MBO (Management by Objectives)
INTRODUCTION:
MBO (Management by Objectives) Management by objectives (MBO) is a
process whereby superiors & subordinates jointly identify the common
objectives,set the results that should be achieved by subordinates, asses the
contribution of each individual, and integrate individuals with the organization so
as to make best use of organizational resources.
Definition
―MBO is a comprehensive managerial system that integrates many key
managerial activities in a systematic manner, consciously directed toward the
effective & efficient achievement of organizational objectives.
―MBO is a result centered, non-specialist, operational managerial process for the
effective utilization of material, physical & human resources of the organization by
integrating the individual with the organization & organization with the
environment.
Objectives of MBO:
1. To measure and judge performance
2. To relate individual performance to organizational goals
3. To clarify both the job to be done and the expectations of accomplishment
4. To foster the increasing competence & growth of these subordinates
5. To enhance communication between superior and subordinates
6. To serve as a basis for judgments about salary and promotion
7. To stimulate the subordinates motivation and
8. To serve as a device for organizational control and integration.
Characteristics of MBO
1. MBO is an approach & philosophy to management & not merely a technique.
2. On the other hand, MBO is likely to affect every management technique. MBO
employs several technique but it is not merely the sum total of these techniques. It
is a way of thinking about management.
3. MBO is bound to have some relationship with every management technique.
Certain degree of overlapping is there. In fact often MBO provides the stimulus for
the introduction of new techniques of management & enhances the relevance &
utility of the existing ones.
4. The basic emphasis of MBO is an objectives.MBO is also concerned with
determining what these results & resources should be. This MBO tries to match
objectives & resources.
5. The MBO is characterized by the participation concerned managers in objective
setting, the performance reviews, and his performance.
6. Periodic review of performance is an important feature of MBO.
7. Objectives in MBO provide guidelines for appropriate systems procedures.
Steps in process of MBO
1. Setting of Organizational Purpose & Objectives
2. Identify the Key Result Areas(KRAs)
3. Establishment of the objectives of the supervision
4. Recommending objectives for the subordinates by the superiors.
5. Setting subordinates objectives
6. Periodic review of the performance of the subordinates.
7. Review of the performance by the superiors.
8. Final review of performance by the superiors.
9. Performance appraisal by superiors.
10. Providing feedback to the top level.
Steps of MBO
1. Setting Goals
1. Top managers formulate the overall organizational goals
2. Middle managers work with first line managers to set goals
3. This strengths organization‘s overall goals and commitment.
2. Planning During action planning, managers decide in the who, what, whom, and
how detail needed to achieve each objective.
Implementing plans
1. To control their performance managers must be allowed to implement plans in
their own way.
2. Element of self control
Reviewing performance
Managers review the performance of the people by supervisor
Evaluate the plans to achieve individual & group goals
Discuss how can these obstacles be removed.
MBO Process Cycle
Benefits of MBO
1. Better management of organization
i. Clarity of objectives
ii. Role clarity
iii. Periodic feedback of performance.
iv. Participation by managers in the management process
v. Realization that there is always scope for improvement of performance in every
situation.
2. Clarity in organizational action
3. Personnel satisfaction
4. Basis for organizational change.
Limitations of MBO
1. Time and cost
2. Failure to teach MBO philosophy
3. Problems in objective setting
4. Emphasis on short- term objectives
5. Inflexibility
6. Frustration
Pre requisites for installing MBO program
1. Purpose of MBO
2. Top management support
3. Training for MBO
4. Participation
5. Feedback for self direction & self control
6. Other factors:-
i. Implementing MBO at lower levels
ii.MBO & Salary Decision
iii. Conflicting objectives.
