Management by Objectives (MBO)

Many approaches have been utilized to integrate individual and group goals with overall goals of the organization of an enterprise. Management by Objectives (MBO) is basically a process whereby the superior and subordinate managers of an enterprise jointly (i) identify its common goals, (ii) define each individuals major areas of responsibility in terms of results expected of him, and (iii) use these measures as guides for operating the unit (or enterprise) and assessing the contribution of each of its members. The goals are jointly established by the manager and his subordinates and agreed upon in advance. These goals emphasize either output variables or intervening variables, or some combination of both. At the end of the pre-decided time period, the subordinate’s performance is reviewed in relation to preset goals. Both superior and the subordinate participate in this review/evaluation. If, after evaluation it is found that there is some discrepancy between the work planned (to be done) and the work accomplished, steps are suggested to overcome the problems or make necessary adjustments in the original plan. This sets the stage for the determination of objectives for the next period. To conclude. Management by Objectives (MBO) implies managing by properly identifying the objectives of an organization.

Management by Objectives (MBO)

Steps in Setting up Management by Objectives (MBO)

  1. The first step is to clarify and set the common goals of the entire organization.
  2. To achieve the goals of the organization, any appropriate changes in the organization structure may be made: changes in titles, duties, relationships, authority, responsibility, span of control, and so forth.
  3. Superior sets down goals for his subordinates; subordinates also propose goals for their jobs and select the areas in which they must be effective during the period of company plan. Usually there are five or six vital areas where the subordinates, concerned must think to obtain the desired results. These results are straight drive to (a) Some targets of growth, (b) Achievement of greater productivity or profitability, (c) Elimination of certain problems etc.
  4. Superior and subordinates sit together and discuss the objectives and reach joint agreement on a subordinates’ goals to be achieved by him during a stated time period. In other words, the goals are jointly established and agreed upon in advance.
  5. Throughout the time period what is to be accomplished should be compared with what is being accomplished; necessary adjustments should be goals or unattainable goals should be discarded s0 that two sources are not unnecessarily wasted.
  6. The performance of all subordinates against their MBO plan (or targets) be formally reviewed at predetermined times during the plan. Usually a review is made annually but it is advisable for lesser quarterly reviews to be undertaken in the areas where progress has slow or where some unforeseen bottlenecks have recurred.
  7. Ultimately the performance of the entire organization should be with respect to the objective set at the start. If there is a discrepancy the objectives decided and those achieved, efforts should initiated mine the steps to be taken to overcome the problems responsibly or discrepancy. This sets the stage for the determination of objectives and the entire cycle of MBO is started again from  first step.

Advantages of Management by Objectives (MBO)

  • MBO may become a powerful tool in gaining mutual commitment and high productivity for an organization. It keeps company objectives\ targets constantly in view. It gives meaning and direction to people in an organization
  • It coordinates the efforts of various departments of an organization.
  • It provides -motivation to people because they work on objectives decided with their consent.
  • It prevents littering away of efforts and money.
  • It allows greater consistency in decision-making.
  • It forces, management to think ahead in respect of its short-term and long-term goals.
  • It helps an enter rise to focus on the areas where it is vital that preventing progress towards many objectives.
  • It assists managers in their own self-development leads to an analysis of training requirement if subordinates are to improve their, performance in future years.
  • It leads to better understanding subordinates between superiors and the subordinates.