INTRODUCTION
Management By Objectives (MBO) is a system in which an organization’s superior and subordinate managers collaborate to identify the organization’s common goals, define each individual’s major area of responsibility in terms of the outcome expected of him, and use these measures as a guide for running the unit and evaluating the contributions of its members.
Every institution or organisation was created with the goal of fulfilling certain objectives. A person who begins a business has the intention of making money.
A nonprofit organisation that establishes schools and colleges with the goal of providing educational services to the general population. As a result, the goals of each organisation may differ. In any case, each organisation has its own goals.
DEFINITION
Mc Farland has defined, “Objectives are the goals, aims or purposes that organisations wish to achieve over varying periods of time.”
Terry has defined that, “A managerial objective is the intended goal which prescribes definite scope and suggests direction to the efforts of a manager.” used to indicate
In the words of Knootz and O’Donnel, “Objective is a term commonly results for which an the endpoint of a management programme.”
Simply said, aims are the expected end outcomes for which an organisation was formed and which it strives to attain.
FEATURES OF OBJECTIVES
- Each person forms a group with his or her own goals. If the people form a group, the group has many goals. These goals are pursued by the newly formed group.
- The goals and objectives of any organisation are specifically specified. The one that secures profit earnings is referred to as the. Short-term or long-term, broad or precise objectives are referred to as specified objectives. A broad objective aim that explains how such gains are achieved over time.
- The personnel objectives of an organisation should be clearly established. The top executives benefit greatly from clearly stated objectives since the objectives are interpreted by the executives, ideally at the highest level.
- The organisation has broad objectives at the top level, such as earning a specified percentage of return on investments. The organisation is broken down into numerous categories. Each segment has distinct goals. The production department has certain goals in mind for reaching a given level of output. The sales section’s goal is to achieve a specified level of sales or something similar. All of the sections strive to meet the organization’s overall goals. A hierarchy of objectives is built in this way.
- The organization’s goals must be in line with the public’s general requirements. All current organisations’ aims are in line with societal needs.
- Every organisation has many goals at the same time. The reason for this is that objectives are required in many sectors of business. Marketing, innovation, profitability, productivity, physical and financial resources, and the growth of social obligations are all examples of business aims, according to Peter F. Drucker.
- The organization’s aims may be amended at any time. The old goals are being replaced by new ones. In order to survive in the commercial world, the goals are altered. The major causes causing changes in aims are government policy and social developments.
- The targets are stated numerically, for example, 1,000 to 10,000 units. Rupees can be used to signify profit or sales. The output may be measured in both rupees and physical units. This aids in the evaluation of actual performance in achieving the goals.
- The set objectives must be attainable. To put it another way, whatever the goals are, they must be attainable and reasonable.
ADVANTAGES OF OBJECTIVES
1. Unified planning: Several people in an organisation make various strategies. These plans are in line with an organization’s aims. These goals then inspire coordinated planning.
2. Individual motivation: An organization’s objectives define the purpose of each position and establish specific goals in addition to the organization’s general aims. The individual thus naturally accepts the organization’s goals as desirable and works to attain them.
3. Co-ordination: When a person considers the organization’s goals to be desirable, obtaining coordination becomes quite simple.
4. Control: Performance is measured against objectives. The actual performance is contrasted to the expected results. This will make the control process easier.
5. Basis for Decentralisation: In order to attain an organization’s common goals, departmental or sectional objectives are set. As a result, objectives serve as a foundation for decentralisation.
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MANAGEMENT BY OBJECTIVES (MBO)
MBO is a management method in which each organisation member actively participates and is involved. Individual power and responsibility are given wide latitude under this system. MBO aligns an individual’s aim with the organization’s goal. It instils self-control in the manager and drives him to act before someone tells him to.
Prof. Reddin defines MBO as, “the establishment of effective standards for managerial positions and the periodic conversion of those into measurable time bound objectives linked vertically and horizontally and with future planning.”
FEATURES OF MBO
1. Management makes an attempt to connect an organization’s and individuals’ ambitions. This will result in more efficient management.
2. MBO aims to balance the organization’s long-term and short-term objectives.
3. Management attempts to link organisational aims to societal aspirations.
4. MBO places a strong focus on both goals and successful performance.
5. On the basis of experience, it is always refining, altering, and enhancing the goals, as well as changing the techniques to achieve the goals.
6. It improves the ability of the organisation to achieve goals at all levels.
7. MBO provides employees with a high level of motivation and satisfaction.
8. Employee engagement in the goal-setting process is recognised.
9. Consultations are intended to replace the exercise of authority.
10. Encourages an atmosphere of trust, kindness, and a desire to succeed.
PROCESS OF MBO
1. Defining organisational objectives: Initially, top-level personnel in an organisation define organisational objectives. Then it begins to descend. The purpose of a company’s existence is defined by its organisational objectives. First, long-term goals are defined. The feasibility of reaching the long-term objectives is considered while framing short-term targets.
