MBO

1. Management by Objective (MBO)

2. What is MBO?
• MBO is a management model that aims to improve performance of an
organization by clearly defining objectives that are agreed by both
management and employees.
• MBO requires that employees set measurable personal goals based upon the
organizational goals.
• MBO is a supervised and managed activity so that all of the individual goals can
be coordinated to work towards the overall organizational goal.

3. Principles
of
MBO
Pursuit of common objectiveFocus on results based on a time frame
Setting meaningful work with accountable results

4. Setting Objectives
Setting Employees targets
Monitoring Performance
Evaluating Performance
Performance Based Incentives
Process of MBO

5. Setting Objectives
• In MBO systems, objectives are written down for each level of organization, the individuals
are given specific aim and targets.
• It provides focus and emphasizes on team and individual targets in congruence with the
organizations goal.
• For MBO to be effective, individual managers should understand the specific objectives of
their job and how these fit in overall with the companies objectives set by the board of
directors.

6. Setting Employee’s Target
• The management has to set the target for each employee and outline their accountability
for the timely fulfillment.
• Thus, the organizational goals are bifurcated into individual objectives and targets.
• Each target should be supported with the means of measurement and a series of steps
towards completion.

7. • 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 appraisals form a crucial part of the MBO process. Actual performance
is compared to the standards and the employees are appraised accordingly.
Monitoring and Evaluating Performance

8. Performance based incentives
• The performance of the employees at all levels of management are assessed and
evaluated and based on the same, performance incentives are given to the employees.
Positive Incentives
Rewards
Bonus
Promotions
Negative Incentives
Reprimand
Fines and Penalty
Warnings

9. Advantages
• Better utilization in resources.
• Aid in planning
• Development of personnel
• Better team work
• Concentration on key result areas
• Objective evaluation
• Result Orientation
• Sound organizational structure

10. Disadvantages
• Incurs time and cost
• Failure to teach MBO philosophy to the employees
• Problem in objective setting
• Emphasis on short term objective
• Inflexibility
• Frustration on employees