MANAGEMENT

BY OBJECTIVES
MBO is one of the rational school of
management's successful products

WHAT IS MBO

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

WHAT IS MBO

MBO aims to increase organizational performance

by aligning goals and subordinate objectives
throughout the organization.

WHAT IS MBO

Employees get strong input in identify their

objectives, time lines for completion, etc. MBO
includes ongoing tracking and feedback in the
process to reach objectives.

THE CORE CONCEPTS OF MBO

According to Drucker managers should avoid the

activity trap, getting so involved in their day to
day activities that they forget their main purpose
of objective. Instead of just a few top-managers,
all managers should:

THE CORE CONCEPTS OF MBO

1. Participate in the strategic planning process,

in order to improve the implement ability of the
plan, and

THE CORE CONCEPTS OF MBO

2. Implement a range of performance systems,

designed to help the organization stay on the
right track.

MBO PRINCIPLES

Cascading of organizational goals and objectives.

MBO PRINCIPLES

Specific objectives for each member

MBO PRINCIPLES

Participative decision making

MBO PRINCIPLES

Explicit time period

MBO PRINCIPLES

Performance evaluation and feedback

THE FIVE STEP MBO PROCESS

Set or Review Organizational Objectives

MBO starts with clearly defined strategic

organizational objectives. If the
organization isn't clear where it's going, no
one working there will be either.

THE FIVE STEP MBO PROCESS

Cascading Objectives Down to Employees

To support the mission, the organization

needs to set clear goals and objectives,
which then need to cascade down from one
organizational level to the next until they
reach the everyone.

THE FIVE STEP MBO PROCESS

Encourage Participation in Goal Setting

Everyone needs to understand how their

personal goals fit with the objectives of the
organization. This is best done when goals
and objectives at each level are shared and
discussed, so that everyone understands
"why" things are being done, and then sets
their own goals to align with these.

THE FIVE STEP MBO PROCESS

Monitor Progress

Set up a specific plan for monitoring goal

performance (once a year, combined with a
performance review is not sufficient!) Badlyimplemented MBO tends to stress the goal
setting without the goal monitoring. Here is
where you take control of performance and
demand accountability.

THE FIVE STEP MBO PROCESS

Evaluate and Reward Performance

MBO is designed to improve performance at

all levels of the organization. To ensure this
happens, you need to put a comprehensive
evaluation system in place.

ADVANTAGES OF MBO
Improved planning
Team work
Effective self control
Objective appraisal
Motivation and Morale

LIMITATION OF MBO
Goal setting problem
Time consuming
Increased paperwork
Pressure oriented
Undermining leadership
Participation problem
Inflexibility