Management by objective

• 1. Management By Objectives

2. 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. The term "management by objectives" was first popularized by Peter Drucker in his 1954 book The Practice of Management. 3. The essence of MBO is participative goal setting, choosing course of actions and decision making. An important part of the MBO is the measurement and the comparison of the employees actual performance with the standards set. Ideally, when employees themselves have been involved with the goal setting and choosing the course of action to be followed by them, they are more likely to fulfill their responsibilities. 4. MBO is both a physical and a technique of management. It represents a rational and systematic approach to management, wherein measurable goals are set up in consultation with subordinate managers and the contribution of each individual is judged in terms of such goals. 5. According to George Odiorne MBO is a process whereby the superior and the subordinates manages of an enterprise jointly identify its common goals, define each individuals major areas of responsibility in terms of the result expected of him, and us these measures as guides for operationg the unit and assessing the contribution of each of its members. 6. According to John W. Humble MBO is a dynamic system which seeks to integrate the companys need to clarify and achieve its profit and growth goals with the managers need to contribute and develop himself. It is a demanding and rewarding style of managing a business. 7. MBO is a comprehensive management approach focusing on objectives or expected results for providing a framework for organisational and managerial decisions. The emphasis in MBO is that the Objective should be the central focus in the management process. 8. Let people know what is expected of them: This concept assumes People perform better when they know what is expected and can establish a relationship between individual goals and organisational goals. Allow employees to participate in setting goals: This concept assumes People want to participate in the determination of goals. 9. Tell people how they are doing: This concept assumes that people need to know how are they performing Reward on the basis of accomplishment: This concept assumes that people need recognition, opportunities for growth, and a sense of achievement in their work. 10. Develop Organisational Goals Establish specific goals Formulate action plans Periodic review Performance appraisal 11. Develop organisational goals: The first step concerns the preliminary activities directed towards an understanding of the important employee needs, jobs, technology and external influences. Every employee is required to describe his/her particular job, its contents, duties, requirements and responsibilities. 12. Establish specific goals: Under MBO, goal setting is a multistage process. First of all the overall goals of the organisation are laid down in all the key-result areas . These organisational goals are laid down keeping in view the internal and external environment of the organisation. On the basis of organisational goals , the goals of individual departments and sections are decided . Managers in every department set its departmental goals. 13. Formulate Action Planning: Goals reflect the ends of managerial performance . Action plans provide means for their attainment. Action planning involves determining what, who, when, where, and how much is needed to achieve a given objective. It is a practical way of establishing a link between objectives and programmes of implementation. There are six steps in action planning: 14. Steps Of Action Planning Specify the major tasks and activities required to attain the objectives. Construct a schedule for performing the activities in the proper sequence. Clarify roles and relationship by delegating appropriate authority for each activity. Estimate time requirements for each major activity. Determine the resources required for each activity. Clarify deadlines and modify the action plan, if required. 15. Periodic Review: After regular time intervals the subordinate and superior get together to review the progress towards the attainment of goals. The focus of these meetings is not only to see what progress has been made, but to adjust the targets in case environmental charges require. 16. Performance appraisal: At the end of the goal setting period, superior and subordinate formally meet to review the results. Emphasis is placed on analysis, discussion and feedback to the next MBO cycle. At the end of this step the cycle is repeated for the next period. Rewards are decided on the basis of final appraisal. The focus is on improving performance and on improving performance and on development of individuals rather than penalising them. 17. MBO offers the following Advantages: Improved Planning: MBO involves participative decision-making which makes objectives explicit and plans more realistic Team Work: MBO helps to clarify the structure and goals of the organization. Harmony of objectives enables individuals at various levels to have a common direction. 18. Motivation and commitment: Participation of subordinates in goal setting and performance reviews tend to improve their commitment to performance. MBO ensures performance by converting objective needs into personal goals and by providing freedom to subordinates. Accurate appraisal: MBO replaces trait based appraisal by performance based appraisal. Quantitative targets for every individual enable him to evaluate his own performance. Performance under MBO is innovative and future oriented. It is positive, more objective and participative. us to substitute management by self- control, for management by domination.Control becomes more effective due to verifiable standards of performance. Subordinates know in advance how they will be evaluated. 19. Effective Self-Control: A clear set of verifiable goals provides effective standards for self-control. Managerial efforts are concentrated on critical areas of performance. Leadership is freed from routine tasks and therefore, concentrates its efforts and time on piloting the enterprise through the turbulent environment. MBO provides a mechanism by which managers can ensure that enterprise is moving in the right direction. 20. MBO has several weaknesses, some of which are inherent in the system while others arise while introducing it. MBO appears to be simple philosophy but very few person understand it fully. The main hurdles in d successful application of MBO are as follows: Goal-Setting Problems Time consuming Pressure-oriented Participation Problem Inflexibility 21. MBO is used for different purposes. Some organisations use MBO to clarify the employees job , others use it to motivate employees while still other organisations apply MBO as a performance control mechanism to check performance. In this way MBO process is directly related to all the major functions of management. Thus, MBO is a result-oriented and rational philosophy. It permits management by results in place of management by crisis. Many organisations both in the private sector and the public sector have benefited a lot through the application of MBO. 22. MBO ???