Chapter-5Chapter-5

ObjectivesObjectives

Definition of objectives:Definition of objectives:

An objectives may be defined as a An objectives may be defined as a specific commitment to achieve a specific commitment to achieve a measurable result within a given time measurable result within a given time period.period.

Anthony P. Raia, Objectives should be Anthony P. Raia, Objectives should be expressed in quantitative, measurable, expressed in quantitative, measurable, concrete terms, in the form of a written concrete terms, in the form of a written statement of expected result to be statement of expected result to be achieved within a given period of time.achieved within a given period of time.

Management by Management by objectivesobjectives

From Wikipedia, the free encyclopediaFrom Wikipedia, the free encyclopedia

• Management by ObjectivesManagement by Objectives (MBO) is a (MBO) is a process of defining process of defining objectivesobjectives within an within an organization so that organization so that managementmanagement and and employeesemployees agree to the objectives and agree to the objectives and understand what they are in the understand what they are in the organization.organization.

• The term "management by objectives" The term "management by objectives" was first popularized by was first popularized by Peter DruckerPeter Drucker in his 1954 book 'The Practice of in his 1954 book 'The Practice of Management'.Management'.

Management by Objectives Management by Objectives (MBO)(MBO)

MBO is a comprehensive management system MBO is a comprehensive management system based on measurable and participatively set based on measurable and participatively set objectives. It has come a long way since it was objectives. It has come a long way since it was first suggested by peter F. Drucker in 1950 as first suggested by peter F. Drucker in 1950 as a way of promoting managerial self-control. a way of promoting managerial self-control.

Weihrich and Koontz asWeihrich and Koontz as, “The comprehensive , “The comprehensive managerial system that integrates many key managerial system that integrates many key managerial activities in a systematic manner managerial activities in a systematic manner and that is consciously directed toward the and that is consciously directed toward the effective and efficient achievement of effective and efficient achievement of organizational and individual objectives.”organizational and individual objectives.”

The MBO CycleThe MBO Cycle

• The four steps or stages of the MBO The four steps or stages of the MBO process are also called the MBO process are also called the MBO cycle. The four-step cycle are:-cycle. The four-step cycle are:-

• Setting objectivesSetting objectives• developing action plansdeveloping action plans• periodic reviewperiodic review• Performance appraisalPerformance appraisal

Features and AdvantagesFeatures and Advantages

• Unique features and advantage of Unique features and advantage of the MBO processthe MBO process

• The basic principle behind Management The basic principle behind Management by Objectives (MBO) is for employees to by Objectives (MBO) is for employees to have clarity of the roles and have clarity of the roles and responsibilities expected of them. They responsibilities expected of them. They can then understand how their activities can then understand how their activities relate to the achievement of the relate to the achievement of the organization. They also provide organization. They also provide direction for the personal goals of each direction for the personal goals of each employee.employee.

• Some of the important features and Some of the important features and advantages of MBO are:advantages of MBO are:

• Motivation – Involving employees in the whole Motivation – Involving employees in the whole process of goal setting and increasing process of goal setting and increasing employee empowerment increases employee employee empowerment increases employee job satisfaction and commitment. job satisfaction and commitment.

• Better communication and Coordination – Better communication and Coordination – Frequent reviews and interactions between Frequent reviews and interactions between superiors and subordinates helps to maintain superiors and subordinates helps to maintain harmonious relationships within the harmonious relationships within the enterprise and also solve many problems enterprise and also solve many problems faced during the period. faced during the period.

Weaknesses of MBOWeaknesses of MBO

• Failure to teach the philosophy of Failure to teach the philosophy of MBO which is built on concepts of MBO which is built on concepts of self-control and self –directed that self-control and self –directed that are aimed at making management are aimed at making management professionals.professionals.

• Failure to give proper guidelines to Failure to give proper guidelines to goal setters by making them well goal setters by making them well aware of the corporate goals in aware of the corporate goals in advance.advance.

• Difficulty in setting verifiable goals Difficulty in setting verifiable goals which help in the process of control.which help in the process of control.

• Emphasis on short-run goals often Emphasis on short-run goals often jeopardizes the achievement of the long-jeopardizes the achievement of the long-term objectives.term objectives.

