Santhosh Zacharias

Management by Objectives (MBO)

MBO, was first popularised by Peter Drucker in 1954, it is a process of agreeing

within an organization so that management and employees buy into the
objectives and understand what they are. It has a precise and written description
objectives ahead, timelines for their motoring and achievement.

The employees and manager agree to what the employee will attempt to achieve
in a period ahead and the employee will accept and buy into the objectives.

Definition

“MBO is a process whereby the superior and the mangers of an organization

jointly identify its common goals, define each individual’s major area of
responsibility in terms of results expected of him, and use these measures as
guides for operating the unit and assessing the contribution of each of its
members.”

Features of MBO

1. MBO is concerned with goal setting and planning for individual managers
and their units.
2. The essence of MBO is a process of joint goal setting between a supervisor
and a subordinate.
3. Managers work with their subordinates to establish the performance goals
that are consistent with their higher organizational objectives.
4. MBO focuses attention on appropriate goals and plans.
5. MBO facilitates control through the periodic development and subsequent
evaluation of individual goals and plans.

Steps in MBO Process

1. Describe the rolls and mission: who does what?

2. Define key result areas’
3. Identify the key indicators of effectiveness: ‘What is good performance?’
4. Set objective with a bottom-up process described above: “To (action verb),
(single key result) by (target date) at (cost, if appropriate).” Eg. : “To
increase average spot prices 15% by the end of second quarter at current
expense level.”
5. Decide of the task oriented process-oriented action plan
6. Monitor progress of the team
7. Team must have continuous communication to everyone including
management. A to and fro communication to communicate how both are
meeting their objectives.
8. MBO cannot work just macro level, but must be managed in a micro level
and involve everyone in the process. Everyone must know: what the
overall objectives are, what the organizations’ departments and teams’,
what goals are, etc.
 9. Finally, the objective in an MBO system must be intrinsically linked to an
organization’s mission statement. Every objective must help accomplish
the overall mission and the managers must “manage the mission.”

MBO in the Human Resource Management perspective

Here management set specific and measurable objectives with each

employee and periodically discuss the latter’s progress towards these goals. This
is a technique participatively set goals are agreed up on by the manager and the
employee, that are tangible, verifiable and measurable.

MBO focuses on what must be accomplished, hence there is a goals setting and
appraisal programmes involving 6 steps:

1. Set the organization’s goal: Establish organizations set goals for the
coming year.
2. Set Departmental goals: departmental head take broader company
goals and with their superiors they jointly set their goals for their
department.
3. Discuss departmental goal: Departmental goals are put to
discussion in a departmental meeting with the subordinates.
Departmental heads require the subordinates to set their own
preliminary goals and focus on what they can personally do to achieve
departmental goals.
4. Define expected results: In the next step, departmental heads and
subordinates agree to set departmental and individual goals in the
short term.
5. Performance reviews: Department heads compare each employee’s
actual and targeted performance, periodically or annually. Review is
conducted to assess ad reward one’s overall performance.
6. Provide feedback: both the parties discuss and evaluate the
progress, find out the discrepancies and rectify the mistake made in
the past and strengthen the workforce for the expected target in the
next time.

Conclusion

I. Setting a measurable task is not an easy thing to do. It is great deal to set
goals for every levels of the organization.

II. When everything goes so rigidly some qualitative aspects may be ignored
(such as employee attitudes, job satisfaction etc.).

III. Often superior set the goal at a frustrating high level, whereas subordinates
may wish to have it at a comfortable level.

IV. Some time short term goals may take precedence over the long term goals.
The only way to overcome this problem is to allow the managers to explain, co-
ordinate and guide the performance in a persuasive and democratic way.
V. Jointly set targets are to be fair and attainable.

VI. Realistic goals are set jointly and they have to familiarize with the results for
which they are responsible.

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