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Objective setting, MBO

McFarland: Objectives are goals, aims, or purposes that organisations wish over varying periods of time. Features: Objectives form a hierarchy Objectives form a network Multiplicity of objectives Long and short range objectives

Areas needing objectives

Market standing (market share) Innovation Productivity Physical and financial resources (resource mobilisation) Managerial performance and development Worker performance and attitudes Profitability Public and social responsibility

Establishing objectives
Two approaches: Traditional view: set by top management, one-way process, process is perfectly rational. Two types of goals: stated and operational Stated goals statements of desired results, reflect what the organisation should be doing. Operational goals are real goals, tells us what the organisation is trying to do (environmental goals, output goals, system goals, product goals, derived goals). Modern approach: Management by objectives

Management by Objectives
An overall philosophy of management that concentrates on measurable goals and end results. Odiorne: MBO is a process whereby the superior and subordinate managers of an organisation jointly identify its common goals, define each individuals major areas of responsibility in terms of results expected of him, and use these measures as guides for operating the unit and assessing the contribution of each of its members.

Features of MBO
MBO emphasises participation in setting goals that are tangible, verifiable and measurable. MBO focuses attention on what must be accomplished (goals) rather than how it is to be accomplished (methods). MBO, by concentrating on key result areas translates the abstract philosophy of management into concrete targets. MBO is a systematic and rational technique that allows management to attain maximum results from available resources by focusing on achievable goals.

Process of MBO
Organisational purpose & objectives Planning premises

Key result areas Superiors objectives

Superiors recommendation for subordinates objectives Matching resources

Subordinates statement of his objectives

Subordinates agreed objectives

Subordinates performance Performance review and appraisal

Clear goals Better planning Facilitates control Objective appraisal Motivational force Better morale Result-oriented philosophy

Goal setting problems Time consuming Increased paperwork Pressure-oriented Undermining leadership Participation problem Inflexibility

Suggestions for making MBO effective

Purpose Top management support Orientation and training Adequate time and resources Decentralisation Timely feedback Politics