Management by Objectives – Examples.

Agnes Miriam. I

Criticism on MBO

• W. Edward Deming – Argument against MBO.• lack of understanding of systems commonly

results in the misapplication of objectives.• Setting production targets – encourage

workers to meet those targets through whatever means necessary – poor quality.

Peter Drucker on MBO

Management Buy Out !!!

Improving Sales Force Performance by MBO.

• Tying compensation to MBO – Motivate the sales team.

• Sales Compensation Plan – traditional – lack proper data to measure sales.

• MBO Centric Compensation Plan – rewards people for meeting objectives.

MBOs Have Their Time and Place

• When the company has indirect or insufficient data that limit the ability to measure individual sales performance.

• Technology company preparing for its first product launch.

• No immediate results even though the production and sales forces have worked hard.

• MBO based incentive plan is a good fit.

Building a Successful MBO Team

• Involve the entire team• Drive results• Develop strong objectives• Tie to ratings• Centralize and automate

Results Achieved

• The company established strong customer relationships.

• The sales force’s efforts created a customer base of eager first movers.

• the company retained its best salespeople in larger numbers than expected.

• The company had approached MBOs the right way, the technology company achieved its initial goals, motivated the sales force and rewarded salespeople appropriately.

MBO – “The HP Way”

• Highly acclaimed management style.• MBO – an integral part of The HP Way !!• Bill Packard – MBO – Antithesis of Management by

Control.• Overall objectives are clearly stated, Flexibility to

work in different ways.• Planning – High level management and then

delegated to all.• Monitoring performance measures – plan modified.

MBO at Microsoft by Bill Gates.

• Eliminate politics by giving everyone the same message.

• Keep a flat organisation in which all issues are discussed openly.

• Insist on clear and direct communication.• Prevent competing measures and objectives.• Eliminate rivalry between the different parts of

the organisation.• Empower teams to do their own things.

MBO in Action at INTEL

• A Manager’s guide at Intel:• Start with a well chosen objectives.• Set your subordinates objective that fit in

within your objective.• Allow the subordinates to setup their own

key results so as to achieve their own objectives.

MBO in Action at INTEL

• In Intel, objectives are written down for each level of the organisation and individuals are given specific aims and targets.

• What organisation is trying to achieve, what is their part and how they can help.

MBO in Action at INTEL

• Andy Groove – “ The only thing MBO should provide is focus.”

• Keep objectives precise and their number small.

• For MBO to be effective, the individual managers must understand their specific objectives and how those objectives fit into the overall objective of the company.