Management By Objectives

Sibnarayan Dash, AMS

Meaning:-

Management By Objectives (MBO) is defined as a program that encompasses specific goals ,

participatively set ,for an explicit time period, with feedback on goal progress.

A comprehensive management system based on measurable anticipatively set objectives that

leverages the motivational power of objectives.

MBO is a motivational program based on goal setting. The goal(s) should:

be mutually agreed upon.

be difficult, but achievable (realistic).

have a defined time frame

be measurable (objective and budgeted).

provide means for feedback.

In an MBO program, good goals are SMART goals:

Specific

Measurable

Attainable

Results-oriented

Time-related

Subordinates work with their supervisor to establish specific task-related objectives.

MBO is the most individualized appraisal method .

MBO works well with counseling, provided the goals focus on important activities.

MBO is not highly subjective to rating errors.

Is a four-step process in which

1. Managers and employees jointly set objectives for the employee

2. Managers develop action plans

 3. Managers and employees periodically review the employee’s performance

4. The manager makes a performance appraisal and rewards the employee according to the results

Three types of objective used in MBO

Improvement Objective

“Increase sport-utility sales by 10%”

Personal Development Objective

“Attend five days of leadership training”

Maintenance Objective

“Continue to meet the increased sales goals specified last quarter”

MBO Requirements:-

For MBO to be successful, three things have to happen:

1. The Commitment of Top Management is Essential

2. It Must Be Applied Organization-wide

3. Objectives Must “Cascade”—MBO works by cascading objectives down through the

organization; that is, objectives are structured in a unified hierarchy, becoming more specific at
lower levels of the organization

Steps in a typical MBO Programme :-

1. The organization’s overall objectives and strategies are formulated.

2. Major objectives are allocated among divisional and departmental units.

3. Unit managers collaboratively set specific objectives for their units with their managers.

4. Specific objectives are collaboratively set with all department members.

5. Action plans, defining how objectives are to be achieved, are specified and agreed upon by
managers and employees.

6. The action plans are implemented.

7. Progress toward objectives is periodically reviewed, and feedback is provided.

8. Successful achievement of objectives is reinforced by performance-based rewards.

The Advantages & Limitations of MBO

Advantages

It can improve performance at all levels

It emphasizes getting results

It motivates employees to do better

Top management commitment and involvement

Limitations

It can take too much time and energy

MBO requires considerable training of managers

It won’t work in rigid, authoritarian organizations

Specific objectives can distract from strategic goals

MBO can be misused by zealous or punitive managers

Not as effective in dynamic environments that require constant resetting of goals

Overemphasis on individual accomplishment may create problems with teamwork

Allowing the MBO program to become an annual paperwork shuffle.