MANAGEMENT BY OBJECTIVES

INTRODUCTION
Management by objectives has gained immense popularity during the past two or three decades. The
growing literature and increasing practice in organizations in different countries confirm this. Management by
objectives is a boon for health care administration. The concept of management by objectives was introduced by
Peter Drucker in 1954. However many elements used in MBO were actually developed earlier, George Odiorne,
Dale D, McConkey, and others are credited with giving MBO a substantial boost in mid 1960s. In India, many
managers have learned about MBO and have applied it in their organizations. In many organizations, MBO has
become the way of management process. Though these concepts have usually been designed with business and
industries in mind, but it also has important implications in nursing.
CONCEPT OF MBO
MBO is both a philosophy and approach of management. It is a process whereby superiors and subordinates
jointly identify the common objectives, set the result that should be achieved by the subordinates, assess the
contribution of each individual, and integrate individuals with the organization so as to make best use of
organizational resources. Thus MBO is a system for integrating managerial activities.
WHAT IS MBO?
MBO is defined as a process whereby the superior and subordinate managers of an organization jointly identify its
common goals, define each individual’s major area of responsibilities in germs of the results expected of an
individual, and use these measures as guides for operating the unit and assessing the contribution of each of its
members. -Odiorne.
MBO is a comprehensive managerial system that integrates many key managerial activities in a systematic manner,
consciously directed towards the effective and efficient achievement of organizational objectives.
- Heinz Weihrich and Harold Koontz
MBO is a result-centered, non specialist, operational managerial process for the effective utilization of material,
physical and human resources of the organization by integrating the individual with the organization and
organization with the environment. - S K Chakravarthy.
The philosophy of MBO is a collective endeavor to create an environment in which each individual is provided
with optimum opportunity to realize his full potential. It is a system in which each employee participates in
determining personnel objectives as well as the emans by which he or she hopes to achieve these objectives. It
makes each employee a manager of his or her own particular work. -George Terry
FEATURES OF MBO
Based on the definitions features are identified as follows:-

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Objectives at all levels.
The basic emphasis of MBO is on objectives. Whereas the various technique of management help in
measurement of results in resources, MBO is also concerned with determining what these results
and resources should be. This is possible because MBO tries to match objectives and resources.
Objectives are established for all levels of the organizations, including the corporate level, all the
units or departments and individual mangers. Objectives provide the means for integrating the
organization with its environment, its subsystem and people. Thus corporate objectives are means to
integrate the organization with its environment, the unit or the departmental objectives integrate the
organization with its parts, while the objectives at the individual levels integrate the managerial
contributions with the needs of the organization.

Participation of concerned managers in objective setting and performance reviews.

MBO is characterized by the participation of concerned managers in objective setting and
performance reviews. Therefore, each manager takes active part in setting objectives for himself and
also evaluating his performance about how he is performing. The total management process
revolves round the objectives set jointly by the superior and subordinates. Therefore, managers have
the opportunity for clarifying their job relationships with peers, superiors and subordinates. This
process clarifies the role very sharply in terms of what one is expected to achieve.
Periodic review of performance.
Periodic review of performance is an important feature of MBO. The performance review is held
regularly, normally once in a year. It emphasis initiative and active role by the manager who is
responsible for achieving objectives. The review is future – oriented because it provides basis for
planning and corrective actions.
Appropriate systems and procedures.
Objectives in MBO provide guidelines for appropriate systems and procedures. Resource allocation,
delegation of authority is determined on the basis of objectives. Similarly reward and punishment
system is attached with the achievement of objectives.
Role clarity
As an approach to management, with objective orientation as its essence, 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 and

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 enhances the relevance and utility of the existing ones. MBO is a joint application of a number of
priciples and techniques. It works as an integrating device.
Multiple accountability.
MBO is an approach and philosophy to management and not merely a technique. A management
technique can be applied in selected parts of the organization and will have limited implication for
its other parts. For example, various control technique like inventory control have their implication
in their respective field and have remote effect on other elements of the organizational process like
recruitment and selection process. On the other hand, MBO is likely to affect every management
practice in the organization. MBO employs several technique but it is not merely the sum-total of all
these techniques. It is a particular way of thinking about management.
PRINCIPLES OF MBO
1. Unity of management action is more likely to occur when there is pursuit of a common objective.
2. The greater the focus on results on a time scale, the greater likelihood of achieving them.
3. The greater the participation in setting meaningful work with accountable results, the greater the motivation
for completing it. It requires the following:
a. Clarification of organizational objectives
b. Specific objectives for each member
c. Participative decision making
d. Explicit time period
e. Performance evaluation and feedback.
OBJECTIVES / PURPOSES OF MBO
To translate mission statements in to operational terms.
To give directions and set standards for the measurement of performance.
To set both long term and short term objectives.
The objectives of MBO must fullfll the SMART criteria:
S – specific
M- Measurable
A- Agreed
R- Realistic
T- Time specific

