What do you mean by Management by Objectives? Explain the goal-setting process through Management by Objectives?
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Discuss the strengths and weakness of Management by Objectives. What are the minimum requirements of a Management by Objectives programme?
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Define Management by Objectives. Explain the Management by Objectives Cycle.
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Discuss the strengths and weakness of Management by Objectives. What are the minimum requirements of a Management by Objectives programme?
OR
Define Management by Objectives. Explain the Management by Objectives Cycle.
Meaning and Definition of Management by Objectives (MBO)
Management by Objectives (MBO) has become a widely used slogan. It is a basic mentality that a high-performance manager brings to the job of managing. Peter Drucker coined the term "Management by Objectives" in 1954. He profounded Management by Objectives concept and emphasized it and than it developed as a management philosophy. Some authors has used the term "management by results" interchangeable with Management by Objectives.
Management by Objectives is an overall philosophy of management that concentrates on goals and end results. Management by Objectives is based on the presumption that people perform better when they know what is expected of them and can relate their personal goals to organisation goals. It also assumes that people are interested in the goal setting process and in evaluating their performances against the target.
Some important definitions of Management by Objectives may be given as follows:
George S. Odiorne
The system of management by objectives can be described as a process whereby the superior and subordinate managers of an organisation jointly identify its common goals, define each individual's major ares of responsibility in terms of the results expected of him and use these measures as guides for operating the unit and assessing the contribution of each of its members.
Peter Drucker
He says that management by objectives and self-control is a philosophy of management, resting on a concept of human action, human behaviour and human motivation. Management by objectives applies to every manager at any level and to all business enterprises whether large or small. He says the Management by Objectives "ensures performance by converting objective needs into personal goals"
Heinz Weihrich and Harold Koontz
"Management by objectives is a 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."
Essential Characteristics of Features of Management by Objectives
A careful study of the above definitions bring out the following features of Management by Objectives:
1. Management by Objectives is a philosophy or a system and not merely a technique.
2. It emphasizes participative goal setting.
3.It clearly defines each individual's responsibilities in terms of results.
4. It focuses attention on what must be accomplished (goals), rather than on how it is to be accomplished (methods).
5. It converts objectives needs into personal goals at every level in the organisation.
6. It establishes standards or yardsticks (goals) as operating guides and also as basis of performance evaluation.
7. It is a system intentionally directed toward effective and efficient attainment of organizational and personal goals.
Management by Objectives Process
There are four important and essential steps or elements in the Management by Objectives process as follows:
1. Setting Objectives
Goal setting or objective-setting is a multistage process. It starts with the examining of the current state of affairs, level of efficiency, threats and opportunities. Then the key result areas are identified, such as product markets, improved services, lowered costs, work simplification, employee motivation, profitability, innovation and social responsibility. The performance of these areas is critical for organisation in the sense that failure in these areas my result in failure of the organisation and this is why they are known as "key" results areas. Peter Drucker says, "Objectives are important in every area where performance and results directly affect the survival and prosperity of business."
Therefore interacting or joint goal setting takes place. Subordinates are actively involved in formulating goals at every level is the organisation. Such goals are finished with reference to the overall objectives of the organisation. Care is to taken establish goals that are measurable and contribute to the accomplishment of corporate objectives. Proper attention is given to "time" element also. Such goals may be long-range, medium-range or short-range. Further, resources availability also becomes an important consideration in goal setting. There is always need to decided priorities among the different objectives keeping in view the environment which business operates as well s possible future changes in it.
2. Developing Action Plans
Set objectives must be translated into action plans. It requires assignment of specific responsibilities to different departments, divisions and individuals. It also requires allocation of necessary resources needed to perform the assigned responsibilities. Time dimensions are also to be decided in order that targets are reached without any unwarranted delays.
3. Periodic Review Or Monitoring the Progress
After setting objectives and developing action plans, it is necessary to establish a proper monitoring system with a view to regularly keeping the activities and efforts on a prescribed path leading to the ultimate objectives. The progress is monitored without day-to-day interference in subordinates functioning. At agreed intervals, results are measured in terms of quantity, quality, time and cost against the set objectives. It is ensured that the deviations found, if any are thoroughly discussed and immediate corrective actions are taken to set them right on the course. Such a regular monitoring and periodic review not only provide feedback, which is essential for completion of work in time, but also motivates the managers accountable for performance. Periodic review and monitoring are done at departmental levels generally.
4. Performance Appraisal
This is the last phase of Management by Objectives programme that evaluates performance annually. The annual review or appraisal is comprehensive and is done at the organizational level. The actual annual results are evaluated against the set objectives. Such assessment is also used for determining targets for next year for modification in standards (goals) if needed and for taking corrective actions in order to avoid deviations from predetermined objectives.
Management by Objectives Cycle and Recycling Objectives
When all the four steps or phases in the Management by Objectives as mentioned above are completed then one Management by Objectives cycle is said to be over. The last phase or the fourth step in the Management by Objectives cycle is used as an input for recycling objectives and other actions. Objectives are changed or modified in the light of the environmental changes and the experiences gained over the year. Then, revised action plans are developed as per needs, periodic review is done. And performance is gain evaluated. Thus goes on the recycling.