master of business administration presentation . School of Managment studies , CUSAT , Ernakulam

1. MBO
- MANAGEMENT BY OBJECTIVES
-Akhilesh Krishnan

2. What is MBO?
• Management by objectives (MBO) is a systematic and
organized approach that aims to increase organizational
performance by aligning goals and subordinate objectives
throughout the organization.
• It allows management to focus on achievable goals and to
attain the best possible results from available resources.
• One of the concepts of MBO is that all managers should
participate in the strategic planning process for better
implementation of plans. It includes on-going tracking and
feedback in the process to reach objectives.

3. Origin of the MBO Concept
• MBO was first outlined by Peter Drucker in 1954 in his
book The Practice of Management.
• Since the book introduced the concept, MBO has been
accepted and implemented in many businesses like xerox
, microsoft , du pont , google , intel , hp etc.

4. Core Concept of MBO
• According to Drucker managers should "avoid the activity
trap", that is, getting so involved in their day to day
activities that they forget their main purpose or objective.
• MBO is primarily a tool for strategic planning, employee
motivation, and performance enhancement. It intends to
improve communication between employees and
management, increase employee understanding of
company goals, focus employee efforts upon
organizational objectives, and provide a concrete link
between pay and performance.
• The emphasis is on the results achieved by employees
rather than the activities performed in their jobs.

5. Basic Principles of MBO
• Unity of management action is more likely to occur when
there is pursuit of a common objective.
• The greater the focus on results on a time scale, the
greater likelihood of achieving them.
• The greater the participation in setting meaningful work
with accountable results, the greater the motivation for
completing it.

6. Applications of MBO:
• The MBO concept is appropriate for knowledge-based
enterprises where staff is competent.
• Appropriate in situations where one wishes to build
employees management and self-leadership skills and tap
their creativity, tacit knowledge and initiative.
• Used by Chief Executives of Multinational Corporations
for their country managers abroad.

7. Process of MBO

8. Setting Objectives
• In MBO systems, objectives are written down for each
level of the organization, and individuals are given specific
aims and targets.
• It provides focus and emphasizes on team and individual
targets in congruence with organizational goals.
• For MBO to be effective, individual managers must
understand the specific objectives of their job and how
those objectives fit in with the overall company objectives
set by the Board of Directors.

9. Setting Employees Targets
• The management has to set the targets for each
employee and outline their accountability for the timely
fulfilment of the same.
• Thus, the organizational goals are bifurcated into
individual objectives and targets. A successful MBO
program requires each employee to produce five to ten
specific, measurable goals.
• Each target should be supported with a means of
measurement and a series of steps toward completion.
• These targets should be proposed to the employees
manager in writing, then discussed and approved.

10. Monitoring and Evaluating Performance
• To monitor the performance of employees in pursuit of the
targets assigned to them, a proper review system and
Management Information System has to be designed and
made operational.
• Periodical and strict performance appraisals form a crucial
part of the MBO process. Actual Performance is
compared to the standards and employees are appraised
accordingly.

11. Performance Based Incentives
• The performances of employees at all levels of
management are assessed and evaluated and based on
the same, performance incentives are given to
employees.
• These incentives can be: Negative Incentives, Positive
incentives, Reprimand Rewards, Fines and penalties
,Bonus, Warnings ,Promotions Retrenchment.

12. Advantages of MBO
• Better utilization of resources
• Aid in Planning
• Development of personnel
• Better Team Work
• Concentration on Key Result Areas
• Objective Evaluation
• Result Orientation & Sound Organizational Structure.

13. Disadvantages of MBO
• MBO is not the best approach for organization functioning
in dynamic environment.
• Overemphasis on individual accomplishment may create
problems with teamwork.
• Difficulty in implementation.
• Incurs Time & Cost
• Problems in Objective setting & Emphasis on short-term
objectives
• Inflexibility & Frustration of employees.

14. Strengths of MBO
• One of the best reviews on the strengths of MBO
programs is reported by Henry J. Tosi and Stephen J.
Carroll. They opine:
• MBO stresses collaborative efforts between managers
and subordinates which aids in planning.
• MBO lets subordinates know what is expected of them by
forcing managers and subordinates to establish attainable
objectives within specified periods of time.

15. • MBO improves communication between managers and
subordinates and makes individuals cognizant of
organizational objectives and goals.
• MBO improves the performance review and evaluation
process by focusing on results and by providing
systematic feedback

16. MBO at Hyundai Motors
• Like many organizations, Hyundai Motors applies the
concept of MBO in their managerial spans.
• Annual, quarterly and weekly targets are determined for
employees at all levels of the organization and various
constraints and performance measurement criteria are
explained to them.
• Periodical reviews are done to evaluate the degree of
achievement of employees’ targets and their congruence
with the organizational goals.
• Hyundai Motors incentivizes employees’ performances
through non - monetary rewards and punishments.

17. • https://www.youtube.com/watch?v=9FZDVmSvsH0

18. THANK YOU