Management By Organisation

8/7/2019 Management By Organisation

1/19

Management ByObjectives.

Amit S. Rajpal

Jasmeet S. Kohli

Yogesh G. Raghani


2/19

What is MBO?

Management by objectives (MBO) is a systematic and organizedapproach that allows management to focus on achievable goals and toattain the best possible results from available resources. It aims toincrease organizational performance by aligning goals and subordinateobjectives throughout the organization. Ideally, employees get strong

input to identify their objectives, time lines for completion, etc. MBOincludes ongoing tracking and feedback in the process to reachobjectives.

Management by Objectives (MBO) was first outlined by Peter Druckerin 1954 in his book 'The Practice of Management'. In the 90s, Peter

Drucker himself decreased the significance of this organizationmanagement method, when he said: "It's just another tool. It is not thegreat cure for management inefficiency... Management by Objectivesworks if you know the objectives, 90% of the time you don't."


3/19

THE NATURE & PURPOSE OF MBO

MBO is concerned with goal setting and planning for individual

managers and their units.

The essence of MBO is a process of joint goal setting between a

supervisor and a subordinate.

Managers work with their subordinates to establish performance goals

that are consistent with higher organizational objectives.

MBO helps clarify the hierarchy of objectives as a series of well-defined

means-ends chains.


4/19

Essential Steps for MBO

Set Goals

The most difficult step.

Develop Action Plan For both workgroups and individuals.

Review Progress/ Take corrective action

Periodic during the year.

Appraise Overall Performance. Review Annual Goals.


5/19

Essential Steps for MBO

Set GoalsThe most difficult step.ConcreteSpecific target and timeframeAssign responsibility

Develop Action PlanCourse of actionFor both workgroups and individuals

Review ProgressPeriodicity?

Course corrections

Appraise Overall Performance.How are we doing?Do we need to restate our goals?


6/19

MBO Principles

Cascading of organizational goals and objectives.

Specific objectives for each member. Participative decision making.

Explicit time period.

Performance evaluation and feedback.


7/19

Main Principle of MBO

The principle behind Management by Objectives (MBO) is to

make sure that everybody within the organization has a clear

understanding of the aims, or objectives, of that organization, as

well as awareness of their own roles and responsibilities inachieving those aims. 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.


8/19


9/19

Setting Objectives

In Management by Objectives (MBO) systems, objectives are writtendown for each level of the organization, and individuals are givenspecific aims and targets. "The principle behind this is to ensure thatpeople know what the organization is trying to achieve, what their partof the organization must do to meet those aims, and how, as

individuals, they are expected to help. This presupposes thatorganization's programs and methods have been fully considered. If theyhave not, start by constructing team objectives and ask team members toshare in the process."

"The one thing an MBO system should provide is focus", says Andy

Grove who ardently practiced MBO at Intel. So, have your objectivesprecise and keep their number small. Most people disobey this rule, tryto focus on everything, and end up with no focus at all.

Contd


10/19

Setting Objectives

For Management by Objectives (MBO) to be effective, individualmanagers must understand the specific objectives of their job and howthose objectives fit in with the overall company objectives set by theboard of directors. "A manager's job should be based on a task to be

performed in order to attain the company's objectives... the managershould be directed and controlled by the objectives of performance ratherthan by his boss."

The review mechanism enables leaders to measure the performance oftheir managers, especially in the key result areas: marketing; innovation;

human organization; financial resources; physical resources;productivity; social responsibility; and profit requirements.


11/19

Six MBO Stages

Define corporate objectives at board level

Analyze management tasks and devise formal job specifications,

which allocate responsibilities and decisions to individual managers

Set performance standards

Agree and set specific objectives

Align individual targets with corporate objectives

Establish a management information system to monitor achievements

against objectives


12/19

MBO Strategy : Three Basic Parts

All individuals within an organization are assigned a special set ofobjectives that they try to reach during a normal operating period.

These objectives are mutually set and agreed upon by individuals andtheir managers.

Performance reviews are conducted periodically to determine howclose individuals are to attaining their objectives.

Rewards are given to individuals on the basis of how close they cometo reaching their goals.


13/19

MAKING MBO PROCESS EFFECTIVE

If MBO is to be successful,it must start at the top ofthe organization

Employees must be educated about what MBO is and whattheir role in it will be.

Managers must implement MBO in a way that is consistentwith overall organizational goals.


14/19

THE EFFECTIVENESS OF MBO

- STRENGTHS Organizations create a powerful motivational system for their

employees by adopting MBO.

Through the process of discussion and collaboration, communication is

greatly enhanced.

With MBO performance appraisal may be done more objectively.

MBO helps identify superior managerial talent for future promotion.

Contd


15/19


- STRENGTHS MBO provides a systematic management philosophy.

MBO facilitates control through the periodic development and

subsequent evaluation of individual goals and plans.


16/19


- WEAKNESSES

The major reason for MBO failure islack of top managementsupport .

goals and plans cascading throughout the organization may not be those

of top management.

Some firms mayoveremphasize quantitative goals.

Some managers will not or cannot sit down and work out goals with

their subordinates


17/19

Advantages Of MBO.

MBO programs continually emphasize what should be donein an organization to achieve organizational goals.

MBO process secures employee commitment to attainingorganizational goals.


18/19

Disadvantages Of MBO.

The development of objectives can be time consuming, leavingboth managers and employees less time in which to do their

actual work.

The elaborate written goals, careful communication of goals,and detailed performance evaluation required in an MBO

program increase the volume of paperwork in anorganization.


19/19

Management By Organisation

Documents