MANAGEMENT BY
OBJECTIVES(MBO)
PRESENTED BY:
AMIT TIWARI (07)
ASIM N. PAHWA (17)
AYUSH GUPTA (18)
BHUVAN MADAN (21)
HARLEEN K SETHI (34)
Introduction
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MBO is a system in which specific performance objectives are jointly
determined by subordinates and their superiors, progress toward objectives is
periodically reviewed, and rewards are allocated on the basis of this progress .
MBO involves subordinate managers’ participation in
planning and controlling activities. It is a fact that more
of their involvement will result in more commitment,
which will lead to more and better results.
Main purpose of MBO is that instead of just few top
managers, all managers of the firm should participate
in the strategic planning process, in order to improve
the implement ability of the plan.
FEATURES of MBO
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MBO is an approach and philosophy to Mgt.
It provides new thinking line and new techniques
MBO emphasizes setting goals that are tangible
verifiable and measurable.
MBO focuses attention on what must be accomplished
(goal) rather than how it is accomplished (method).
MBO by concentrating on key results area translates
the abstract philosophy of management into concrete
phraseology.
PROCESS OF MBO
Step 1. Setting of organizational purposes and objectives
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Usually objectives setting at top level with the
following sequence:
1. Defining the purpose of the organization
2. Setting long range and strategic e.g. questions like whether to
achieve growth through expansion or diversification etc.
3. Setting short – term organizational objectives
4. Setting divisional / departmental / sectional objectives
PROCESS OF MBO
Step 2 : Identifying Key Result Areas (KRA)
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The organizational objectives and planning come
together to define KRA. KRA’s are derived from
different stake holders.
KRA indicate
priorities of organizational performance.
Present state of health of an organization
Top Management’s perspective.
Examples of KRA are:
Profitability, market standing, innovation, productivity,
manager’s and worker’s performance, financial and
physical resources, public responsibility.
PROCESS OF MBO
Step 3: Setting subordinates Objectives
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All middle level managers are both superior and
subordinate except the top and lowest level.
Organizational objectives are achieved through
individuals
Hierarchy of setting objectives
Superior’s recommendation to subordinates
Subordinates in turn states his own objectives
Setting of final objectives of subordinates in consultation
Bridging the gap between the objectives set by superiors and
stated by the individual subordinate
PROCESS OF MBO
Step 4. Matching of resources with objectives
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Once the objectives are set carefully they indicate resource
requirement.
Proper allocation of resources ensures the achieving of
objectives.
Need and economy of resources can be viewed in a better way
because of the matching of objetives with resources.
PROCESS OF MBO
Step 5: Appraisal
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Appraisal (assessment / evaluation) is an on – going
process with a view to find out any deficiency in the
working and also to remove promptly.
It is a system which checks that everything goes
smoothly as per the plan.
PROCESS OF MBO
Step 6: Recycling
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Objective setting is a joint process which occurs
through the interaction between superiors and
Subordinates.
The change at any level affects the other levels.
Hence there is a requirement of objective recycling
Three aspects of recycling are
Action Planning
Performance Review
Objective setting
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MBO is often achieved using set targets.
MBO introduced the SMART method for checking
the validity of the objectives which should be
SMART
Specific
Measurable,
Agreed
Realistic, and
Time-Specific or Time related
BENEFITS OF MBO
Better management & utilization of resources
Aid in Planning
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Development of personnel/satisfaction
Better Team Work
Concentration on Key Result Areas
Objective Evaluation
MBO is Result Oriented
Sound Organizational Structure
DISADVANTAGES OF MBO
Time & Cost, Failure to teach MBO Philosophy, Problems in
Objective setting, Emphasis on short-term objectives, Inflexibility,
Frustration
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