Management by Objectives (Mbo) (1)

7/29/2019 Management by Objectives (Mbo) (1)

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MBO


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Management by objectives (MBO) is a systematic andorganized approach that allows management to focus onachievable goals and to attain the best possible resultsfrom available resources. It aims to increaseorganizational performance by aligning goals and

subordinate objectives throughout the organization.Ideally, employees get strong input to identify theirobjectives, time lines for completion, etc. MBO includesongoing tracking and feedback in the process to reachobjectives.

Management by Objectives (MBO) was first outlined byPeter Drucker in 1954 in his book 'The Practice ofManagement'. In the 90s, Peter Drucker himselfdecreased the significance of this organizationmanagement method, when he said: "It's just anothertool. It is not the great cure for managementinefficiency... Management by Objectives works if youknow the objectives, 90% of the time you don't."
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According to Drucker managers should "avoidthe activity trap", getting so involved in theirday to day activities that they forget theirmain purpose or objective. Instead of just afew top-managers, all managers should:

participate in the strategic planning process,in order to improve the implementability ofthe plan, and

implement a range of performance systems,

designed to help the organization stay on theright track.
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MBO managers focus on the result, not theactivity. They delegate tasks by "negotiating acontract of goals" with their subordinateswithout dictating a detailed roadmap for

implementation. Management by Objectives(MBO) is about setting yourselfobjectives andthen breaking these down into more specificgoals or key results.
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The principle behind Management byObjectives (MBO) is to make sure thateverybody within the organization has a clearunderstanding of the aims, or objectives, ofthat organization, as well as awareness oftheir own roles and responsibilities inachieving those aims. The complete MBOsystem is to get managers and empoweredemployees acting to implement and achievetheir plans, which automatically achieve thoseof the organization.
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The MBO style is appropriate for knowledge-based enterprises when your staff iscompetent. It is appropriate in situationswhere you wish to build employees'

management and self-leadership skills andtap their creativity, tacit knowledge andinitiative. Management by Objectives (MBO) isalso used by chief executives of multinationalcorporations (MNCs) for their countrymanagers abroad.
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In Management by Objectives (MBO) systems, objectives arewritten down for each level of the organization, andindividuals are given specific aims and targets. "The principlebehind this is to ensure that people know what theorganization is trying to achieve, what their part of theorganization must do to meet those aims, and how, asindividuals, they are expected to help. This presupposes thatorganization's programs and methods have been fullyconsidered. If they have not, start by constructing teamobjectives and ask team members to share in the process."

"The one thing an MBO system should provide is focus", saysAndy Grove who ardently practiced MBO at Intel. So, haveyour objectives precise and keep their number small. Most

people disobey this rule, try to focus on everything, and endup with no focus at all.
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For Management by Objectives (MBO) to be effective,individual managers must understand the specificobjectives of their job and how those objectives fit in withthe overall company objectives set by the board of

directors. "A manager's job should be based on a task to beperformed in order to attain the company's objectives... themanager should be directed and controlled by theobjectives of performance rather than by his boss."

The review mechanism enables leaders to measure the

performance of their managers, especially in the key resultareas: marketing; innovation; human organization; financialresources; physical resources; productivity; socialresponsibility; and profit requirements.
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The balance between management and employeeempowerment has to be struck, not by thinkers,but by practicing managers. Turning their aims

into successful actions, forces managers tomaster five basic operations:

setting objectives, organizing the group,

motivating and communicating, measuring performance, and developing people, including yourself.
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Management by Objectives (MBO) creates a link between topmanagement's strategic thinking and the strategy'simplementation lower down. Responsibility for objectives ispassed from the organization to its individual members. It

is especially important for knowledge-based organizationswhere all members have to be able to control their ownwork by feeding back from their results to their objectives.

Management by objectives is achieved through self-control,the tool of effectiveness. Today the worker is a self-manager, whose decisions are of decisive importance for

results. In such an organization, management has to ask each

employee three questions: What should we hold you accountable for? What information do you need?

What information do you owe the rest of us?
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Cascading oforganizational goals andobjectives

Specific objectives for each member

Participative decision making

Explicit time period

Performance evaluation and feedback
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Routine objectives Innovation objectives Improvement objectives

The objectives must be: focused on a result, not an activity consistent specific

measurable related to time attainable
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All individuals within an organization areassigned a special set of objectives that theytry to reach during a normal operating period.

These objectives are mutually set and agreedupon by individuals and their managers.

Performance reviews are conductedperiodically 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.


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Define corporate objectives at board level

Analyze management tasks and devise formaljob specifications, which allocateresponsibilities and decisions to individualmanagers

Set performance standards

Agree and set specific objectives Align individual targets with corporate

objectives

Establish a management information system to

monitor achievements against objectives
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Marketing Innovation Human organization Financial resources Physical resources Productivity Social responsibility Profit requirements
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Advantages MBO programs continually emphasize whatshould be done in an organization to achieveorganizational goals.

MBO process secures employee commitment to

attaining organizational goals. Disadvantages The development of objectives can be time

consuming, leaving both managers andemployees less time in which to do their actualwork.

The elaborate written goals, carefulcommunication of goals, and detailedperformance evaluation required in an MBO

program increase the volume of paperwork in anorganization

Documents

Management by Objectives (Mbo) (1)