MBO is a performance appraisal method where employee goals are aligned with organizational goals. It was first introduced by Peter Drucker in 1954. MBO involves setting specific, measurable goals for employees that are agreed upon by both managers and employees. Progress is monitored periodically and performance is evaluated and rewarded. Studies have found mixed results on MBO's effectiveness in improving productivity and satisfaction. When implemented properly with support from top management and clear goals, MBO can help organizations achieve objectives and motivate employees.

1. Presented By-
Deinichwa Dkhar
Ph.D Agricultural Extension
GKVK, UAS, BENGALURU
Dept. Agrl. Extension, GKVK, UAS, Bengaluru

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MBO

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4. MANAGEMENT BY OBJECTIVES (MBO)
• MBO – is a performance appraisal method
that determines how closely aligned an
employee’s goals are to organizational goals
• Term MBO – 1st used by Peter Drucker
(1954) as approach to planning in his book
‘The Practice of Management’.
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• Drucker believed MBO was not a cure-all, but a tool to be
utilized.
• It gives organizations a process
• Success of MBO is dependent on the
Support from top
management
Clearly outlined objectives
Trained managers who can
implement it

5. •Also referred to as Management by motivation,
Management by exception, Management by results
or Goal Management
•McGregor has specified two sets of assumptions on
motivation
1. Theory X : Believes, people have inherent disliking
to work. Managers have to strict.
2. Theory Y : If there are some people lack motivation,
it is due to their particular life experience or work
situation. Manager has to motivate and help
subordinates - MBO
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6. Definitions of MBO
• J. W. Humble
‒Dynamic system
‒Seeks to integrate the company’s needs to clarify and achieve its profit
and growth goals with the managers need to contribute and develop
himself
‒Demanding and rewarding style of managing a business
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• Koontz and O’Donnell
‒ Comprehensive managerial system
‒ Integrates many key managerial
activities in a systematic manner,
consciously directed towards the
effective and efficient achievement of
organizational objectives

7. Source: Robbins and DeCenzo, Fundamentals of Management, Sixth edition.
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8. Common Elements in MBO
1. Goal Specificity: Firstly specific goals are set which when achieved should
bring forward the results that support organizational, operational, tactical,
strategic objectives and plan.
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Clarity of goals –
With MBO, came the concept of SMART goals i.e. goals that are:
• Specific
• Measurable
• Attainable
• Realistic
• Time-bound

9. 2. Participative Decision Making: Goals when set by the participation
of subordinates allows them to achieve goals that are difficult.
However the goals set must be accepted by the subordinates as it
impacts positively from motivation to performance of the
employee.
3. Explicit Performance Period: Time period must be set so as to
ensure everything works out within the specified time frame.
Explicit time period also allows employees to carry out actions in a
proper planned manner so as to meet the deadline.
4. Performance Feedback: Periodic performance feedback helps
employees evaluate whether they are on target or off target so that
they can retain or adjust their behaviour. Their performance is
greatly affected in accordance to the quality of feedback provided.
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10. MBO PROCESS
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11. Steps in MBO (Also called MBO Process Cycle)
Set organizational
objectives
Set
Individual/
employee
objectives
Monitor
Performance
Evaluate
Performance
Reward
Employees
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MBO
Process

12. MBO Process….
1.In the first step, MBO emphasizes on goals that are measurable,
tangible and achievable keeping the organizational mission in mind.
2.The second step is to set and align these objectives with the
employees/individuals and the employees are allowed plan their
own objectives.
3.In the third step, the progress of the employees is monitored.
4.The fourth and fifth step is to evaluate and reward employees.
Honest feedback is given and also new strategies for goals not
achieved are established.
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13. Case studies
1. Kondrasuk, J. 1981. Studies in MBO Effectiveness. Acad.
Manage. Rev. 6(3): 419-430.
• He analyzed 185 studies for the effects of MBO on
employee productivity and/or job satisfaction
• Although the five well-controlled experiments leaned toward
finding MBO to be ineffective
• It appears a contingency approach to MBO is more
appropriate than a definitive affirmation or rejection of MBO
effectiveness.
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15. 2. Ofojebe, W. N. and Olibie, E. I. 2014. Management by Objectives
(MBO) Imperatives for Transforming Higher Education for a Globalised
World. J. Int. Educ. Leadership.4(2):1-12.
OBJECTIVES:
To determine the extent to which the stipulations and visions of
Management by Objectives (MBO) would be integrated in higher
education institutions in South Eastern Nigeria to enhance higher
education transformation in a globalised world.
METHODOLOGY:
• Four research questions and a null hypothesis guided the study
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16. IMPLICATIONS:
• Findings indicated that in the views of the respondents, various MBO
stipulations would be integrated in transforming the areas of
administration, curriculum, quality assurance and committee works as
well setting visions for future directions in the institutions.
• The acceptability of MBO was the same across the Universities, Colleges
and Polytechnics.
• This implies that it is imperative to integrate MBO and improve the
ability of the institutions to attain the objectives of higher education in
Nigeria as well as compete favourably with other higher education
institutions around the globe.
• It was thus recommended among other things that the management of
the institutions should adapt and integrate MBO principles and practices
so as to transform their institutions to compete favorably in a globalised
world.
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17. Advantages/ Benefits of MBO
a) Benefits for the Enterprise
•Emphasis on development and utilization of human
resources
•Facilitates the enterprise ability to organizational
change
•Structures, strategies and practices are well identified
•Planning more specific and purposeful
•Helps in clarification to the objectives
•Helps bringing coordination and cooperation
•Helps in managing centralized operations
•Applicable to any part of the organization
•Flexible in nature
•Voluntary commitments for performance
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18. b) Benefits for Superiors
•Provides participative atmosphere, helps the superior in
coaching the subordinates
•Stimulates motivating subordinates to give better
performance by committing themselves to achieve a set
of results agreed through participation
C) Benefits for employees
•Enhance employee job satisfaction
•Makes clear what is expected of the employees
•Provides measurable objectives that the employee is
expected to achieve
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19. Problems with MBO
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Distrust in MBO
Ideology
Time consuming
Resistance to Paper
Work
Interruptions
Unwanted Forced
Acceptance of the
System
Despondency and
Despair
Information
Constraints and
compulsion
Limits in
Measuring
Objective

20. Limitations in MBO
•The Puzzling Details
•Lack of Direction and
Guidance to Goal Setters
•Problems in Goal Setting
•Snag in Short- Goals
•Hazardous inflexibility
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21. Suggestions for Improving the Effectiveness of MBO
1. It is important to secure top management support and commitment.
2. The objectives should be clearly formulated, should be realistic
and achievable
3. MBO should be on overall philosophy of management and the entire
organization, rather than simply a divisional process or a
performance appraisal technique.
4. The goals must be continuously reviewed and modified, as the
changed conditions require.
5. All personnel involved should be given formal training in
understanding the basics as well as the contents of the programme.
6. Management by Objectives (MBO) system is a major undertaking
based upon sound organizational and psychological principles.
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22. Dept. Agrl. Extension, GKVK, UAS, Bengaluru
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24. References
• Karthikeyan, C. , Sendil Kumar, R. and Jaganathan, D. 2018. A Textbook on
Agricultural Extension Management. Atlantic Publishers, New Delhi. Pp 115-
120.
• Hayes, A., December 2020. Management by Objectives (MBO).
Investopedia.
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