5. Agenda
Introduction
Definition
Objectives
MBO principles
Smart goal
The MBO process
tools
Advantage
Disadvantage
Problem & Limitation
Obsolete
Conclusion
6. Introduction
Popular Technique of Appraisal of managerial
performance.
Introduced by Peter Druker’s book, “THE PRACTICE
OF MANAGEMENT”, Published in 1954.
Usually been design and used with the business &
Industries.
It is the most widely accepted philosophy of
management today. It is a demanding and rewarding
style of management.
A process whereby superiors & subordinates
jointly identify the common objectives to make
best of organizational resources.
8. DEFINITION OF MBO
Management Model based on Objectives that are agreed
on between Management and Employees
The aim is to reach overall Strategic Goals for the
Organization but also Individual Goals for the Employees
This Model integrates Employees in the planning process
what leads to Participation, Motivation and Commitment
9. DEFINITION OF MBO
Employees measure their dailyWork on their individual
goals and act in best interest of the company
Sum of all individual goals forms the overall goal of the
company
10. Objectives
To Measure and judge performance.
To relate individual performance to
organizational goals
To clarify both the job to be done and the
expectations of accomplishment.
To foster the increasing competence & growth
of the subordinates.
To enhance communication between superior
& subordinates.
To serve as a basis for judgment about salary &
Promotion.
To stimulate the subordinate‘s motivation.
To serve as a device for organizational control
& Integration.
11. Balance Between
Management
Employee
Empowerment
The balance between management and
employee empowerment has to be struck, not
by thinkers, but by practicing managers.
Turning their aims into successful actions,
forces managers to master four basic
operations:
setting objectives,
organizing the group,
motivating and communicating,
measuring performance, and
developing people, including yourself.
12. MBO Principles
Setting Goals Together
Periodically Evaluation
Support from Superior
Focus on Goals, not on Methodologies
MBO
PRINCIPLES
14. How to be a smart?
Specific
Measurable
Achievable
Relevant
Time-based
15. SMART G O A L STEP-1
Get SPECIFIC and clear
about what you want to
achieve!
I want to be
rich
16. SMART G O A L STEP-2
Make your goal
MEASURABLE-quantify
what you want !
I want to have
One Billion
Dollars
17. SMART G O A L STEP-3
Make your goal
ACHIEVABLE within
your resources!
I work hard
as hell
18. Make your goal
RELEVANT–Is it
worthwhile?
SMART G O A L STEP-4
I want to
keep her
happy
19. SMART G O A L STEP-5
Your goal needs to be
TIMED-Set a start and a
finish date!
One year till
the first
million
20. SMART G O A L Finally
Work
Specific
Measurable
Achievable Have
S
U
C
E
S
S
Relevant
Time-based
21. Central
Goal Setting
The MBO’s
Process
Individual
Goal Setting
Progress
Monitored
Performance
appraisal
The MBO’s Process
Next MBO
Operating
period
Achievers
Rewarded
28. KEY PERFORMANCE INDICATORS
Organizational Goals =
Organizational KPI
(e.g. number of complaints in the end of the week)
Individual Goal =
Individual KPI
(e.g. weekly % difference in complaints handled that result in
satisfied customers vs. unsatisfied customers)
29. 8 Key Result Areas
Where Managers Must Pursue Clear Objectives
Marketing
Innovation
Human organization
Financial resources
Physical resources
productivity
Social responsibility
Profit requirement
30. ADVANTAGES OF MBO
• Improves employee motivation
• Improves communication in the
organization
• Flags up and highlights training needs
required to achieve objectives
• Improves overall performance and
efficiency
31. DISADVANTAGES OF MBO
Requires the cooperation of all employees
to succeed
Can be bureaucratic and time consuming
(meetings, feedback)
Can encourage short-term rather a more
focused long-term growth
Setting targets for certain specialized
employees may be difficult
32. PROBLEMS AND LIMITATIONS OF MBO
Difficulty of setting goals
Failure to teach MBO philosophy
Problems in objective setting
Emphasis on short-term objectives
Inflexibility
Frustration
34. High Volatility in Markets
and Trends
YES! BUT WHY?
Conservative Individual
Goals
Having productivity
measured is hard
Non Collaborative Goals =
Inefficiency
35. Conclusion
• MBO is used for different purposes. Some organizations
use MBO to clarify the employee’s job , others use it to
motivate employees while still other organizations apply
MBO as a performance control mechanism to check
performance. In this way MBO process is directly related
to all the major functions of management.
Thus, MBO is a result-oriented and rational philosophy.
It permits management by results in place of
management by crisis. Many organizations both in the
private sector and the public sector have benefited a lot
through the application of MBO.