2. OUT LINES
Introduction
Definition of MBO
Importance of MBO
Principles of MBO
Process of MBO
How to make MBO effective
Advantages of MBO
Disadvantages of MBO
Limitations of MBO
3. Introduction
Peter Drucker in 1954.
Concept of planning
Accomplishment of objectives through participation of all
concerned persons
Participative and democratic style of management
The principle behind Management by Objectives (MBO) is
to make sure that everybody within the organization has a
clear understanding of the aims, or objectives, of that
organization, as well as awareness of their own 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.
4. Definition of MBO
MBO is "a dynamic system which seeks to integrate the
company's needs to clarify and achieve its profits and
growth goals with the manager's need to contribute and
develop himself. It is a demanding and rewarding style of
managing a business.“
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.
Management by objective is a philosophy of
management by which every managerial activity
must be directed at a specific objective
5. Importance of MBO
1-To increase organizational performance by aligning
goals and subordinate objectives throughout the
organization.
2-Motivation – Involving employees in the whole process of
goal setting and increasing employee empowerment. This
increases employee job satisfaction and commitment.
3-Better communication and Coordination .
4-Clarity of goals and plans at all levels.
5-Subordinates tend to have a higher commitment to
objectives they set for themselves than those imposed on
them by another person.
6. 6-Managers can ensure that objectives of the subordinates
are linked to the organization's objectives.
7-Evaluating employee performance according to
predetermined standard.
Principles of MBO
Cascading of organizational vision, goals and objectives
Specific objectives for each member
Participative decision making
Explicit time period
Performance evaluation and feedback
9. 1)Goal setting:
Subordinate should actively participate in goal and objective setting.
Objective should be (SMART)
Specific, measurable, achievable, realistic, and time tabled.
2)Develop action plan:
Goal setting should be translated into action plan. It requires
assignment of specific responsibilities to different departments,
division and individuals.
It also requires allocation of necessary resources needed to perform the
assigned responsibilities.
Time dimensions are also to be decided in order that targets are
reached without any delay.
10. 3)Monitor progress:
Monitor and evaluate employee actual performance against
the set objective at agree interval, the manager and
subordinate meet to discuss progress. At this meeting some
modification can be made to the origin goals.
4)Appraise Overall Performance
It is the last step to evaluate performance annually and take
corrective actions according to the evaluation to avoid
deviation from predetermined objectives. Also used to
determine targets for next year or modification of goals if
needed.
And cycle of MBO is repeated.
11. How to make MBO effective:
Managers should be trained in MBO philosophy and
procedures before installing the system.
Effective Feedback.
Encouraging employee participation.
Top management support.
Formulating Clear Objectives
Advantages of MBO
1.Improves employee motivation
2.Improves communication in the organisation
3.Flags up and highlights training needs required to achieve objectives
12. 4.Improves overall performance and efficiency
5.Attainment of goals can lead to the satisfaction of Maslow’s higher
order needs
6.Develops result-oriented philosophy
7.Means of planning and control
8.Facilitates personal leadership.
9.Basis for organizational change
10.Identify problems
11.Increase employee commitment as they participate in goal
setting.
12.Enhance spirit of team work
13. Disadvantages of MBO
1) Subordinate feels uncomfortable
2) Lacks Objective clarity
3) Too much multi-tasking !!!
4) Low initial goal set by subordinates
5)Requires the cooperation of all employees to succeed
6)Can be bureaucratic and time consuming (meetings, feedback)
7)Can encourage short-term rather a more focused long-term growth
8)Objectives may go out of date and can restrict staff initiative and
creativity
9)May de-motivate staff if targets are too high and unrealistic, also if
imposed rather than agreed
14. Limitations of MBO:
Time-consuming
Failure to teach MBO philosophy
Reward-punishment approach
Increases paper-work
Creates organizational problems
Develops conflicting objectives
Problem of co-ordination
Inflexibility