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CHAPTER -2 PLANNING

MBO
 Is a comprehensive managerial system that integrates many key
managerial activities in a systematic manner and that is continuously
directed towards effective and efficient achievement of
organizational and individual objectives.

MBO – Management By Objectives MBO = comprehensive managerial system

(many key managerial activities)

Effective & Efficient achievement of objectives

(organizational and individual)

A process of mutually agreed upon goals and using those goals to

evaluate employee performance

Impetus to MBO Management By Objectives (MBO)

 Management By Objectives (MBO)
 PETER F DRUCKER (1954):Self control & self direction
 __ objectives must be set in all areas where performance
affects the health of enterprise.__ ex: GE Company
 Specific performance goals are jointly
determined by employees and managers
 Progress toward accomplishing goals is
periodically reviewed
 Rewards are allocated on the basis of progress
toward the goals
 Key elements of MBO:
 Goal specificity, participative decision making,
 an explicit performance/evaluation period,
feedback.

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Systems Approach to MBO Steps in a Typical MBO Program

Jointly Set Objectives Develop Action Plans Review Objectives and Give Rewards for
to Achieve Objectives Provide Feedback Achieved Objectives

Overall objectives Managers and

and strategies of employees work on
organization action plans together

Objectives allocated to Action plans

divisional and implemented
departmental units

Specific objectives
collaboratively set
with employees

Does MBO Work? Benefits of Management by Objectives

 Reason for MBO Success
 Top management commitment and involvement
 Potential Problems with MBO Programs
 Not as effective in dynamic environments that
require constant resetting of goals
 Overemphasis on individual accomplishment may
create problems with teamwork
 Clear goals lead to high Motivation levels.
 Improve managing through results-oriented
planning.
 Clarify organizational roles, structures and the
delegation of authority.
 Encourage personal commitment to their own
and organizational goals.
 Facilitate effective controlling, measuring results,
and leading to corrective actions.

Failures of Management by Objectives

 Many weakness of the system despite all the
Advantages.
 1. Mostly due to shortcomings in applying the MBO
concepts.
 2. Failure to give guidelines to goal setters.
 3. It is difficult to set verifiable goals with the right degree
of flexibility.
 4. Unreasonable Objectives and Unethical activities.
 5. Over use of quantitative Goals.
 6. Attempt to use numbers in the areas where they are
not applicable.