8/6/2019 Copy of MBO[1]

1/13

Management By Objectives

8/6/2019 Copy of MBO[1]

2/13

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 motivationalpower of objectives.

8/6/2019 Copy of MBO[1]

3/13

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 motivationalpower of objectives.

8/6/2019 Copy of MBO[1]

4/13

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.

8/6/2019 Copy of MBO[1]

5/13

Management By Objectives (MBO)

In an MBO program, good goals are SMART

goals:

Specific

Measurable

Attainable

Results-oriented

Time-related

8/6/2019 Copy of MBO[1]

6/13

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 thegoals focus on important activities.

MBO is not highly subjective to rating errors.

8/6/2019 Copy of MBO[1]

7/13

Key elements of MBO

Goal specificity

participative decision making

an explicit performance/evaluation period feedback

8/6/2019 Copy of MBO[1]

8/13

Management By Objectives (MBO)

Is a four-step process in which

1. Managers and employees jointly setobjectives for the employee

2. Managers develop action plans

3. Managers and employees periodicallyreview the employees performance

4. The manager makes a performanceappraisal and rewards the employeeaccording to the results

8/6/2019 Copy of MBO[1]

9/13

Three Types of Objectives Used in MBOThree Types of Objectives Used in MBO

Improvement ObjectiveImprovement Objective

Increase sport-utility sales by 10%

Personal Development ObjectivePersonal Development ObjectiveAttend five days of leadership training

Maintenance ObjectiveMaintenance Objective

Continue to meet the increased sales goalsspecified last quarter

8/6/2019 Copy of MBO[1]

10/13

MBO RequirementsMBO Requirements

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

1.1. The Commitment of Top ManagementThe Commitment of Top Managementis Essentialis Essential

2.2. It Must Be Applied OrganizationIt Must Be Applied Organization--widewide

3.3. Objectives Must beObjectives Must be down through the

organization; that is, objectives are structuredin a unified hierarchy, becoming morespecific at lower levels of the organization

8/6/2019 Copy of MBO[1]

11/13

Steps in a Typical MBO Program

1. The organizations overall objectives and strategies areformulated.

2. Major objectives are allocated among divisional anddepartmental units.

3. Unit managers collaboratively set specific objectives for their

units with their managers.

4. Specific objectives are collaboratively set with all departmentmembers.

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

6. The action plans are implemented.

7. Progress toward objectives is periodically reviewed, andfeedback is provided.

8. Successful achievement of objectives is reinforced byperformance-based rewards.

8/6/2019 Copy of MBO[1]

12/13

The Strengths & Limitations of MBOThe Strengths & Limitations of MBO

StrengthsStrengths It can improve performance at allIt can improve performance at all

levelslevels

It emphasizes getting resultsIt emphasizes getting results

It motivates employees to do betterIt motivates employees to do better

Top management commitment and

involvement MBO forces and aids in planning .

MBO reduces role conflicts andambiguity.

LimitationsLimitations It can take too much time and energyIt can take too much time and energy

MBO requires considerable training ofMBO requires considerable training ofmanagersmanagers

It wont work in rigid, authoritarianIt wont work in rigid, authoritarianorganizationsorganizations

Specific objectives can distract fromSpecific objectives can distract fromstrategic goalsstrategic goals

MBO can be misused by zealous orMBO can be misused by zealous orpunitive managerspunitive managers

Notas effective in dynamicenvironments that require constantresettingof goals

Overemphasis on individual

accomplishmentmay create problemswith teamwork

Allowing the MBO program to becomean annual paperwork shuffle.

8/6/2019 Copy of MBO[1]

13/13

Overall

organizational

objectives

company

Consumer products division Industrial products division

production salesCustomer

servicemarketing research development

Individual

objectives

Divisional

objectives

Departmental

objectives