Chapter-5
Objectives
Definition of objectives:
An objectives may be defined as a specific
commitment to achieve a measurable result
within a given time period.
Anthony P. Raia, Objectives should be expressed
in quantitative, measurable, concrete terms, in
the form of a written statement of expected
result to be achieved within a given period of
time.
Management by objectives
From Wikipedia, the free encyclopedia
• Management by Objectives (MBO) is a
process of defining objectives within an
organization so that management and employees
agree to the objectives and understand what they
are in the organization.
• The term "management by objectives" was first
popularized by Peter Drucker in his 1954 book
'The Practice of Management'.
Management by Objectives (MBO)
MBO is a comprehensive management system based on
measurable and participatively set objectives. It has
come a long way since it was first suggested by peter F.
Drucker in 1950 as a way of promoting managerial selfcontrol.
Weihrich and Koontz as, “The comprehensive
managerial system that integrates many key managerial
activities in a systematic manner and that is consciously
directed toward the effective and efficient achievement
of organizational and individual objectives.”
The MBO Cycle
• The four steps or stages of the MBO process
are also called the MBO cycle. The four-step
cycle are:• Setting objectives
• developing action plans
• periodic review
• Performance appraisal
Features and Advantages
• Unique features and advantage of the MBO
process
• The basic principle behind Management by
Objectives (MBO) is for employees to have
clarity of the roles and responsibilities expected
of them. They can then understand how their
activities relate to the achievement of the
organization. They also provide direction for the
personal goals of each employee.
• Some of the important features and advantages of
MBO are:
• Motivation – Involving employees in the whole process
of goal setting and increasing employee empowerment
increases employee job satisfaction and commitment.
• Better communication and Coordination – Frequent
reviews and interactions between superiors and
subordinates helps to maintain harmonious
relationships within the enterprise and also solve many
problems faced during the period.
Weaknesses of MBO
• Failure to teach the philosophy of MBO which
is built on concepts of self-control and self –
directed that are aimed at making management
professionals.
• Failure to give proper guidelines to goal setters
by making them well aware of the corporate
goals in advance.
• Difficulty in setting verifiable goals which help
in the process of control.
• Emphasis on short-run goals often jeopardizes
the achievement of the long-term objectives.
• Danger of inflexibility also causes a serious
problem since managers may strive for goals
that have been made obsolete by revised
corporate objectives, changed premises, or
modified policies.
• Clarity of goals
• Subordinates have a higher commitment to
objectives that they set themselves than those
imposed on them by their managers.
• Managers can ensure that objectives of the
subordinates are linked to the organisation 's
objectives.
• The use of MBO needs to be carefully aligned with the
culture of the organization. While MBO is not as
fashionable as it was before the 'empowerment' fad, it
still has its place in management today. The key
difference is that rather than 'set' objectives from a
cascade process, objectives are discussed and agreed,
based upon a more strategic picture being available to
employees. Engagement of employees in the objective
setting process is seen as a strategic advantage by many.
Arguments Against
• MBO has its detractors, notably among them W.
Edwards Deming, who argued that a lack of
understanding of systems commonly results in
the misapplication of objectives. Additionally,
Deming stated that setting production targets
will encourage resources to meet those targets
through whatever means necessary, which
usually results in poor quality.
• Point 7 of Deming's encourages managers to
abandon objectives in favour of leadership
because he felt that a leader with an
understanding of systems was more likely to
guide workers to an appropriate solution than
the incentive of an objective. Deming also
pointed out that Drucker warned managers that
a systemic view was required and felt that
Drucker's warning went largely unheeded by the
practitioners of MBO.
Management by exception (MBE)
• Definition
An organizational system in which managers intervene
only when employees fail to meet performance
standards or when plans or budgets go awry. Managers
compare results with plans and take action when
serious differences occur.
• What type of organization is best served by a policy of
management by exception? It seems as if most
managers would have difficulty implementing this type
of policy.
• All organizations can use management by exception.
When routine work results in acceptable performance,
no management attention is required. Managers who
have properly trained their subordinates should have no
problems delegating authority and allowing people to
manage their own work. Managers are then able to
devote their expertise and attention to non routine
problems. Some managers have trouble allowing their
subordinates to make decisions because of control
issues, but this psychological barrier will hinder their
careers.
• The essence of MBO is participative goal
setting, choosing course of actions and decision
making. An important part of the MBO is the
measurement and the comparison of the
employee’s actual performance with the
standards set. Ideally, when employees
themselves have been involved with the goal
setting and choosing the course of action to be
followed by them, they are more likely to fulfill
their responsibilities.