• Danger of inflexibility also causes a Danger of inflexibility also causes a serious problem since managers may serious problem since managers may strive for goals that have been made strive for goals that have been made obsolete by revised corporate objectives, obsolete by revised corporate objectives, changed premises, or modified policies.changed premises, or modified policies.

• Clarity of goals Clarity of goals • Subordinates have a higher Subordinates have a higher

commitment to objectives that they commitment to objectives that they set themselves than those imposed set themselves than those imposed on them by their managers. on them by their managers.

• Managers can ensure that objectives Managers can ensure that objectives of the subordinates are linked to the of the subordinates are linked to the organisation 's objectives.organisation 's objectives.

• The use of MBO needs to be carefully aligned The use of MBO needs to be carefully aligned with the culture of the organization. While with the culture of the organization. While MBO is not as fashionable as it was before MBO is not as fashionable as it was before the 'empowerment' fad, it still has its place in the 'empowerment' fad, it still has its place in management today. The key difference is that management today. The key difference is that rather than 'set' objectives from a cascade rather than 'set' objectives from a cascade process, objectives are discussed and agreed, process, objectives are discussed and agreed, based upon a more strategic picture being based upon a more strategic picture being available to employees. Engagement of available to employees. Engagement of employees in the objective setting process is employees in the objective setting process is seen as a strategic advantage by many.seen as a strategic advantage by many.

Arguments AgainstArguments Against

• MBO has its detractors, notably among MBO has its detractors, notably among them them W. Edwards DemingW. Edwards Deming, who argued , who argued that a lack of understanding of systems that a lack of understanding of systems commonly results in the misapplication commonly results in the misapplication of objectives. Additionally, Deming of objectives. Additionally, Deming stated that setting production targets stated that setting production targets will encourage resources to meet those will encourage resources to meet those targets through whatever means targets through whatever means necessary, which usually results in poor necessary, which usually results in poor quality.quality.

• Point 7 of Deming's encourages Point 7 of Deming's encourages managers to abandon objectives in favour managers to abandon objectives in favour of leadership because he felt that a leader of leadership because he felt that a leader with an understanding of systems was with an understanding of systems was more likely to guide workers to an more likely to guide workers to an appropriate solution than the incentive of appropriate solution than the incentive of an objective. Deming also pointed out an objective. Deming also pointed out that Drucker warned managers that a that Drucker warned managers that a systemic view was required and felt that systemic view was required and felt that Drucker's warning went largely unheeded Drucker's warning went largely unheeded by the practitioners of MBO.by the practitioners of MBO.

Management by exception Management by exception (MBE)(MBE)

• DefinitionDefinitionAn organizational system in which An organizational system in which

managers intervene only when employees managers intervene only when employees fail to meet performance standards or fail to meet performance standards or when plans or budgets go awry. Managers when plans or budgets go awry. Managers compare results with plans and take compare results with plans and take action when serious differences occur.action when serious differences occur.

• What type of organization is best served What type of organization is best served by a policy of management by exception? by a policy of management by exception? It seems as if most managers would have It seems as if most managers would have difficulty implementing this type of policy.difficulty implementing this type of policy.

• All organizations can use management by All organizations can use management by exception. When routine work results in exception. When routine work results in acceptable performance, no management acceptable performance, no management attention is required. Managers who have attention is required. Managers who have properly trained their subordinates should properly trained their subordinates should have no problems delegating authority and have no problems delegating authority and allowing people to manage their own work. allowing people to manage their own work. Managers are then able to devote their Managers are then able to devote their expertise and attention to non routine expertise and attention to non routine problems. Some managers have trouble problems. Some managers have trouble allowing their subordinates to make decisions allowing their subordinates to make decisions because of control issues, but this because of control issues, but this psychological barrier will hinder their careers.psychological barrier will hinder their careers.

• The essence of MBO is participative goal The essence of MBO is participative goal setting, choosing course of actions and setting, choosing course of actions and decision making. An important part of decision making. An important part of the MBO is the measurement and the the MBO is the measurement and the comparison of the employee’s actual comparison of the employee’s actual performance with the standards set. performance with the standards set. Ideally, when employees themselves Ideally, when employees themselves have been involved with the goal setting have been involved with the goal setting and choosing the course of action to be and choosing the course of action to be followed by them, they are more likely followed by them, they are more likely to fulfill their responsibilities.to fulfill their responsibilities.