Management by Objectives

Foundation course in
“Fundementals of management”
for Batch 19,August 2010.
 What is management by
Objectives?

• Management by objectives(M.B.O)is a
comprehensive managerial system that
integrates many key managerial activities
in a systematic manner that is consciously
directed towards the effective and efficient
achievement of organisational and
individual objectives.
 Early contributions to MBO.
• 1) Peter F.Drucker in 1954 acted as the
catalyst for MBO by advocating a
philosophy of control and self-direction in
all levels of management.
• Douglas Mc Gregor in 1957 stressed on
management by objectives as the right
way to appraise managerial ability rather
than using personality traits as the
evaluation criteria.
 The procedures involved in MBO
• Setting of Basic goals in the highest levels of the
organisation.
• Identifying the specific roles of those personnel who are
responsible for attaining these goals.
• Setting and modifying specific roles for all subordinates.
• Developing monitoring and conrol features at all levels of
management.
• Evaluating the progress of the efforts of the personnel in
reaching specific objectives.
• Ensuring sub-objectives have synergy with overall goals.
• Taking corrective action at all relevant stages.
 Unique features and advantage of
the MBO process
• The principle behind Management by
Objectives (MBO) is to create empowered
employees who have clarity of the roles
and responsibilities expected from them,
understand their objectives to be achieved
and thus help in the achievement of
organizational as well as personal goals.
Important features and advantages
of MBO
• Motivation – Involving employees in the whole
process of goal setting and increasing employee
empowerment increases employee job
satisfaction and commitment.
• Better communication and Coordination –
Frequent reviews and interactions between
superiors and subordinates helps to maintain
harmonious relationships within the enterprise
and also solve many problems faced during the
period.
• Clarity of goals – With MBO, came the concept
of SMART goals
 SMART
1. Specific
2. Measurable
3. Achievable
4. Relevant, and
5. Time bound.
• The goals thus set are clear, motivating
and there is a linkage between
organizational goals and performance
targets of the employees.
• The focus is on future rather than on past.
Goals and standards are set for the
performance for the future with periodic
reviews and feedback.
 Benefits of implementing MBO.

• Results in more transparency of group

objectives.
• Smoothens Inter-departmental coordination.
• Employees have better understanding of the
structure of their organisation and the role of
each employee.
• Employees are more commited to achieve
objectives which have been set with their
participation.
• Control measures are better organised when
MBO is in operation.
 Downside of implementing MBO.
The weaknesses are mainly due to bad implementation
such as:
• The participants are not fully aware of the concepts and
the benefits.
• The employees may not be emotionally mature to handle
self-control and self direction.
• Goals are normally very difficult to set.
• Goals and related objectives may be inflexible and
incompatible for the changing environment.
• Sometimes quantifiable goals are overemphasised at the
cost of value oriented goals.