Notes on Management By Objectives (MBO)

      Management by objectives (MBO) is an objective oriented personnel management technique that aims to define and achive the objectives of the organisation and coordinate the behaviours and functions of both managers and employees in confirmity for the achievement of these objectives.

       The concept of MBO was first developed by Peter Drucker in 1954. Various writers like John Humble, George cardione and Dugregor, later developed it.

       It should be noted that many years before 1954, objectives were emphasised by classical writers like become a philosophy of Managing in many enterprises and has come to be recognized as the most dynamic thinking in the area of Management.

       The following are some precise definitions:

Defined by John Humble:

       In the words of John Humble MBO is "a dynamic system which integrates the company's need to achieve its goal for profit and growth."

Defined by peter Drucker:

       As penned by peter Drucker, "MBO encourages innovation and it lays more emphasis on results and less on methods employed in achieving the goals."

       In a nutshell, MBO makes the job of subordinate managers meaningful and interesting and offers examples of job satisfaction.

Benefits of MBO:

1. Better Management:

       MBO forces Management thinkers to plan for results and think how these can be achieved and what resources would be required. All these leads to better Management in the organisation.

2. Clarification In Organisational Action:

      MBO leads to clarification in organisational rates and structure. Various positions are treated as center of authority and responsibility. The process removes differences in the organisation particularly in the area of delegation of authority.

3. Commitment:

       MBO provides a psychological satisfaction to workers and stimulates them for hard work they enjoy considerable authority which is a source of inspiration for better performance. Moreover people are made clear about their area of operations their strength and their limits. These things make feeling of commitment.

4. Help In Appraisal:

       MBO provides Management criteria to judge where one stands so that corrective measures can be taken well in time.

Process of MBO/ Steps in MBO:

       The process of MBO is not as simple as it appears to be. Managers need training and experience to develop the required skill. It is a continuous process and this nature of MBO helps in modifying the objectives to suit the changed situation.

       The steps involved in MBO are as follows:

1. Setting of Objectives:

       The first step of MBO is to set up objectives for the organisation as well as for the various positions at various levels. Questions such as why do the organisation the guidelines for setting of objectives.

       In order to set objectives for the enterprise, a detailed assessment has to be made of the various resources at its disposal. Proper forecast should be made to estimate the demand and business condition in the country.

2. Revision of organisational structure:

       On MBO process, it might be necessary to revise the existing organisational structure. The organisational chart and manual should be suitably amended to depict the changes brought by the introduction of MBO. Job descriptions at various level must define their objectives, responsibility and authority.

3. Establishing checkpoint:

       The superiors must establish checkpoints on the standard of performance for evaluating the progress of the subordinates. The standard should be defined quantitatively as for as possible and the subordinates must understand them fully.

4. Appraisal of Performance:

       The organisational may undertake formal or informal appraisal. Formal appraisal is usually done once or twice a year. Tue design and format of the performance review form will depend upon the nature of the enterprise.

       Though appraisal is the last step of MBO process, it is used as a recycling objectives and action. When it happens at one level, it may affect the other level also. Therefore appraisal at one level is recycled to see if the objectives have been achieved properly at the level concerned and also at the next level.

Limitation of MBO:
  1. It imposes a burden of extra duty on the Managers, as MBO requires regular attention by them.
  2. It involves huge paper works. Hence, it is said to create more pile of papers in the organisation and adds to the existing large amount of paper works.
  3. The goals set out by MBO process are rigid. Emphases are put on short-term goal and the long-term goals are neglected.
  4. MBO stresses on quantitative goal while the other Aspect of quality are neglected.
  5. MBO process is more time consuming in nature It fails if the Managers couldn't spare adequate time required by the process.
  6. MBO required to be integrated with other system of the organisation such as budgeting, communication; control etc. changing of the current working system may disrupt the work process and may cause other difficulties.
  7. The process of MBO though simple but its application is difficult in dynamic environment.
  8. The process of MBO to be successful requires a pretty long time more than a year or two. This proves to a testing of patients for the Managers and on the process creates hurdle for the current running process of the organisation.