Management By
Objectives
INTRODUCTION
Introduced by Peter Druker, 1954
Usually been designed and used with business &
industries.
A process whereby superiors & subordinates jointly
identify the common objectives to make best use of
organizational resources
Peter Druker
Definition
A comprehensive managerial system that integrates many
key managerial activities in a systematic manner,
consciously directed towards the effective & efficient
achievement of organizational objectives. (Harold Koontz )
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 & organization with the
environment. (SK Chakrabo rthy)
Definition
A process whereby the superior & subordinate managers of
an organization jointly identify its common goals, define
each individual's major areas 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. ( George S. Odiorne, 1965).
Features of MBO
Objectives at all levels
Emphasis on all significant priority areas
Participation of concerned managers in objective
setting and performance reviews
Periodic reviews of performance
Appropriate systems and procedures
Role clarity.
Multiple accountability
Objectives of MBO
1. To measure and judge performance
2. To relate individual performance to organizational goals
3. To clarify both the job to be done and the expectations of
accomplishment
4. To foster the increasing competence & growth of the
subordinates
5. To enhance communication between superior &
subordinates
6. To serve as a basis for judgments about salary &
promotion
7. To stimulate the subordinates’ motivation
8. To serve as a device for organizational control
Concepts of MBO
Objectives:
– Form a network of desired results and events
Time strategy
– Time strategy is the timetable for blending the activities
and operation of individual managers to achieve long and short
range set of results
Total management
– A formalized effort to involve and coordinated the
contribution of each individual manger towards a common
goal.
Individual commitment
Process of MBO
Finding the Setting the Validating
objective objective the objective
Controlling &
Implementing
reporting the
the objectives
objectives
MBO Cycle
Setting
Evaluation
Assessing theofstrengths
Identifyingobjectives
of Result
Key results
& at the top
limitations
Areas
Clarifying
Holding
Setting the
periodic
organizational
subordinate reviews
objectivesrole
Aspects of MBO
Key result areas (KRAs) – Priority areas which can help in
directing the limited resources towards significant
achievements
a)Profitability b)Market standing c)Innovation
d)Productivity e)Worker performance f) Financial and
physical resources g)Mangers performance and development
h)Public responsibility
Importance of KRA’s
1. Indicates the areas where results are important
2. KRA’s are identified at first and then specific
objectives are set for each KRA’s
3. It provides guidelines for objectives & strategies &
facilitate the pursuit process
Objectives: log term- short term
– Visionary objectives-Very long term goals towards which
the organization proposes to move.
– Attainable objectives -achieved in 5-10 years time
– Operational objectives -Short period objectives which can
be achieved in a time period ranging from a few months to
3years
• Keys in objective – Quantity (How much)? – Quality
(How well)? – Cost (with what resources)? – Time (how
Action planning
Elements:
1.Decisions on appropriate strategies for achieving the
agreed objectives.
2.Assignment of responsibility for the achievement of an
objective.
3.Allocation of resources, people, materials, facilities,
funds, etc., required to achieve the objectives.
4.Programming of specific activities on the basis of the
best possible alternative for the effective use of allocated
resources towards achievement of agreed objectives.
Performance appraisal
• Steps
1. Prepare commitments
2. Implement schedule activities
3. Progress reviews
4. Plan and schedule activities
5. Annual reviews
• Features
6. Focus on performance,
7. Emphasis on improvement
8. Future orientation
9. Frequent reviews
10. Self appraisal
Training & Development
Technical skill: Proficient use of knowledge in specific
disciplines.
Behavioural skill: Utilization of knowledge & understanding of
people as they conduct themselves with others.
Conceptual skill: Ability to utilize existing knowledge in order
to perceive additional knowledge.
Implementing skill: Ability to get work done
Economic business skill: Utilization of knowledge &
understanding of the business enterprise.
Managerial skill: Effective utilization of planning, directing &
controlling enterprise towards profit & perpetuating.
Implementation of MBO
1. Establish clear, mutually understood and agreed upon
goals.
2. Establish a plan of action detailing how the goals are to
be achieved.
3. Set up specific rewards to be associated with goal
achievement
4. Set up and conduct periodic reviews designed to discuss
progress towards goal achievement.
ADVANTAGES OF MBO
It identifies problems of management
It focuses attention and effort on priority areas
Planning becomes more precise and useful.
It makes objectives explicit and directs work
activity towards their achievement.
It provides clear standards of control and
facilitates self control.
It highlights interdependence within the
organization.
ADVANTAGES OF MBO
It sharpens accountability.
MBO provides a vehicle for delegation of
authority.
It is an effective instrument for managing
decentralized operation
It emphasizes development and utilization of
human resources
It provides clarity in organization action.
It helps in coordinating the activities of different
units and departments.
DISADVANTAGES OF MBO
Difficulty in objective setting.
It is a time consuming process especially in the initial
stages.
Lack of cooperation between superiors and
subordinates can be there due to differences in their
opinions during setting objectives.
MBO can be in failure, if competent and trained
mangers are not available.
It can lead to a lot of frustrations among subordinates,
if the decisions are taken under pressure from the
subordinates
IMPLICATIONS OF MBO IN NURSING
It measures and judge performance.
It correlates individual performance to organizational
goals.
It clarifies the job responsibilities expected from staff.
It fosters the increasing competence and growth of the
subordinates
It provides a data base for estimating the salary and
promotion.
It stimulates the subordinate's motivation.
It helps in organizational work control and integrating the
activities.
