MANAGEMENT BY

OBJECTIVES

MBO
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.
 MBO includes ongoing tracking and feedback in the
process to reach objectives.
Core Concepts of MBO
 According to Drucker managers should "avoid
the activity trap“. Instead of just a few top
managers all managers should:
 participate in the strategic planning process, in
order to improve the implementation of the
plan, and
 implement a range of performance systems
designed to help the organization stay on the
right track.
Managerial Focus
 Focus on Results
 “Negotiating a contract of goals“
 Breaking down into more specific goals
or key results
Main Principle of MBO
 The principle behind Management by
Objectives (MBO) is to make sure that
everybody within the organization understands
aims, objectives, their roles and responsibilities
in achieving 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.
Where to Use MBO
Appropriate for knowledge based enterprise
when the staff is competent.
Appropriate in situations where we wish to build
employees' management and self leadership,
skills and tap their creativity, knowledge and
initiative.
Setting Objectives
 Objectives are written down for each level of
the organization,
 Individuals are given specific aims and
targets.
 Provides focus
 Objectives precise and their number is kept
small.
 Setting Objectives
 Fit in with the overall company objectives set by the
board of directors.
 Measure the performance of managers in the key
result areas
 Activities involved in MBO
 Balance between management and employee
empowerment to be struck. Turning aims into
successful actions, forces managers to master five
basic operations:
 Setting objectives,
 organizing the group,
 motivating and communicating,
 measuring performance, and
 developing people
Features of MBO
 Approach and philosophy to management, can be
applied in all parts of the organization.
 Matches objectives & resources.
 Participation of managers.
 Future oriented performance review.
 Reward and punishment systems are attached with
the achievement of objectives.
The Five-Step MBO Process
Benefits of MBO
 Better Managing (Clarity of objectives,
role clarity, periodic feedback of
performance, participation by managers,
Scope for improved performance).
 Clarity in organizational action.
 Personnel Satisfaction.
 Basis for Organizational Change.
Problems & Limitations of MBO
 Time & Cost
 Failure to teach MBO Philosophy.
 Problems in Objective Setting.
 Emphasis on short- term objectives.
 Inflexibility
Prerequisites for installing MBO
programme
 Purpose of MBO
 Top Management Support
 Training for MBO
 Participation
 Feedback for self-direction and self-control
 Other factors:
• Implementing MBO at lower levels
• No Conflicting Objectives
 Types of Objectives
 Routine objectives
 Innovative objectives
 Improvement objectives
 The objectives must be:
 focused on a result, not an activity
 consistent
 specific
 measurable
 related to time
 attainable