Management By Objective

Goal-Setting Theory (Edwin Locke) Basic Premise: That specific and

difficult goals, with self-generated feedback, lead to higher performance

But, the relationship between goals and performance will depend on goal commitment

“I want to do it & I can do it”task characteristics (simple, well-learned)national culture

Management By Objective

A system in which specific performance objectives are jointly determined by subordinates and their supervisors, progress toward objectives is periodically reviewed, and rewards are allocated on the basis of that progress.

MBO makes objectives operational by a process in which they cascade down through the organisation.

MBO

A program that encompasses specific goals, participatively set, for an explicit time period, with feedback on goal progress.

Key Elements

1. Goal specificity

2. Participative decision making

3. An explicit time period

4. Performance feedback

Key Elements

1. Goal specificity

2. Participative decision making

3. An explicit time period

4. Performance feedback

Cascading 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.

SMART goals

SpecificMeasurableAttainableResults-orientedTime-related

Steps in a Typical MBO Program1. 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.

Setting Employee Objectives

Identify an employee’s key job tasks. Establish specific and challenging

goals for each task. Allow the employee to actively

participate. Prioritize goals. Build in feedback mechanisms to

assess goal progress. Link rewards to goal attainment.

How to Set Objectives

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How to Set Objectives

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Checklist for Manager Objectives

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Checklist for Manager Objectives

Why MBOs Fail

Unrealistic expectations about MBO

results

Lack of commitment by top

management

Failure to allocate reward properly

Cultural incompatibilities

Other Approaches

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 Walking Around 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.