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The ultimate objective of MBO is to aid each manager and supervisor in promoting the most effective use of the
human resources such that each member, as a part of a team, makes an optimum contribution to the organizational
performance and profitability.
PROCESS OF MBO
1. SETTING OF OBJECTIVES AT THE TOP LEVEL
First step in setting objectives is for the top manager is to determine the purpose or mission of the
organization under given appropriate planning premises. These are based on the given analysis and
judgment of answers to the questions like “ why does the organization exist”, “what should be our
business”. Usually the objective setting starts at the top level of the organization and moves downward to
the lowest managerial levels. This will go in a sequence like
o Defining the purpose of the organization
o Long range and strategic objectives
o Short term organizational objectives
o departmental, unit objectives
o individual manager’s objectives.
2. IDENTIFYING KEY RESULT AREAS ( KRA s)
Organizational objectives and planning premises together provide the basis for the identification of KRAs.
KRAs are derived from expectations of stakeholders and it indicates the priorities for organizational
performance. It also indicates the present state of an organizational health and top management perspective
for the future. Exmples of KRAs in business are :
o Profitability
o Innovation
o Worker performance
o Financial and physical resources
o Manager performance
o Development of organizations
o Labour relations
Even though KRAs are more durable the list of KRAs gets considerably changed over period in
response to new needs and oppurtunities.
3. CLARIFYING OORGANIZATIONAL ROLES
Each goal and sub goal should be of one person’s clear responsibility. Hence the specific part of each
coordinating managers contribution to the program goal should be identified.

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4. SETTING SUBORDINATES OBJECTIVES.
The organizational objectives are achieved through individuals. Therefore each manager must know in
advance what he is expected to achieve. After setting all level objectives, identifying KRA s, the superior
can then proceed to work with subordinates in setting their objectives. The process of objective setting
begins with superior’s proposed recommendations for his subordinate’s objective. In turn, the subordinate
states his own objectives as perceived by him. Thereafter, final objective is set by the mutual negotiation
between superior and subordinate.The subordinate’s contribution or participation is very important at every
stage.
5. HOLDING PERIODICAL MEETINGS
Periodical meetings are conducted by the superior to discuss the progress of work and implementation of
plans with their subordinates.
6. ASSESS STRENGTH AND WEAKNESS OF KEY RESOURCES
The strength and weakness of key resources like human, financial, physical are assessed. The allocation
and movement of resources are done in consultation with subordinate managers.
7. EVALUATION OF RESULTS OR PERFORMANCE APPRAISAL
This aspect tries to measure whether subordinate is achieving the objectives or not. If not, what are the
problems and how these problems can be overcome? This is a continuous process with a view to find out
the deficiencies in work, and also to remove those deficiency. It is not taken merely to punish the non-
performer or to reward the performer. It is taken as a matter of system to ensure that everything is going on
as planned and the organization is able to achieve its objectives.

8. RECYCLING OR RE-EVALUATING THE PROCESS

The result of performance appraisal is used as an input for recycling objectives and other actions.
Objectives are neither set at the top and communicated to the bottom nor are they set at the bottom and go
up. Objective setting is a joint process through interaction between superior and subordinate. Therefore
what happens at each level may affect other levels also. The outcome of appraisal at one level is recycled to
see if the objectives have been set properly at the level concerned and also at the next level. The three
aspects involved in recycling are:-
o Objective setting
o Action planning
o Performance review

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ADVANTAGES OF MBO
 It Identifies problems of management, including structure, strategies and practice.
 Better managing
 Clarity in organizational action
 Personal satisfaction
 Basis for organizational change
 It focuses attention and effort on priority areas.
 Planning becomes more precise and useful.
 It makes objectives explicit and directs work activity towards their achievement.
 It provides clear standards of control and facilitates self control.
 It sharpens accountability.
 It highlights interdependence with in the organization.
 MBO provides a vehicle for delegation of authority. It is an effective instrument for managing decentralized
operation.
 It emphasizes development and utilization of human resources.
 It stimulates organizational change enabling the top management to initiate plan, direct and control the
direction and speed change by providing guidelines for planned change.
 It provides clarity in organization action. The organization can look forward to what it intends to do in
future, in short and long run.
 It provides greatest opportunity for personnel satisfaction by adopting participatory approach.
 It establishes good interpersonal relationship between management and employees. All the superiors and
subordinates work together with a team spirit and minimize the difference between them.
 It increases efficiency of management and organization as a whole as the decision are taken by superiors
and subordinates.
 It helps in coordinating the activities of different units and departments.
 It is the welding technique that joins personal – centered management to result centered management.
LIMITATIONS OR DISADVANTAGES OF MBO
Difficulty in objective setting.
Failure to teach MBO philosophy
Inflexibility
frustration
It is a time consuming process especially in the initial stages.

