Management by Objectives

WHAT IS MANAGEMENT BY OBJECTIVES?

It focuses on the objectives or results, emphasizes participants management, an approach which provides high motivation to individuals in an organization, MBO is coined by Peter F Drucker in 1954. It is a comprehensive management system that integrates key managerial activities in a systematic manner, directed towards the efficient & effective achievement of organizational objectives. It is a result centered, non-specialist, operational managerial process for the effective utilization of material, physical & human resources of the organization by integrating the individual with the organization and organization with the environment.

MAIN CONCEPT

The principle behind Management by objective (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.

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WHERE TO USE MBO

The MBO style is appropriate for knowledge-based enterprises when the staff is competent. It is appropriate in situations where you wish to build employees’ management and self-leadership skills and tap their creativity and initiative.

Management by objectives (MBO) is also used by chief executives of multinational corporations (MNCs) for their country manager abroad.

MAIN PRINCIPLE OF MBO

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.

MBO STRATEGY: Three basic parts

• 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.

• Performance reviews are conducted periodically to determine how close individuals are to attaining their objectives.

• Rewards are given to individuals on the basis of how close they come to reaching their goals.

ALSO READ: TECHNIQUES OF DECISION MAKING

MBO ADVANTAGE AND DISADVANTAGES

ADVANTAGES

• MBO programs continually emphasize what should be done in an organization to achieve organizational goals.

• MBO process secures employee commitment to attaining organizational goals.

DISADVANTAGES

• The development of objectives can be time consuming, leaving both managers and employees less time in which to do their actual work.

• 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.