the "bigpicture" is revealed to us, and were even invited toparticipate in some business decisions. Were also keptaware of how our day-to-day activities contribute tocorporate goals.• This type of managing hasnt been around forever. Its anapproach called Management by Objectives (MBO), asystem that seeks to align employees objectives with theorganizations goals.
Introduction• Management by objectives (MBO), also known asmanagement by results (MBR), is a process ofdefining objectives within an organization sothat management and employees agree to the objectivesand understand what they need to do in the organizationin order to achieve them.• It is a systematic and organized approach that allowsmanagement to focus on achievable goals and to attainthe best possible results from available resources.• The concept of MBO is closely connected with theconcept of planning.
Introduction• This MBO concept was popularized by Peter Drucker. Itsuggests that objectives should not be imposed onsubordinates but should be decided collectively by aconcerned with the management. This gives popularsupport to them and the achievement of such objectivesbecomes easy and quick.• Itis themostwidely accepted philosophy ofmanagement today. Itisademanding andrewarding style ofmanagement.• Itisanapproach (toplanning) thathelps toovercome thebarriers. Itinvolves theestablishment ofgoals bymanagers andtheirsubordinates acting together.
Definition• “Managers should avoid the activity trap", getting soinvolved in their day to day activities that they forget theirmain purpose or objective. Instead of just a few top-managers, all managers should:participate in the strategic planning process, in order toimprove the implementability of the plan, and implementa range of performance systems, designed to help theorganization stay on the right track.”Peter Drucker• “A process whereby superior and subordinate managersof an Organization jointly define its commongoals, define each individuals major areas ofresponsibility in terms Of results expected of him anduse these measures as guides for operating the unit andassessing the contribution of each of its members."George Odiome
What is MBO?• Management by objectives (MBO) is a systematic andorganized approach that allows management to focus onachievable goals and to attain the best possible resultsfrom available resources. It aims to increaseorganizational performance by aligning goals andsubordinate objectives throughout the organization.Ideally, employees get strong input to identify theirobjectives, time lines for completion, etc. MBO includesongoing tracking and feedback in the process to reachobjectives.• Management by Objectives (MBO) was first outlined byPeter Drucker in 1954 in his book The Practice ofManagement. In the 90s, Peter Drucker himselfdecreased the significance of this organizationmanagement method, when he said: "Its just anothertool. It is not the great cure for managementinefficiency... Management by Objectives works if youknow the objectives, 90% of the time you dont."
MBO Principles• Cascading of organizational goals and objectives• Specific objectives for each member• Participative decision making• Explicit time period• Performance evaluation and feedback
What are Objectives?• Work Objectives• Targets• Tasks/Projects• Behavioral Parameter• Values• Performance Improvement• Developmental Objectives
MBO Process• Collectively fixingobjectives.• Collectively making aplan.• Subordinatesimplements the plan.• Collectivelymonitoringperformance.
Where to use MBO?• The MBO style is appropriate for knowledge-basedenterprises when your staff is competent.• It is appropriate in situations where you wish to buildemployees management and self-leadership skills andtap their creativity, tacit knowledge and initiative.• Management by Objectives (MBO) is also used by chiefexecutives of multinational corporations (MNCs) for theircountry managers abroad.
MBO is Action:MBO in action.. INTELA Managers Guide at Intel provides the following directions-• Start with a few well-chosen over riding objectives.• Set your subordinates objectives that fit in with youroverriding objectives.• Allow your subordinates to set their own key results toenable them to meet their objectives.
Advantages• Develops result-oriented philosophy• Formulation of dearer goals• Facilitates objective appraisal• Raises employee morale• Facilitates effective planning• Acts as motivational force• Facilitates effective control• Facilitates personal leadership
Limitation• Time-consuming• Reward-punishment approach• Increases paper-work• Creates organizational problems• Develops conflicting objectives• Problem of co-ordination• Lacks durability• Problems related to goal-setting• Lack of appreciation
Balance Between Management& Employee Empowerment• The balance between management and employeeempowerment has to be struck, not by thinkers, but bypracticing managers.• Turning their aims into successful actions, forcesmanagers to master five basic operations: setting objectives, organizing the group, motivating and communicating, measuring performance, and developing people, including yourself.
Goal Setting Theory• Goal setting: The first phase in the MBO process is todefine the organizational objectives. These aredetermined by the top management and usually inconsultation with other managers.• Once these goals are established, they should be madeknown to all the members. In setting objectives, it isnecessary to identify "Key-Result Areas (KRA).• Many Believe that everyone already sets goals but its nottrue. when groups do set goals, output invariablyincreases over groups that do not set goals.
MBO In Organization• Glaxo Laboratories (India) Limited, now GLINDIA.• Xerox• Hewlett-Packard (HP)• Springfield Remanufacturing corporation• DuPont
Conclusion:• Management by objectives has become de facto practicefor management in knowledge-based organizations suchas software development companies. The employeesare given sufficient responsibility and authority toachieve their individual objectives.“What is not measured cannot be managed.”