Management by Objectives (MBO) is a performance appraisal method where managers and employees jointly set specific, measurable, achievable, relevant, and time-bound (SMART) goals. This method aligns individual objectives with organizational goals, fosters communication and feedback, and promotes employee motivation and empowerment. MBO involves periodic discussions to monitor progress and evaluate performance, leading to a more results-driven approach. Key aspects of MBO: Collaborative Goal Setting: Managers and employees work together to define objectives that are both relevant to the organization and aligned with individual roles. SMART Goals: Objectives are set to be specific, measurable, achievable, relevant, and time-bound, ensuring clarity and progress tracking. Periodic Progress Reviews: Regular discussions between managers and employees facilitate ongoing monitoring of progress and identify any challenges or adjustments needed. Performance Evaluation: At the end of the defined period, performance is evaluated based on the achieved objectives, providing feedback and insights. Rewards and Recognition: Achieving objectives can lead to rewards and recognition, motivating employees and reinforcing positive performance. Benefits of MBO: Improved Communication and Feedback: Regular discussions foster open communication and provide opportunities for feedback. Increased Motivation and Engagement: Employees feel more invested in the process when they have input into goal setting and are involved in progress tracking. Enhanced Performance: By focusing on specific, measurable objectives, MBO can improve overall performance and productivity. Better Alignment of Objectives: MBO helps align individual and organizational goals, ensuring that everyone is working towards the same objectives. Objective Performance Evaluation: MBO provides a structured and objective way to evaluate performance based on agreed-upon goals. Challenges of MBO: Time and Resources: Implementing and maintaining MBO can require significant time and resources. Resistance to Change: Some employees may resist the initial change in the performance appraisal process. Subjectivity in Evaluation: Even with SMART goals, there can be some subjectivity in evaluating performance. Potential for Goal Conflicts: In some cases, individual and organizational objectives may conflict, requiring careful management. Need for Skilled Managers: MBO requires managers to be skilled in setting goals, providing feedback, and facilitating discussions. Management by objectives (MBO) is a strategic management model that aims to improve the performance of an organization by clearly defining objectives that are agreed to by both management and employees. According to the theory, having a say in goal setting and action plans encourages participation and commitment among employees, and aligns objectives across the organization. Key Takeaways Management by objectives (MBO) is a process in which a man

1. Management by Objective
(MBO) Performance
Management System

2. Introduction
• Management by objectives (MBO) is a popular method of performance appraisal that
involves setting specific, measurable, achievable, relevant, and time-bound goals for
employees and managers. MBO can help align individual and organizational
objectives, motivate and empower employees, and improve communication and
feedback. However, MBO also poses some challenges, such as setting realistic and fair
goals, avoiding conflicts and biases, and ensuring adequate resources and support.

3. Management by Objective Process

4. Objective Setting
• The objective setting must be according to the mnemonic S.M.A.R.T
which means:
1. Specific: The objective must clearly state the area of the organization
that needs improvement s
2. Measurable: Organizational goals must be set in a way that later they
can be measured by some kind of performance indicator.
3. Agreed-Upon: It’s important that the objectives are communicated to
all levels and all levels must agree upon those objectives. It means the
objectives must be accepted by two levels, those who created the
objectives and those who are going to work and achieve objectives.
4. Realistic: Objectives must be realistic meaning that objectives are set
by keeping the available resources in mind and what can possibly be
achieved.
5. Time-Bound: There must be an end period when the performance can
be measured or when the objectives must be fulfilled.

5. Organization Goals
• Some of the Organization goals
examples include:
1.Increasing ROI by 10% in X number of
months
2.Increase sales by 50% in X number of
months
3.Increasing No. of Customers by 30% in
X no. of Months.
4.Improving employees satisfaction index.

6. MBO Examples for Employees
• MBO Examples for Sales
• Some of the sales examples for MBO are:
1. Increasing the number of sales by …….% in the next 6 months
2. Increasing the average sale price to INR …….
3. Increasing No. of customers to …….. On monthly basis.
• MBO Examples for Human Resources
• Some of the HR examples for MBO are:
1. Increasing employee satisfaction rate to …….%
2. Increasing employee retention rate to …….%
3. Introducing internal training programs
4. Get ………% hiring from employee’s references etc.

