Management By Objectives

Definition: -‘Management By Objectives’ is a comprehensive managerial system that integrates many key managerial activities in a systematic manner and that is consciously directed towards the effective and efficient achievement of organizational and individual objectives.

Evolving Concepts In MBO:

Early Impetus to MBO:

Since many centuries people have used their common sense and given importance to management by objectives. It was in 1954 that Peter F.Drucker first emphasized that objectives must be set in all areas where performance affects the health of the enterprise. About at the same time General Electric Co. was using MBO in its reorganization

Emphasis On Performance Appraisal:

In traditional appraisal programs personality traits were used for evaluating subordinates. But when MBO was implemented emphasis was given on performance rather than personality which lead to self appraisal and self development. The active involvement of subordinates leads to commitment and creates an environment for motivation.

Emphasis on short-term objectives and motivation:

Individual goal setting is an important factor in motivating employees. It is known that performance is higher when people have specific objectives than when they are asked simply to do their best.

Inclusion Of Long Range Plan In MBO:

In MBO programs that emphasis performance appraisals and motivation the focus tends to be on short term objectives, which may lead to undesirable managerial behavior. Due to these short-comings many organization now include long range and strategic planning in MBO programs.

The System Approach To MBO

MBO has undergone many changes. It has been used in performance appraisals as an instrument for motivating individual and in strategic planning. But there are still other managerial subsystems that can be integrated into MBO process. Various managerial activities need to be integrated into a system. For MBO to be a comprehensive system of managing indicates that most key managerial activities can and should be integrated with the MBO process. The degree of integration however differs for individual activities. For MBO to be effective it has to be viewed as a comprehensive system and it must be considered as a way of managing and not an addiction to the managerial job.

The Process Of Managing By Objectives:

The process starts at the top of an organization and has the active support of the chief executive, who gives direction to the organization. It is not essential the objective setting starts at the top. It can start at the divisional level, at the marketing level or even lower level.

As in all planning, one of the critical need in MBO is the development and

dissemination of consistent planning premises. No manager can be expected to set goals or establish plans and budgets without guidelines.

Setting preliminary objectives at the top: Given appropriate planning premises, the first step in setting objectives is for the

top manager to determine what he or she perceives to be the purpose or mission and the more important goals of the enterprise for a given period ahead. Certain goals should be scheduled for accomplishment in a much shorter period and others in a much longer period.

The goals set by the superior are preliminary based on an analysis and judgment as to what can and should be accomplished by the organization within a certain period. This requires taking into account the company’s strength and weakness in the light of available opportunities and threats. Most managers also find out the process of working out goals with the subordinates reveals both problems they should deal with and the opportunities they were not previously aware of.

When setting objectives, the manager also establishes measure of goal accomplishment. If verifiable objectives are developed, these measures, whether in sale dollars profits, percentages, cost level, or program execution, will normally built into objectives.

Clarifying Organizational Roles:

The relationship between expected results and the responsibility of attaining is often overlooked. Ideally, each goal and sub goal should be one particular person’s responsibility. Analyzing an organization structure, however, often reveals that the responsibility is vague and the clarification or reorganization is needed. Sometimes it is impossible to structure an organization so that a given objective is someone’s personal responsibility.

Setting Subordinates Objectives: After making sure that subordinate managers have been informed of pertinent

general objectives, strategies, and planning premises, the superior can then proceed to work with subordinates in setting their objectives. The superiors ask what goals the subordinates believe they can accomplish, in what time period and with what resources.

Superiors must also be patient counselors, helping their subordinates develop consistent and supportive objectives and being careful not to set goals that are impossible to achieve. One of the things that can weaken a program by objectives is to allow managers to set unrealistic objectives. One of the major advantages of carefully setting up a network of verifiable goals and a requirement for doing so effectively is trying in the need of capital, materials and human resources at the same time. All managers at all levels require these resources to accomplish their goals. By relating these resources to the goals themselves, superiors can better see the most effective and the most economical way of allocating them

Recycling of objectives: Objectives can hardly be set by starting at the top and dividing them up among

subordinates nor should they be started from the bottom. A degree of recycling is a must. Top managers may have some idea of what their subordinates’ objectives should be; but they will almost certainly change these preconceived goals as the contributions of the subordinates come into focus. Thus setting objectives is not a joint process but also an interactive one.

Benefits of Management by Objectives:

1. Improvement of managing : Managing Sense in a Manager Improves.2. Clarification of organization: Management by objectives forces managers to

clarify roles i.e. organizational roles and structures.3. Encouragement of Personal Commitment: It encourages people to commit

themselves to their goals.4. Development of Effective Controls: MBO helps in effective planning, it also

aids in developing effective controls.

Weakness of Management by Objectives:

1. Failure to teach the philosophy of MBO.2. Failure to give guidelines to goal setters.3. Difficulty of setting goals.4. MBO programs are set for short terms.5. Danger of inflexibility.