The document discusses management by objectives (MBO), including: 1) MBO was first outlined by Peter Drucker in 1954 as a systematic approach for management to focus on achievable goals using available resources. 2) Drucker later decreased the significance of MBO, saying it is just another tool and objectives are often unknown. 3) The core concepts of MBO include avoiding getting trapped in daily activities and forgetting objectives, having all managers participate in strategic planning, and focusing on results rather than activities.

1. Management by Objectives (MBO)
1. MBO is a systematic and organized approach that
allows management to focus on achievable goals and to
attain the best possible results from available resources.
2. Management by Objectives was first outlined by Peter
Drucker in 1954 in his book 'The Practice of
Management'.
3. In the 90s Peter Drucker himself decreased the
significance of MBO when he said:
"It's just another tool. It is not the great cure for
management inefficiency... Management by Objectives
works if you know THE OBJECTIVES 90% of the time you
don't.“
4 Drucker, however, gave the core concept of MBO to
clarify his position. Let us discuss that.
1

2. Core Concepts of MBO
According to Drucker concepts/ principles of MBO are:
1. “Avoid the activity trap", getting so involved in their day
to day activities that they forget their main purpose or
objective.
2. All Managers not just the top Management should
participate in the strategic planning process, process,
in order to make implementation of the plan easy.
3. There must be an effective performance systems
designed to help the organization stay on the right
track.
4. Managers should focus on result not the activity. They
should delegate tasks by "negotiating a contract of goals"
with their subordinates.
2

3. Core Concepts of MBO
5. MBO is about setting objectives and then breaking these
down into more specific goals or key results.
6. The principle behind MBO is to make sure that everybody
within the organization has a clear understanding of the
objectives, of that organization as well as awareness of
their own roles and responsibilities in achieving those
aims.
7. The complete MBO system is to get managers and
empowered employees acting to implement and achieve
their plans, which automatically achieve those of the
organization.
8. Let us review the application.
3

4. Application of MBO
1. The MBO is appropriate for knowledge –based
organizations where the staff are competent.
2. It is appropriate in situations where you wish to build
employees' management and self leadership skills and
tap their creativity and initiative.
3. Managers are directed by their objectives rather than the
Boss. Therefore they are kept focused.
4. The review mechanism enables leaders to measure the
performance of their managers, especially in the key
result areas: marketing; human organization; financial
resources; productivity; and profit requirements.
4

5. The Five-Step MBO Process
5

6. Staff Appraisal
1. Staff appraisal is a formal assessment of the performance of
an employee on periodic basis.
2. The Human Resources (HR) department is generally
responsible to manage the process.
3. The objective for this exercise includes:
a. Goals / Targets achievement
b. Salary increment
c. Promotions and transfers
d. Succession planning
e. Identification of Top Performers and Non Performers
f. Identification of competencies Gaps for Training Plan
g. Confirmation of Probationers
4. The above objectives may be different for some levels of
employees but they help in defining the appraisal content,
forms, ratings/ weights, and employee evaluation parameters
6

7. Appraisal Process
1. HR must communicate relevant information on the appraisal to
the affected Staff, Units, Departments and Divisions. Issues
that must be made open are discussed below.
2. Type of Appraisal – the forms and levels of Managers that will
be involved in the following appraisals may not be the same:
a. Succession planning appraisal
b. Promotions and Transfers appraisal
c. Salary Increments appraisal
d. Confirmation of Probationers appraisal
e. Competency Gap Analysis
7

8. Appraisal Process
3. Proposed Timelines – there must be timelines for
completion or the work will not be done on time. An
example is:
Nos. Step Time Line
1 Employee completes appraisal form 2 days
2 Manager completes His / Her portion of the form 5 to10 days
3 HOD finalizes the Employees scores and give doc. to HR 2 to 5 days
4 HR Screens the forms – removes bias 2 to 12 days
5 Manager Discusses the appraisal with employees 2 to 5 days
6 Employees accepts their appraisal and sign 1 day
7 Total Time taken (maximum) 35 days
8

9. Appraisal Factors and Weights
4. Below is an example of qualitative factors and weights
that an organization may use. The approach varies and
depends on process in each organization:
Nos. Factor Weight
1 Job Knowledge 20
2 Technical Competence 20
3 Quality of Work 10
4 Dependability 20
5 Creativity 10
6 Customer Service 10
7 Interpersonal Relationship 10
9

10. Generic Application of Staff Appraisal
1. Evaluation of employees contribution to the organization
based on the goals assigned.
2. Determination of employee’s ranking e.g. Excellent
Performer, Good Performer, Average Performer.
3. To know the competency Gap and identify the
Development Plan.
4. Finalize incentives such as performance Bonus and
annual increments
5. Manage promotions and Transfers / (including sanctions)
6. Identify succession Plans.
10

