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The concept of Management by Objectives (MBO) was first given by Peter Drucker in 1954. It can be defined as a process whereby the employees and the superiors come together to identify common goals, the employees set their goals to be achieved, the standards to be taken as the criteria for measurement of their performance and contribution and deciding the course of action to be followed. The essence of MBO is participative goal setting, choosing course of actions and decision making. An important part of the MBO is the measurement and the comparison of the employees actual performance with the standards set. Ideally, when employees themselves have been involved with the goal setting and the choosing the course of action to be followed by them, they are more likely to fulfill theirresponsibilities. UNIQUE FEATURES AND ADVANTAGES OF MBO The principle behind Management by Objectives (MBO) is to create empowered employees who have clarity of the roles and responsibilities expected from them, understand their objectives to be achieved and thus help in the achievement of organizational as well as personal goals. Some of the important features and advantages of MBO are: Clarity of goals With MBO, came the concept of SMART goals i.e. goals that are: Specific, Measurable, Achievable, Realistic,and Timebound. The goals thus set are clear, motivating and there is a linkage between organizational goals and performance targets of the employees. The focus is on future rather than on past. Goals and standards are set for the performance for the future with periodic reviews and feedback. Motivation Involving employees in the whole process of goal setting and increasing employee empowerment increases employee job satisfaction and commitement. Better communication and Coordination Frequent reviews and interactions betweensuperiors and subordinates helps to maintain harmonious relationships within the enterprise and also solve many problems faced during the period.
MBO Model.
MBO PLANNING.
MBO Implementation.
Features of MBO: 1. Management by Objectives is a philosophy or a system, and not merely technique. 2. It emphasizes participative goal setting. 3. It clearly defines each individual responsibility in terms of results. 4. If focuses attention on what must be accomplished (goals0 rather than on how it is to be accomplished. 5. It converts objective needs into personal goals at every level in the organization. 6. It establishes standards or yardsticks (goals) as operation guides and also as basis of performance evaluation. 7. It is a system intentionally directed toward effective and efficient attainment of organizational and personal goals. 8. MBO process (or management by Objective cycle or key elements of management by Objectives or minimum equirements of management by objectives. Disadvantages of MBO: It over-emphasizes the setting of goals over the working of a plan as a driver of outcomes. It underemphasizes the importance of the environment or context in which the goals are set. That context includes everything from the availability and quality of resources, to relative buy-in by leadership and stake-holders. As an example of the influence of management buy-in as a contextual influencer, in a 1991 comprehensive review of thirty years of research on the impact of Management by Objectives, Robert Rodgers and John Hunter concluded that companies whose CEOs demonstrated high commitment to MBO showed, on average, a 56% gain in productivity. Companies with CEOs who showed low commitment only saw a 6% gain in productivity. Companies evaluated their employees by comparing them with the "ideal" employee. Trait appraisal only looks at what employees should be, not at what they should do. It did not address the importance of successfully responding to obstacles and constraints as essential to reaching a goal. Conclusion: The use of MBO needs to be carefully aligned with the culture of the organization. While MBO is not as fashionable as it was before the 'empowerment' fad, it still has its place in management today. The key difference is that rather than 'set' objectives from a cascade process, objectives are discussed and agreed, based upon a more strategic
picture being available to employees. Engagement of employees in the objective setting process is seen as a strategic advantage by many.