Management By Objectives

Management By Objectives

MBO Principles:

* Cascading of organizational goals and objectives.

* Specific objectives for each member.

* Participative decision making.

* Explicit time period.

* Performance evaluation and feedback.

Types of objectives:

* Routine objectives.

* Innovation objectives.

* Improvement objectives.

The objective must be:

o Focused on a result, not an activity.

o Consistent.

o Specific.

o Measurable.

o Related to time.

o Attainable.

MBO strategy has three basic parts:

1. All individuals within an organization are assigned a special set

of objectives that they try to reach during a normal operating

period. These objectives are mutually set and agreed upon by

individuals and their managers.

2. Performance reviews are conducted periodically to determine how

close individuals are to attaining their objectives.

3. Rewards are given to individuals on the basis of how close they

come to reaching their goals.

MBO has six stages:

1. Define corporate objectives at broad level.

2. Analyze management tasks and devise formal job specifications,

which allocate responsibilities and decisions to individual

managers.

3. Set performance standards.

4. Agree and set specific objectives.

5. Align individual targets with corporate objectives.

6. Establish a management information system to monitor achievements

against objectives.

The 8 key result areas where managers must pursue clear objectives

are:

· Marketing.

· Innovation.

· Human organization.

· Financial resources.

· Physical resources.

· Productivity.

· Social responsibility.

· Profit requirement.

MBO Key Advantages and Disadvantages:

Advantages

o MBO programs continually emphasize what should be done in an

organization to achieve organizational goals.

o MBO process secures employee commitment to attaining organizational

goals.

Disadvantages

o The development of objectives can be time consuming, leaving both

managers and employees less time in which to do their actual work.

o The elaborate written goals, careful communication of goals, and

detailed performance evaluation required in an MBO program increase

the volume of paperwork in an organization.

Managing for Results: The Eight Perceptions:

· Resources and results exist outside, not inside, the business.