2. Goals of each section: The objectives for each area, department, or division are based on the organization’s general goals. The time frame in which these goals must be met is also set. Goals or objectives are stated in a clear and concise way.
3. Fixing key result areas: The key outcome areas are determined by the organization’s objectives. The Key Results Areas (KRA) are ordered in order of importance. KRA measures an organization’s strength. Profitability, market position, and innovation are all instances of KRA.
4. Setting subordinate objectives or targets: Each subordinate’s or individual’s goals are set in stone. Fixing the objectives at a lower level in quantitative units is preferred. The boss and his subordinates should have an open and honest debate.
By providing a chance, subordinates are encouraged to define their own standards. If subordinates are given the freedom to do so, they are more likely to set lofty goals and achieve them. The subordinates’ objectives or aims are set in this way.
5. Matching resources with objective: The objectives are set in the context of the available resources. When specific resources (technical staff or limited raw materials) are insufficient, an organization’s goals are adjusted accordingly. As a result, resources must be matched to objectives. The available resources should then be assigned and utilised correctly.
6. Periodical review meetings: Periodic meetings between superiors and subordinates should be held to discuss progress toward achieving objectives. In the light of advancement, the established norms may be modified. The underlying circumstances do not change, and the periodic review meeting takes place throughout the time frame designated for attaining the goals.
7. Appraisal of activities: There should be a dialogue between the superior and subordinates at the conclusion of the specified term for completing the objectives. The topic of debate is subordinates’ performance in comparison to the established criteria. Corrective action should be taken by the superior.
According to Earl P. Strong. “Only by bringing company objectives down from long range to short range, from company level to individual position level, from preperformance to post-performance and by penalizing for failure and rewarding for success can the effective programme of managing by objectives be accomplished.”
The superior should determine the reasons for the failure to meet objectives. The difficulties that subordinates are experiencing should be addressed, and efforts taken to address them.
8. Reappraisal of objectives: An organisation exists in a changing environment. There are many changes in a short period of time. The ability of a contemporary corporate organisation to adapt to changing circumstances is critical to its survival and success. As a result, the senior management executive should assess the organization’s objectives and reframe them in light of changing circumstances.
According to Newman, Summer and Wanen, “Every manager must frequently reappraise the emphasis he gives to his various objectives. The job is like that of a captain of a large ship who is continually changing his speed and direction in relation to his present position, tides, winds and other conditions.”
BENEFITS OF MBO
1. Under MBO, managers are involved in creating objectives at all levels of management, and this commitment guarantees that they are met.
2. The MBO process assists managers in understanding their function within the organisation.
3. The manager understands the importance of planning and values it.
4. MBO lays the groundwork for participatory management. Goals are set in collaboration with subordinates.
5. A department does not collaborate with another department at the same time. In other words, the goals of each department are in line with the overall goals of the company.
6. MBO is used to conduct a systematic performance review.
7. MBO specifies the performance requirements. It aids in the implementation of remedial measures.
8. It is straightforward to delegate authority with the help of MBO.
9. MBO allows management to focus on employee development.
10. MBO encourages workers by enriching their tasks and making them more meaningful.
11. MBO determines a worker’s level of responsibility.
12. The management makes decisions extremely swiftly. The rationale for this is that each employee understands why a choice is being made and does not object to it.
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PROBLEMS AND LIMITATIONS OF MBO
1. MBO fails to convey the philosophy; most executives have no idea how MBO works, what MBO is, why MBO is required, or how MBO might benefit participants.
2. MBO takes a long time to complete. Senior personnel will require a lot of time to frame the MBO. It then leads to a lot of spending. Managers are sometimes irritated with MBO. MBO necessitates a lot of paper labour.
3. MBO focuses solely on short-term goals and ignores long-term goals.
4. The status of subordinates is required for the correct formulation of objectives. However, in the MBO procedure, this is not feasible.
5. MBO is a tight organisation. Objectives should be adjusted in response to changing external and internal circumstances. If this is not done, the desired outcomes will not be achieved.
6. The goals are set without taking into account the available resources.
GUIDELINES FOR SETTING EFFECTIVE OBJECTIVES
If the organisation follows specific criteria, the constraints of MBO can be alleviated to some extent. Prof. Terry has provided these instructions. When developing goals, keep the following criteria in mind:
1. Only the participants who will be accountable for implementing the goals set them.
2. All of the objectives should contribute to the organization’s overarching goals.
3. Achievable objectives should be set.
4. Workers should be motivated as a consequence of the objectives.
5. For successful execution, objectives must be reviewed on a regular basis.
6.The features of innovation should be included in the objectives.
7. Each management member should have a suitable amount of objectives. A decent number of objectives is four or five.
8. The importance of the objectives should be prioritised.
9. Within a company or organisation, objectives should be balanced.
10. Simple and unambiguous objectives should be set.
11.Specific and time-bound goals should be set.