Management By Objective MBO

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Main Principle

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.

The MBO style is appropriate for knowledge-based enterpriseswhen your staff is competent. It is appropriate in situations where you wish to build employees' management and self-leadership skills and tap their creativity, tacit knowledge and initiative. Management by Objectives (MBO) is also used by chief executives of multinational corporations (MNCs) for their country managers abroad.

Management by Objectives (MBO) systems, objectives are written down for each level of the organization, and individuals are given specific aims and targets. "The principle behind this is to ensure that people know what the organization is trying to achieve, what their part of the organization must do to meet those aims, and how, as individuals, they are expected to help. This presupposes that organization's programs and methods have been fully considered. If they have not, start by constructing team objectives and ask team members to share in the process."

"The one thing an MBO system should provide is focus", says Andy Grove who ardently practiced MBO at Intel. So, have your objectives precise and keep their number small. Most people disobey this rule, try to focus on everything, and end up with no focus at all.

For Management by Objectives (MBO) to be effective, individual managers must understand the specific objectives of their job and how those objectives fit in with the overall company objectives set by the board of directors. "A manager's job should be based on a task to be performed in order to attain the company's objectives... the manager should be directed and controlled by the objectives of performance rather than by his boss.

The managers of the various units or sub-units, or sections of an organization should know not only the objectives of their unit but should also actively participate in setting these objectives and make responsibility for them.

The review mechanism enables leaders to measure the performance of their managers, especially in the key result areas: marketing; innovation; human organization; financial resources; physical resources; productivity; social responsibility; and profit requirements.

However, in recent years opinion has moved away from the idea of placing managers into a formal, rigid system of objectives.

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