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 Lack of cooperation between superiors and subordinates can be there due to differences in their opinion
during setting objectives.
It represents the danger of inflexibility in the organization, particularly when objectives needs to be
changed.
MBO can be in failure, if competent and trained managers are not available. It can lead to a lot of
frustrations among subordinates, if the decision are taken under pressure from the subordinates.
It is one of the greatest managerial illusions because it fails to take adequately in to account the deeper
emotional components of emotion.
PREREQISITES FOR IMPLEMENTING MBO PROGRAMME
MBO is a philosophy, rather than a mere technique. As such, its installation requires a basic change in the
organizational culture and environment. Many of the organization ccould not use MBO successfully because of
lack of appreciation of this fact. The rperequisites for implementing MBO are as follows:
1. Purpose of MBO
MBO is a means rather than an end. It has to achieve certain things in an organization; it has to
solve some problems. Thus the organization should be very clear about purpose for which it is being
implemented. If the purpose of MBO is not precisely defined and particular techniques in MBO
suitable to the purpose are not emphasized, there is every possibility that MBO does not produce the
result as anticipated.
2. Top management support
The presence or absence of top management support is a critical factor in determining the degree to
which an MBO programme will be successful. The subordinates who can see their superiors as
having a positive approach towards MBO are themselves also like to show a positive attitude. The
manager has the responsibility of :
 Personally discussing with each subordinate the objectives that were set.
 Evaluating progress made in achieving these objectives.
 Assisting and supporting the subordinate by removing obstacles that hinder work
accomplishment.
Mere verbal or printed commitment is not enough. Vigorous involvement amongst top management
is essential and this must be seen and perceived throughout the organization.
3. Training for MBO
Systemic training is required in the organization for disseminating the concepts and philosophy
underlying MBO. The training should start with the concept, philosophy and need for MBO. If

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 people in the organization are not clear about the reasons for which MBO is being undertaken, they
will fear and may show their resistance.
4. Participation
Success of MBO requires a commitment on the part of each individual involved in this type of
system. Their commitment is a function of their identification with and participation in the system.
The subordinate should not perceive that MBO is another technique being used by his superior to
control his performance. Such undesirable perception may be avoided by encouraging the
subordinate to play an active role in the preliminary phases leading to actual writing of the
objectives. There cannot be a standard set of participation and each organization may make its own
diagnosis about the extend and type of participation it desires under given conditions.
5. Feedback for self - direction and self - control
One of the strong position in MBO is that within this system a man can direct and control his own
performance. For such a purpose worker should know where he stands and where he is going so that
he can make necessary adjustments to achieve the desired results on his own. Feedback is an
essential ingredient in sustained learning and improvement of situation.
IMPLICATION OF MBO IN NURSING
MBO is not only essential and useful for business managers, but is equally important to nursing
administrators to improve the efficiency of nursing personnel. MBO based on Taylorist principles can be
used in nursing managerial process. The implications of MBO are as follows:
It measures and judge performance.
It correlates individual performance to organizational goals.
It clarifies the job responsibilities expected from staff.
It fosters the increasing competence and growth of the subordinates.
It provides a data base for estimating the salary and promotion.
It stimulates the subordinates motivation.
It helps in organizational work control and integrating the activities

REFERENCE
1. Vati Jogindra. Principles and practice of nursing management and administration for BSc and MSc nursing.
2013. Jaypee medical publishers. P 189-91.
2. Prasad M. Principles and Practice of management. ed 4. Sultan chand and sons educational publishers. New
Delhi. Pg 160-73

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 3. https://en.wikipedia.org/wiki/Management_by_objectives

RESEARCH EVIDENCE
Using Management by Objectives as a performance appraisal tool for employee satisfaction
Abstract
This study deals with the importance of applying Management by Objectives (MBO) method, as a method for
performance appraisal (PA) in enhancing employees’ effectiveness. A self- administered questionnaire was used,
the number of participants included the survey is 172 employees from 13 firms operating in Kosovo. The study aim
is to identify the importance of creating objectives, communication objectives, planning goals, setting control
points, employees’ commitment to determine objectives, freedom and independence in fulfilling duties, continuous
communication, as steps for realizing MBO method in employees’ effectiveness. The questionnaire of the study
has been prepared, the responses obtained, the econometric model is constructed in order to test empirically this
relationship, passed through the IBM SPSS v.23.0 program has been utilized for the obtained findings. Results and
proposals are brought forward by the matched t-test, independent sample t-test, anova, pearson and correlation used
as the hypothesis tests. Econometric results suggested that MBO method should be used as a method of
performance appraisal as the employees’ effectiveness is enhanced. Also it resulted that the evaluation of
individual employees’ performance and a clear definition of results are the hugest parameters from all the other
activities of MBO method which we took in the study to raise employees’ effectiveness in organization.

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NURSING MANAGEMENT

SEMINAR ON

MANAGEMENT BY OBJECTIVES

Submitted to, submitted by,

Mrs. Prathibha Rani, Yashly Varghese,
Assistant Professsor, II Year MSc Nursing,
Govt. College Of Nursing, Govt. College Of Nursing,
Thrissur. Thrissur.

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