Management By Objectives (MBO)

Management By Objectives (MBO):

Management by objective is a planning and management technique whereby a superior and his subordinates set a mutually agreed upon goal for the subordinate to achieve within a give period of time.,at the end of which the subordinates performance is appraised. Management by Objective is a comprehensive management system based on measurable and participatively set objectives. MBO was first suggested by peter drucker in 1954 as a means of promoting managerial self control. MBO is a process in which the manager and his subordinates jointly establish goals and both periodically evaluate performance to know the subordinates performance towards the realisation of the set goals. In it subordinates are given discretion in choosing the means of implementation.

THE MBO CYCLE:

• Setting objectives: A hierarchy of Challenging, fair,internally consistent objectives is the necessary starting point of an MBO Cycle and serves as the foundation for all that follows.

• Developing action plans: When setting plans jointly with subordinates,action statements should be stated to ensure a complete planning phase. Managers at each level develop plans that incorporate objectives established in step 1. Higher managers should ensure that their subordinates plans complement one another and do not work at cross purposes.

• Periodic review:After the action phase and plans are being implemented,there is a need to monitor and evaluate the performance of the managers to the set objectives. Advocates of mbo usually recommend face to face meetings between a manager and his or her people at three,six and nine month intervals.

• Performance appraisal: At the end of one complete cycle of MBO.,typically one year after the original goals where set,a final review is conducted and compared with previously agreed upon objectives.

Advantages of MBO

1) It makes managers know their expected duties

2) It aids planning

3) It facilitates communication

4) Effort is focused on organizational goals

5) It boosts staff morale

6) It encourages participative management

7) It helps to minimize errors

8) It helps to correct underemployment of human resources.

9) It allows individual to appreciate their performance

10) It increases organization and employee's productivity

11) it helps in personnel development

12) It minimizes row conflict in the organization

13) It helps to develop effective control

14) It allows logical ordering of priorities.

Disadvantages of MBO

1) It takes considerable time

2) It may be resented by subordinates

3) It may require organization changes in order to become fully effective

4) Conditions change to frequently for MBO to work

5) Goals are difficult to set

6) As It involves a lot of multi-stage meetings and agreements,it can generate unnecessary paperwork

7) It requires constant review and feedback.

8) Time and money might be wasted in identifying measurable goals as the cost of measurement may not be justified by benefits.