11. Special Application of Staff Appraisal
Employees Perceptions on organizational issues such as:
1. Quality of leadership at various levels
2. Effectiveness of the training provided
3. Awareness about company policies
4. Awareness about business objectives and plans
5. Factors causing concern and dissatisfaction to employees
11

12. Recognition and Rewarding
1. Employee recognition is the acknowledgement of
employee achievement which may involve monetary
reward or non-monetary reward. It could also be public or
private achievement.
2. The goal of employee recognition is to show appreciation
for an employee’s achievement and motivate such
employees to continue with good performance and loyalty
to company.
3. Successful employee recognition will help the
organization to retain key employees and keep employees
happy along the way.
4. Ideally there should be a Management policy on
employee recognition and eligibility / reward process.
12

13. Types of Employee Recognition
1. Years of Service
2. Contribution to Safety (human or material)
3. Attendance / Punctuality
4. Certifications or Degrees
5. Customer Service (acknowledged by third party)
6. Positive Public Service
7. Employee of the month, week, year
8. Retirement after a long meritorious service
9. Positive contribution to Suggestion Program
10. Extra-ordinary Performance
13

14. 14
Why Employee Recognition is Important
1. Helps to attract and retain key employees.
2. Motivates employees to perform at higher levels.
3. Increases employee productivity.
4. Can increase employee competitiveness.
5. Can increase company revenues and profitability.
6. Improves business quality and service.
7. Improves safety.
8. May lower stress.
9. Reduces absenteeism and turnover costs.
10. Fosters employment longevity.
11. Encourages employees to continue education and
training.

15. 15
Example of Rewards for Recognition
1. Verbal, written or formal praise from Management
2. Gift cards endorsed by the Managing Director
3. Spot award (monetary)
4. Opportunities to attend conferences or other trainings
5. Opportunities to mentor other employees and work with
people outside their areas
6. Call employee and thank him / her specially
7. Add a personal thank-you note OR letter to paycheck
8. Employee of the Month or Year Award (With Plague or
Trophy

16. 16
Value Driven Strategy
1. Customers are now:
a. Highly informed and global in outlook
b. Sophisticated and cautious
c. Value conscious
2. The winning response should therefore be “Value
Driven Strategy” resulting:
a. Internal value – driven strategy of companies based on
distinctive competences.
b. Using Strategies to gain competitive advantage.
c. Use of “intelligence” to increase productivity and
enhance creativity. (see the next slide)

17. 17
Value Driven Strategy
Frederick E. Webster – author of Market Driven
Management stated:
1. “All businesses, including Manufacturing companies, should
define themselves as service - businesses because
Customers buy BENEFITS, NOT PRODUCTS.
2. Usually the physical product itself is only one part of the total
value-delivery system for the Customer;
3. Customers’ expectations revolve around the
service aspects of the product offering.
4. Otis Lift , for instance, usually station service centers
close to where their products are installed to ensure that
Users are not trapped or complain – around the world.

18. 18
Value Driven Strategy
Illustration:
1. A packet of Procter & Gamble’s Crest toothpaste
includes a toll-free telephone number allowing
Customers to call in with questions or comments.
2. When Callers request information about dental care,
their names and addresses become part of a
database. In this way the product becomes a
service.
3. This entire process will lead to a two-way relationship
between the Marketer and the Customer who is
buying improved dental health, not just a physical
product only.

19. 5 Forbidden Phrases
Nancy Friedman, The Telephone Doctor
Forbidden Phrase . . . Replacement . . .
• I don’t know . . .
– “Good Question, let me look into that for you.“
• We can’t . . .
– “That’s a tough one, let’s see what we can do” (find an alternative)
• You’ll have to . . .
– ”Here’s how we can help you with that.”
• Hang on a second, I’ll be right back. . .
– “I’ll need to ask an associate to be sure, are you able to wait while I check into it?”
• No . . .
Find a positive alternative. “We are all out of stock, but we can give you rain check
or a similar product at the same price.”
19

20. 20
Strategies to find the Needs
9. Spot the trend or vogue. You can follow these hints:
a. Think globally.
b. Think e – commerce
c. Consider safety and home
d. Think of convenience (Shop-rite).
e. Think of the Baby Boomers.
f. Consider information and service

21. 21
Build The Database
1. We will use two tables to illustrate the building of
database.
2. The first will show a comprehensive analysis of the
database to help the marketing team. And the
second will show the features of the Customers.
3. In order to do it effectively, there should be a
responsible officer in charge.