7. Score Card : Mention Position
Name: Mention name of employee Designation: Mention
Designation of the
Employee
Job Location:
Your Total Score
B
Emp. Code: Mention Employee ID Department : Mention
Department
Job category:
Your Total Points earned
85
Reporting Officer Name: RO Name RO Designation: RO Emp. Code:
Review Manager Name: HOD Name RM Designation: RM Emp. Code:
For Example only
KRA/Goals KPI Target /Unit Weight% KPI
KRA
%
Score Weightage
A B C Score
Increasing the
number of sales by
30 % in the next 6
months
lead conversion ratio 5% Leads in a month 50.00
100.00
50.00 A
New Lead search 100 Lead per month
50.00 40.00 B
100.00 50.00 40.00 0.00 90.00
Score Weightage
Overall Grade
Weightage
A 100 A >=90
B 80 B >=80
C 60 C >=60
D 40 D >=40
E 0 E >=0

8. Guidelines for Setting Objectives
 KRA/Goals should not be more than 5 in numbers .
 One KRA/Goals should not have more than 2 KPIs.
 The Maximum % for one KRA is 30% & Minimum is 5%.
 The KPI % Must be in multiple of 5 only i.e. 5,10,15,20,25,30.
 The Total % of all the KRA' Must need to be 100%( Not Below or More).

9. Implementation
• Employees to be divided in to 3 grades based on your performance:
Inflation Consideration
5% (depends on
latest inflation rate)
Grade Category Min Score % Increment
% Effective
Increment
A Outstanding 90 15% 20%
B Good 80 11% 16%
C Average 60 7% 12%

10. Eligibility
DOJ* Treatment*
1st
April- 31st October
Eligible to be part of current Increment
cycle.
Entitled to prorated increment based
on month of service.
On/After 1st
November
Not eligible to be part of current
Increment cycle.
Tenure from DOJ- 31st
March will be
considered in the subsequent
Increment cycle.

11. Benefits for Employees
• One of the main benefits of MBO for employees is that it gives them a clear
direction and purpose for their work. By setting SMART goals, employees
can understand what is expected of them, how their performance will be
evaluated, and how they contribute to the overall success of the
organization. MBO also encourages employees to participate in the goal-
setting process, which can increase their sense of ownership and
responsibility. Moreover, MBO provides regular feedback and recognition for
employees, which can boost their morale, confidence, and satisfaction.

12. Challenges for Employees
• One of the main challenges is to set realistic and attainable goals that are
neither too easy nor too difficult. Setting goals that are too easy can lead to
complacency and underperformance, while setting goals that are too
difficult can cause frustration and stress. Another challenge is to avoid
conflicts and biases that may arise from different perspectives and interests
among employees, managers, and the organization. For example, employees
may feel pressured to agree to goals that are not in their best interest, or
they may face unfair evaluations or rewards based on subjective or
inconsistent criteria.

13. Benefits for Managers
• MBO can also benefit managers by helping them manage their teams more
effectively and efficiently. By setting SMART goals, managers can
communicate their expectations and priorities clearly, delegate tasks and
responsibilities appropriately, and monitor and measure progress and results
objectively. MBO also enables managers to align their goals with the
strategic vision and mission of the organization, and to coordinate and
collaborate with other managers and departments. Furthermore, MBO
facilitates constructive feedback and coaching for managers, which can
enhance their professional skills.

14. Challenges for Managers
• Similarly, MBO can pose some challenges for managers. One of the main
challenges is to ensure adequate resources and support for employees to
achieve their goals. Managers need to provide sufficient time, training,
guidance, and feedback for employees to perform their tasks and overcome
obstacles. Another challenge is to balance the quantity and quality of goals,
and to avoid overloading or underutilizing employees. Managers need to
consider the workload, skills, and potential of each employee, and to assign
goals that are challenging but feasible. Moreover, managers need to review
and revise goals periodically, and to adapt to changing circumstances and
needs

15. Thankyou