2. • In many organizations, it's hard to remember a time when
non-managerial employees were kept in the dark about
strategy.
• We're often reminded about the corporate mission
statement, we have strategy meetings where the "big
picture" is revealed to us, and we're even invited to
participate in some business decisions. We're also kept
aware of how our day-to-day activities contribute to
corporate goals.
• This type of managing hasn't been around forever. It's an
approach called Management by Objectives (MBO), a
system that seeks to align employees' objectives with the
organization's goals.
3. Introduction
• Management by objectives (MBO), also known as
management by results (MBR), is a process of
defining objectives within an organization so
that management and employees agree to the objectives
and understand what they need to do in the organization
in order to achieve them.
• It is a systematic and organized approach that allows
management to focus on achievable goals and to attain
the best possible results from available resources.
• The concept of MBO is closely connected with the
concept of planning.
4. Introduction
• This MBO concept was popularized by Peter Drucker. It
suggests that objectives should not be imposed on
subordinates but should be decided collectively by a
concerned with the management. This gives popular
support to them and the achievement of such objectives
becomes easy and quick.
• Itis themostwidely accepted philosophy ofmanagement today. It
isademanding andrewarding style ofmanagement.
• Itisanapproach (toplanning) thathelps toovercome thebarriers. It
involves theestablishment ofgoals bymanagers andtheir
subordinates acting together.
5. Definition
• “Managers should avoid the activity trap", getting so
involved in their day to day activities that they forget their
main purpose or objective. Instead of just a few top-
managers, all managers should:
participate in the strategic planning process, in order to
improve the implementability of the plan, and implement
a range of performance systems, designed to help the
organization stay on the right track.”
Peter Drucker
• “A process whereby superior and subordinate managers
of an Organization jointly define its common
goals, define each individual's major areas of
responsibility in terms Of results expected of him and
use these measures as guides for operating the unit and
assessing the contribution of each of its members."
George Odiome
6. What is MBO?
• Management by objectives (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. It aims to increase
organizational performance by aligning goals and
subordinate objectives throughout the organization.
Ideally, employees get strong input to identify their
objectives, time lines for completion, etc. MBO includes
ongoing tracking and feedback in the process to reach
objectives.
• Management by Objectives (MBO) was first outlined by
Peter Drucker in 1954 in his book 'The Practice of
Management'. In the 90s, Peter Drucker himself
decreased the significance of this organization
management method, 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."
7. MBO Principles
• Cascading of organizational goals and objectives
• Specific objectives for each member
• Participative decision making
• Explicit time period
• Performance evaluation and feedback
8. What are Objectives?
• Work Objectives
• Targets
• Tasks/Projects
• Behavioral Parameter
• Values
• Performance Improvement
• Developmental Objectives
9. MBO Process
• Collectively fixing
objectives.
• Collectively making a
plan.
• Subordinates
implements the plan.
• Collectively
monitoring
performance.
10. Where to use MBO?
• The MBO style is appropriate for knowledge-based
enterprises when your staff is competent.
• It is appropriate in situations where you wish to build
employees' management and self-leadership skills and
tap their creativity, tacit knowledge and initiative.
• Management by Objectives (MBO) is also used by chief
executives of multinational corporations (MNCs) for their
country managers abroad.
11. MBO is Action:
MBO in action.. INTEL
A Manager's Guide at Intel provides the following directions-
• Start with a few well-chosen over riding objectives.
• Set your subordinates objectives that fit in with your
overriding objectives.
• Allow your subordinates to set their own key results to
enable them to meet their objectives.
12. Advantages
• Develops result-oriented philosophy
• Formulation of dearer goals
• Facilitates objective appraisal
• Raises employee morale
• Facilitates effective planning
• Acts as motivational force
• Facilitates effective control
• Facilitates personal leadership
13. Limitation
• Time-consuming
• Reward-punishment approach
• Increases paper-work
• Creates organizational problems
• Develops conflicting objectives
• Problem of co-ordination
• Lacks durability
• Problems related to goal-setting
• Lack of appreciation
14. Balance Between Management
& Employee Empowerment
• The balance between management and employee
empowerment has to be struck, not by thinkers, but by
practicing managers.
• Turning their aims into successful actions, forces
managers to master five basic operations:
setting objectives,
organizing the group,
motivating and communicating,
measuring performance, and
developing people, including yourself.
15. Goal Setting Theory
• Goal setting: The first phase in the MBO process is to
define the organizational objectives. These are
determined by the top management and usually in
consultation with other managers.
• Once these goals are established, they should be made
known to all the members. In setting objectives, it is
necessary to identify "Key-Result Areas' (KRA).
• Many Believe that everyone already sets goals but its not
true. when groups do set goals, output invariably
increases over groups that do not set goals.
16. MBO In Organization
• Glaxo Laboratories (India) Limited, now GLINDIA.
• Xerox
• Hewlett-Packard (HP)
• Springfield Remanufacturing corporation
• DuPont
17. Conclusion:
• Management by objectives has become de facto practice
for management in knowledge-based organizations such
as software development companies. The employees
are given sufficient responsibility and authority to
achieve their individual objectives.
“What is not measured cannot be managed.”
