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Management By

Objectives
MBO

 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.
Management By Objectives
(MBO)
 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.
Management By Objectives
(MBO)
 In an MBO program, good goals are SMART
goals:
 Specific
 Measurable
 Attainable
 Results-oriented
 Time-related
Management by objectives
(MBO).
 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.
Key elements of MBO

 Goal specificity
 participative decision making
 an explicit performance/evaluation period
 feedback
Management By Objectives
(MBO)
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 Objectives 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
Program
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 Strengths &
Limitations of MBO
Strengths Limitations
 It can improve performance at all levels  It can take too much time and energy
 It emphasizes getting results  MBO requires considerable training of
 It motivates employees to do better managers
 Top management commitment and  It won’t work in rigid, authoritarian
involvement 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.
Overall
organizational company
objectives

Divisional
objectives Consumer products division Industrial products division

Departmental
Customer marketing research
objectives production sales development
service

Individual
objectives
Management by Walking
Around
Management By Walking
Around
 Develop a broad network & sources of information,
both formal & informal
 Formal channels
 Talk with key subordinates
 Read written reports
 Glean statistics from latest operating results
 Get feedback from customers
 Watch competitive reactions of rivals
 Informal channels rely heavily on MBWA
 Visit the “field” regularly, talking with many people at all
levels
MBWA
 Problems addressed - Main managerial productivity
problem of many companies is that managers are
remote from the detail, out of touch with their people
and their customers. As W. Edwards Deming, an
American who introduced the idea of quality
management to the Japanese, put it: "If you wait for
people to come to you, you'll only get small
problems. You must go and find them. The big
problems are where people don't realize they have
one in the first place."
MBWA Practices
 Managers consistently reserving time to walk through
their departments and/or to be available for impromptu
discussions.
 Individuals forming networks of acquaintances
throughout their organizations
 Lots of opportunities for chatting over coffee or lunch, or
in the corridors.
 Managers getting away from their desks and starting to
talk to individual employees. The idea is that they should
learn about problems and concerns at first hand. At the
same time they should teach employees new methods to
manage particular problems. The communication goes
both ways.
Seven MBWA Principles-by
Tom Peters
 Publicize the fact that you are out wandering 50% of the time,
and that your colleagues are as well (if you and they are).
 Be meticulous in having meetings in others' offices/spaces
rather than yours.
 Evaluate managers in part - and directly - on the basis of their
people's assessment of how well/how frequently they are in
touch.
 Fire a supervisor who doesn't know all his people's first and
last names.
 Hold meetings and reviews in the field.
 Start randomly popping into offices and asking the inhabitants
why they aren't out.
 If you are a manufacturing, or an R&D boss, etc., make sure
you have a second office in the workplace.
Main Benefits

 MBWA is a hyperactive, out-of-the office,


interventionist top management practice.
 open-door management policy.
 made leadership more effective in many well-
run organizations.
 MBWA has been found to be particularly
helpful when an organization is under
exceptional stress;
What Leaders and Managers
Should Do
 As leaders and managers wander around, at
least three things should be going on:
 They should be listening to what people are
saying.
 They should be using the opportunity to
transmit the company's values face to face.
 They should be prepared and able to give
people on-the-spot help.
Ways in which you could
improve MBWA
 Appear relaxed as you make your rounds. Employees will reflect your
feelings and actions.
 Remain open and responsive to questions and concerns.
 Observe and listen and let everyone see you do it.
 Make certain your visits are spontaneous and unplanned.
 Talk with employees about their passions—whether family, hobbies,
vacations, or sports.
 Ask for suggestions to improve operations, products, service, sales, etc.
 Try to spend an equal amount of time in all areas of your organization.
 Catch your employees doing something right and recognize them
publicly.
 Convey the image of a coach—not an inspector.
 Encourage your employees to show you how the real work of the
company gets done.
20 Ways to Communicate With Your
Employees
 Include affected employees in goal setting.
 Give frequent and meaningful recognition for a job well done.
 Interact with employees on an informal basis.
 Go to staff's work area. Meet them on their own turf.
 Ask for staff's opinions and listen with an open mind. Try to understand their point of view.
 Share non-confidential information with staff, and ask for their input and response on issues.
 Offset demoralizing actions and events by emphasizing what went well, and use the experience as a learning
opportunity.
 Listen 80% of the time and talk 20%.
 Ask staff what rumors they have heard, and address them.
 . Get into the "trenches" with staff. Look for opportunities to understand employees' jobs better.
 . Give information to staff after management meetings.
 . Ask staff. "Have I made our vision, mission, and goals clear and understandable?
 . Ask staff, "What can I do to help you with your job, and what am I doing that gets in your way?"
 . Ask staff "What is making our clients/customers the most and/or the least satisfied?"
 . Praise in public and give feedback in private.
 . Find something to like about each staff member with whom you work.
 . Actively make a point of speaking to all employees seen each day.
 . Build bridges with people with whom you are uncomfortable.
 . Set goals each month on ways to accomplish "Managing by Walking Around."
 . Occasionally have lunch with staff members. Use this as an opportunity to build trust.
Management by Exception
Management By
Exception(MBE)
 Management by exception is the practice of
focusing on important variances so that
managers can direct their attention to areas
that need improvement.
 Performance reports show differences
between budgeted and actual amounts
Management By
Exception(MBE)
 Source for Management by Exception-The
80/20 Principle (Pareto Analysis)
 A majority of causes, inputs, or efforts tend to
produce a majority of results, outputs, or reward
 Review only exceptions from expected
results that are of a certain size or type to
save time
Management By
Exception(MBE)
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