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Management by objectives (MBO) is a management model that aims to improve performance of an organization by clearly
defining objectives that are agreed to by both management and employees. According to the theory, having a say in goal
setting and action plans should ensure better participation and commitment among employees, as well as alignment of
objectives across the organization.[1]
Features of MBO[4]
A discussion of various definitions of MBO brings out the following features:
1. MBO is not merely a technique but a philosophy to management. A technique is applicable only in specified areas but a
philosophy or approach guides and influences every aspect of management. MBO is an approach which includes various
techniques of better management.
2. In this approach various objectives of the organization and of individuals are collectively decided by superiors and
subordinates. These objectives become the targets which are to be achieved by various persons in the organization. The review
of objectives is also done collectively.
3. The corporate, departmental and individual objectives are used as a yardstick to measure performance. A comparison of
targets and actual results will enable managers to judge the performance of subordinates and top level will similarly assess the
performance of managers.
4. MBO provides for a regular review of performance. This review is normally held once in a year. It emphasizes initiative and
active role by the manager who is responsible for achieving the objectives. The review is future oriented and provides a basis
for planning and corrective actions.
5. The objectives in MBO provide guidelines for appropriate system and procedures. The degree of delegation of authority,
fixation of responsibility, allocation of resources etc. can be decided on the basis of objectives of various individuals. These
objectives also become a basis of reward and punishment in the organization.
The Management by Objectives process helps the employees to understand their duties at the workplace.
KRAs are designed for each employee as per their interest, specialization and educational qualification.
The employees are clear as to what is expected out of them.
Management by Objectives process leads to satisfied employees. It avoids job mismatch and unnecessary confusions
later on.
Employees in their own way contribute to the achievement of the goals and objectives of the organization. Every
employee has his own role at the workplace. Each one feels indispensable for the organization and eventually develops a
feeling of loyalty towards the organization. They tend to stick to the organization for a longer span of time and contribute
effectively. They enjoy at the workplace and do not treat work as a burden.
Management by Objectives ensures effective communication amongst the employees. It leads to a positive ambiance at
the workplace.
Management by Objectives leads to well defined hierarchies at the workplace. It ensures transparency at all levels. A
supervisor of any organization would never directly interact with the Managing Director in case of queries. He would
first meet his reporting boss who would then pass on the message to his senior and so on. Every one is clear about his
position in the organization.
The MBO Process leads to highly motivated and committed employees.
The MBO Process sets a benchmark for every employee. The superiors set targets for each of the team members. Each
employee is given a list of specific tasks.
It presupposes fixing of individual goals and responsibilities. But all work in an organisation is a group effort where
activities are so closely interrelated that no single individual can be blamed or rewarded, for any end result.
It is difficult to make comparative ratings of individuals because each individual's goals are different from those of others
in terms of complexity, etc.
It is difficult to appraise and identify potential. MBO only deals with performance on the present job.
The method is extraordinarily time-consuming.
MBO presumes a certain level of trust throughout the hierarchy. But the organisational life teaches people to be cautious.
This inhibits honest dialogue and appropriate goal setting.
MBO is less applicable to routine worker-level jobs, such as an assembly line. In these kinds of situations more
traditional performance appraisal tends to'be used. The technique is especially suitable for managerial, professional, and
sales people and those who work independently.
Specific
Measurable
Agreed/Achievable/Attainable
Realistic/Responsible/Receivable
Time-bound
The aphorism "what gets measured gets done", is aligned with the MBO philosophy.