Management by Objectives (MBO) is a management system where each member participates in setting objectives. The process of MBO involves defining organizational objectives and goals for each section. It then sets subordinates' objectives, matches resources to objectives, and has periodic review meetings. MBO aims to combine long-term goals with short-term goals through participation in objective setting at all levels, but it can be time-consuming and fail to explain its philosophy clearly. Effective objectives should be specific, attainable, innovative, and ranked by importance when set according to MBO.

1. MANAGEMENT BY
OBJECTIVES - MBO

2. Objectives
• At the end of the chapter you will be
able to
– Know about Objectives, its features and
advantages
– Learn about MBO, its features, process
and benefits
– Have an idea about the problems of MBO
– Understand the guidelines for effective
objectives

3. Introduction
• Every institution or organization is
established for he purpose of
achieving some objectives
• The objective may differ from one
organization to another

4. Definition
• According to McFarland: Objectives
are the goals, aims or purposes that
organization wish to achieve over
varying periods of times
• Objectives may be defined as the
expectations of end results for which
an organization is established and
which it tries to achieve

5. Features of Objectives
• Each individual has objectives of his
own
• The objectives of any organization are
specially mentioned
• The objectives of any organization
should be clearly defined
• The whole organization is divided
into several sections

6. Features of Objectives
• The objectives of any organization
must conform to the general
needs of the public
• All the organizations have several
objectives at a time
• The objectives of any
organization may be changed in
due course
• The profit or sale may be expressed in

7. Advantages of
Objectives
• Unified planning
• Individual Motivation
• Co-ordination
• Control
• Basis for
Decentralization

8. MBO
• Management by Objectives (MBO) is
a management system in which
each member of the organization
effective participates and involves
himself
• Popularized in the USA by George
Odiorne

9. Feature of MBO
• MBO tries combine the long range
goals of organization with range
goals
• MBO’s emphasis is not only on
goals but also on effective
performance
• It increases the organizational of
achieving goals at all levels
• Aims at replacing the exercise of

10. Process of MBO
• Defining organizational objective
– States why the business is started and
exists
• Goal of each section
– Goals or objectives are expressed in a
meaningful manner
• Fixing key result areas
– Indicates strength of an organization

11. Process of MBO
• Setting subordinates objectives or
targets
– Subordinates are induced to set
the standards themselves giving an
opportunity
• Matching resources with objective
– The objectives are framed on the basis of
availability of resources
• Periodical review meetings
– The fixed standards may be changed in

12. Process of MBO
• Appraisal of activities
– At the end of the fixed period for
achieving the objectives, there should
be discussion between the superiors
and subordinates
• Reappraisal of objectives
– There are a lot of changes within the short
period in this dynamic world. So the top
management executive should review the
organization’s objectives to frame them
according to the changing situation

13. Benefits of MBO
• Helps the managers to understand
their role in the total organization
• Managers are involved in objectives
setting at the various levels of
management under MBO
• Manager recognizes the need for
planning
• Provides a foundation for
participative management
• A department does not work at

14. Benefits of MBO
• Systematic evaluation of the
performance
• Helps to take corrective
actions for performance
• Delegation of authority is done
• Motivates the workers
• A workers responsibility is fixed
through MBO
• Decision taken by the
management is very quickly

15. Limitations of MBO
• Fails to explain philosophy
• Time consuming
• Emphasizes on only the short-term
objectives
• Status setting of subordinates is not
possible
• Rigid
• Objectives are set without
considering the available
resources

16. Guidelines for
setting Effective
Objectives
• Objectives are framed only by the
participants who are responsible for
implementing them
• Objectives should be attainable ones
• Objectives should have the
characteristics of innovation
• Objectives should be ranked on
the basis of their importance
• Objectives should be simple, clearly
defined, specific and time bound

17. Summary
• Objectives are the goals, aims or
purposes that organization wish to
achieve over varying periods of times
• Management by Objectives (MBO) is
a management system in which
each member of the organization
effective participates and involves
himself

18. Summary
• Process of MBO involved defining the
organizational objectives, goals of
each section etc.
• MBO fails to explain philosophy
• MBO is rigid
• Objectives should be simple, clearly
defined, specific and time bound

19. End of Chapter 5
Objectives and MBO