22. 22
Customers’ Database - 1
Demography Occupation Income level Nationality Education
Geographic Market locations Population
density
Urban or rural Seasonality
Sociological Personality
traits
Lifestyle Consumption
Style
Values
Behaviour Loyalty Services
demanded
Services
ignored
Sensitivity to
price
Needs Loans accounts Deposits
accounts
Savings
accounts
Cash
management
Marital Family size Transport
system
Sensitivity to
quality
Sensitivity to
electronic
Others

23. 23
Customers’ Database - 2
Nos. Details Data obtained
1 Customers’ Name
2 Address
3 Nature of Business
4 Industry
5 Customers biggest weakness
6 Public complaints against the firm
7 Pending litigation against the firm

24. 24
Customers’ Database - 2
Nos. Details Data obtained
8 Industry-wide problems
9 Customers greatest priority
10 Last 5 or 3 year’s market share
11 Our Customer’s greatest priority
12 Last 5 or 3 year’s market share
13 Customer’s winning strategy
14 Customers biggest Customer

25. 25
Segment the Customers
1. Segmentation in this context means the same set
of people that could be targeted for the purpose of
serving them.
2. The benefits that banks usually derive when they
do this include profitable allocation of resources.
3. The method usually leads to understanding of the
market, customers and competition.

26. 26
Customers’ Segmentation Elements
Element Factors
Measurable Size, depth of market, and probability analysis
Substantial Large and profitable enough for the Bank to
commit resources
Accessible Segment can be reached and served
Differentiable Can be distinguished.
Actionable Action plan can be implemented

27. 27
Segmentation Approach
1. There are three specific stages of the segmentation. These
are:
a. SURVEY STAGE
The bulk of the work here will be done outside the
office.
b. ANALYSIS STAGE
The data obtained from outside will be classified
according to the various headings.
c. PROFILING STAGE
Clusters of behavior and needs will be identified
and profiled.

28. 28
Segmentation Results
1. Single sector concentration – allows the Institution
to select a single or narrow segment of the market
e.g. OIL & GAS, POWER or Agric.
2. Market specialization allows the Institution to meet
the needs of a particular sector of the market and
service their needs with a variety of products – e.g.
Oil & Gas + their Contractors.

29. 29
Segmentation Results
3. Product Specialization – The driving force here is
the product or service e.g. Retail banking or
Investment banking.
4. Full or Mass Marketing – This is the strategy of the
big banks. They serve all the market segments
without discrimination – once the needs are similar
and the Customers are not complaining.

30. 30
Facts About Conflicts or Objections
a. There will always be objections or conflicts.
Human appetite is insatiable.
b. Absence of conflicts or objections is
unhealthy but the conflicts should be
resolved.
c. It is also unhealthy when conflicts occur too
frequently.
d. Business success arises from continuous
conflicts and resolutions between the
organization and the Customers.

31. 31
Facts About Conflicts or Objections
a. There will always be objections or conflicts.
Human appetite is insatiable.
b. Absence of conflicts or objections is
unhealthy but the conflicts should be
resolved.
c. It is also unhealthy when conflicts occur too
frequently.
d. Business success arises from continuous
conflicts and resolutions between the
organization and the Customers.

32. 32
Customers Segmentation – Key elements
Element Factors
Measurable Size, depth of market, and probability analysis
Substantial Large and profitable enough for the Bank to
commit resources
Accessible Segment can be reached and served
Differentiable Can be distinguished
Actionable Action plan can be implemented

33. 33
Segmentation Approach and Results
1. The segmentation approach are:
a. Survey stage. (Data capture from the public
domain)
b. Analysis stage. (Classification of data obtained)
c. Profiling stage. (Clusters of behavior)
2. The results of the exercise may lead to any of the
a. Single sector concentration
b. Market specialization
c. Product specialization
d. Full or Mass Marketing

34. 34
Segmentation Approach and Results
1. The segmentation approach are:
a. Survey stage. (Data capture from the public
domain)
b. Analysis stage. (Classification of data obtained)
c. Profiling stage. (Clusters of behavior)
2. The results of the exercise may lead to any of the
a. Single sector concentration
b. Market specialization
c. Product specialization
d. Full or Mass Marketing

35. 35
Buying Motives / Selling Points
A. A Consumer is a person (an individual or corporate
body) that BUYS a product or service from you, PAYS
for it as agreed and believes he or she GOT VALUE
for money.
B. A consumer makes purchases for four specific
reasons (inter – alia):
1. To solve problems
2. Achieve goals
3. Fulfill aspirations
4. Exploit Opportunities

36. 36
Buying Motives / Selling Points
C. A Consumer considers your products or services
as valuable if you can meet the:
1. Expected standard.
2. Exceed the standard
3. Delight the Customers
4. Render Extra-ordinary standard
D. A Consumer is delighted if his perception of the
value of your service is higher than the cost that
he pays. You have succeeded!!

37. Some research findings…
• Only 4% of unhappy customers actually complain. Even
some with serious problems
• Complainers are more likely to do business with you again
• 50%-70% of complainers will give repeat business if the
complaint is resolved
• 95% complainers will give repeat business if the complaint
is resolved quickly
• Dissatisfied complainers will tell at least 9 or 10 people.
13% tell more than 20 people
• Satisfied complainers will tell about 5 people