MANAGEMENT ByOBJECTIVE

Presentation By:

Rohit Kushwaha

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The term "management by objectives" was first popularized by Peter Drucker in his 1954 book 'The Practice of Management. The term

MBO was coined by Peter Drucker in 1954.

Management By Objective (MBO)

DRUCKER

Peter

“MBO is a comprehensive managerial system that integrates many key managerial activities in a systematic manner, consciously directed towards the effective achievement of organizational objectives.”

Management by Objectives (MBO) is a process of agreeing upon objectives within an organization so that management and employees agree to the objectives and understand what they are in the organization.

Business, that's easily defined - it's other people's money. 

Heinz n Koontz define MBO as “ a systematic manner and that is consciously directed towards the effective and efficient achievement of organizational and individual objectives.”

HAROLD KOONTZ

MANAGEMENT A G l o b a l P e r s p e c t i v e

Appraise Performance

•Corporate Strategic goals

•Departmental goals

•Individual goals

STEP 1: SET GOALS

STEP 4: APPRAISE OVERALL

PERFORMANCE

Action Plans

Review Progress & Take

Corrective Action

STEP 2: DEVELOP PLANS

STEP 3: REVIEW PROGRESS

Need For MBO

1. Cascading of organizational goals and

objectives

2. Specific objectives for each team member

3. Participative decision making

4. Explicit time period

5. Performance evaluation & feedback

PRINCIPLES of MBOM

anagem

ent

By

Obje

ctiv

e

Setting the ObjectiveO

BJE

CTIV

E S

ET

TIN

G

SpecificMeasurable

WORK Achievable Result Oriented Time Related

SUCCESS

HAVE

MBO Strategy : Three Basic PartsS

trate

gy o

f M

BO

All individuals within an organization are assigned a special set

of objectives that they try to reach during a normal operating

period. These objectives are mutually set and agreed upon by

individuals and their managers.

Performance reviews are conducted periodically to determine

how close individuals are to attaining their objectives.

Rewards are given to individuals on the basis of how close they

come to reaching their goals.

Guidelines for writing objectivesG

uid

eli

ne

s 1. Commitment to action

2. Specify a single key result

3. Specify a target date

4. Should be measureable and verifiable

5. Individual objectives related to higher objective of organization

6. Understandable

7. Should be consistent with organizational resources

8. Should be mutually acceptable by both supervisor and

subordinates.

Develop overall organizational

objectives

Establish specific goals for various

departments, subunits and individuals

Formulate action plan by identifying

problem areas

Implement and maintain self

control

Conduct periodic review

of the plans

Appraise performance of the employees

feedback

Steps in the MBO process

Advantages of MBO

1. Improves employee motivation

2. Improves communication in the organisation

3. Flags up and highlights training needs required to achieve objectives

4. Improves overall performance and efficiency

5. Attainment of goals can lead to the satisfaction of Maslow’s higher

order needs

BENEFITS

MBOof

Better Managing

Mbo helps managers to allocate organizational

resources and plan activities effectively

Mbo identifies the key result areas where organizational efforts are needed. A

clear definition of the objectives in the key result areas helps in relate the

organization with its environment organizational objectives are always influenced

by the external environment organizational functions.

Clarity in Organizational Action

Encouragement of Personal Environment

The biggest advantage of mbo is that it encourages personal commitment

to goals by employees. The mbo programs gives employees the

responsibility of setting their own objectives.

Personal Satisfaction

MBO brings about personal satisfaction by allowing employees

to participate in setting their objectives and by appraising their

performance in a rational manner.

Other Benefits

Bases for organizational change

Development of effective control

1. May demotivate staff if targets are too high and unrealistic, also if imposed rather than agreed

2. Requires the cooperation of all employees to succeed

3. Can be bureaucratic and time consuming (meetings, feedback)

4. Can encourage short-term rather a more focused long-term growth

5. Objectives may go out of date and can restrict staff initiative and creativity

6. Setting targets for certain specialised employees may be difficult

DISADVANTAGES OF MBO

SOURCES of MBO FAILURES

1. Lack of top management commitment and follow through

on MBO.

2. Employees’ negative beliefs about management’s sincerity

in its efforts to include them in the decision-making process.