Management by objectives (MBO) is a systematic process for setting objectives that provide direction and help achieve organizational and individual goals. Key aspects of MBO include formulating clear and measurable objectives, setting objectives at all levels of the organizational hierarchy from board to individual employees, and reviewing objectives periodically with feedback to evaluate progress and make adjustments. For MBO to be effective requires top management support, training employees in MBO, ensuring objectives are clear, providing feedback, and encouraging participation in setting objectives.

1. Management By Objectives

2. managing an organization effectively requires the formulation of clear objectives . Objectives serve as guidelines or road lines or roadmaps for managerial efforts and action. Well thought objectives steers an organization to success.

3. Heinz Weihrich and Harold Koontz define management by objectives as “ a systematic manner and that is consciously directed toward the effective and efficient achievement of organizational and individual objectives.”

4. An objective is a goal or an idea that an organization or an individual aims at or strives to attain. A supervisor of a team sets the objectives and decides the process by which these objectives can be achieved . Objectives provides a direction for the organization and specify the quantity and quality of work to be accomplished within a given period of time. Objectives determine what individuals, groups , and organizations are expected to accomplish.

5. Relationship of objectives and organizational Hierarchy Level of organizational Hierarchy Board of Directors and top Level managers Middle level managers Lower level managers Types of objectives Socio economic purpose Mission Overall objectives of the firm Objectives in the Key result areas Productivity Physical and financial resources. Profitability and market standing. Innovation. Managerial performance and attitude. Social responsibility. Quality and service issues. Divisional objectives Departmental objectives Department and unit objectives Objectives of subordinates Performance goals Development goals. Top down approach Bottom – up Approach

6. A Network Of Objectives

7. Objectives and planning programs are co-existential and co relational. They support one another to form a network of expected outcomes and results. If the objectives are not linked with each other and if they do not support one another, it is possible that individuals may carry out their plans, keeling in mind only their individual or departmental goals. This may be harmful for the organization.

8. Guidelines for writing objectives

9. 1. Commitment to action. The objectives must begin with the word “To” followed by an action verb. Any particular objective is achieved and a result of some action. Therefore , commitment to action is a prerequisite forthe formulation of an objectives.

10. 2. Specify a single key result. An objective should specify a single key result area to measure a particular objective effectively each subordinate an manager must know specifically what is to be achieved. Therefore , the focus should be on a single key result area in each performance objective.

11. 3. Specify a target date . Objective should specify a deadline for results to be accomplished. If the objective intends to improve the state of affairs in the organization , it should have a specific target date identified.

12. 4. Should be measurable and verifiable. Objective should be specific and quantitative . Only if they are measurable and verifiable, it is possible to assess how much progress has been made. . This is extremely difficult for managers to accomplish as they are often confused as to how to identify specific criteria in areas which are subjective, if the objectives are qualitative , then it should be explained as to why the objective has been chosen, what will be its end results and how one will know whether the objective has been achived or not.

13. 5.Individual objectives should be related to higher objectives of the organization Objectives of a subordinate should be in keeping with the objectives of the superior and the organizational goals. This will help in achieving both individual and organizational goals.

14. 6. understandable. An objective that is easy to understand can be easily implemented . It should be understood by those who are responsible for accomplishing it. As far as possible , an objective should be free from ambiguity.

15. 8. Should be consistent with organizational resources. A performance objective should match with the resources of an organization . Moreover , an organization should be willing to commit its resources towards the attainments of those objectives.

16. 9.Should be mutually acceptable by both superior and subordiante. Objectives should be discussed by the superior and subordinate and should result in mutually understood and accepted objectives. By discussing the objectives and thereby reaching an agreement, the subordinate would feel involved and be more committed.

17. Systems approach To MBO

18. MBO was introduced in the 1950s by Peter F. Drucker ,who considered objectives a necessary in every area where performance and results directly affect the survival and growth of a business. He emphasized the importance of participative goal setting , self control and self evaluation. Unfortunately , MBO was not taken as a way of managing . But selective asect were applied to performance appraisal.

19. The systems approach to MBO adds on two new areas , besides the other existing concepts of the MBO approach : 1. MBO is viewed as a comprehensive system in which many key managerial activities are integrated 2. Systems concepts are used to emphasize the interdependence of MBO with it’s environment . The systems approach recognizes the fact that the organization does not exist in a vacuum but receives inputs {human , capital , managerial, technological etc }from external environment.

20. Steps In the MBO Process

21. Develop overall organizational goals Establish specific goals for various departments, subunits & individuals Formulate action plans identifying the problem areas Implement and maintain self control Conduct periodic review of the plans Appraise performance of the subordinate. Feedback Steps in the MBO Process

22. The process of managing and appraising by objectives Enterprise objectives Planning premises Key result area Appropriate Organization Superiors objectives Available Needed resources Superior’s Preliminary Recommendation Of objectives for subordinates Periodic review Of progress by superior Subordinate’s objectives Financial review And Appraisal of performance Final performance by subordinate Corrective Measures and Superior’s assistance New inputs Subordinate’s preliminary Statement of objectives Agreement Subordinate’s Ongoing performance Recycling

23. Benefit Of MBO

24. 1. Better Managing MBO helps managers allocate organizational resources and plan activities effectively . As a part of the MBO process , managers have to chart out a methods for accomplishing results and decide what resources and assistance they will require for achieving objectives .

25. 2. Clarity in organizational action. MBO identifies the key result areas where organizational efforts are needed. A clear definition of the objectives in the key result areas helps relate the organization with its environment organizational objectives are always influenced by the external environment in which the organizational functions.

26. 3.Encouragement of personal commitment. The biggest advantage of MBO is that it encourages personal commitment to goals by employees, the MBO program fives employees the responsibility of setting their own objectives , gives them the opportunity of having their ides included in the planning program, provides them a clear pictures of their areas of discretion or authority and facilitates assistance from superiors for accomplishing their goals.

27. 4. Personnel satisfaction MBO brings about personnel satisfaction by allowing employees to participate in setting their objectives an by appraising their performance in a rational manner.

28. 5. Basis for organizational change. Every organization has to be flexible and adaptable to changes in order to keep up with changes in the external and internal environments. However bringing about organizational change is not an easy task and requires a great deal of effort on the part of managers. The MBO process stimulates organizational change. Provides the framework and guidelines for planning change And helps managers overcome resistsnce to change.

29. 6. Development of effective control Since MBO forces management to clearly state objectives , it leads to the development of effective controls. Management control involves the measurement of results and taking corrective action to check deviations from plans. A clear set of verifiable goals helps managers determine what should be measured an what action should be taken to correct deviations.

30. Making MBO Effective

31. 1. Top management support The degree to which as MBO program in an organization is likely to succeed depends on the extent of top management support it receives. In order to keep the MBO program alive and fully functional . The top management must provide continued support to the subordinate. Tip-level commitment for the MBO program is also essential for its acceptance by employee.

32. 2. Training for MBO.

33. 3. Formulating clear objectives.

34. 4. Effective feedback.

35. 4.Encouraging participation.

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