Read this article to understand the meaning, features, and process of management by objectives (MBO)…
Meaning of Management by Objectives (MBO)
What is Management by Objectives (MBO)??
Management by Objectives (MBO) is a type of goal which defines the scope, directions, and suggests a path of planning to our managers. The term objectives categorized into four paths:-
1. Goal: The success and growth of every organization are totally depend on its goals. The goals give direction or path to planning, organizing, coordinating, and other managerial activities.
2. Scope: It indicates the area of operations and boundaries within which business activities are performed.
3. Definiteness: The goal should be clear or easy to understand.
4. Direction: All organizational activities are transferred from one place to another place. It defines goals in this form:
Social goals < Missions < Overall organizational goals < Definite organizational goals < Departmental Goals < Individual goals.
Features of Management by Objectives (MBO)
The features of management by objectives (MBO) are also known as characteristics of management by objectives (MBO)...
1. Management philosophy:
MBO is not a method of management to be applied in purposive areas of working performance. It is a kind of management philosophy that affects organizational thinking. It provides a path to an organization for executing the divisions and levels.
MBO involves all types of managers (whether it is superiors and subordinates) to set the overall goals. The goals of every level are set with the participation of managers at lower levels. This helps to establish a greater commitment towards the goals.
Every manager target to set his objectives and optimize for future achievements. This identifies the relationship of superiors with their peers and subordinates.
When goals are formulated with the participation of seniors and juniors, it ensures the integration of organizational objectives and functional areas also. This helps to provide a proper focus to managerial activities and their established goals.
Management by Objectives integrates the objectives at various stages like departmental, Individual, and corporate.
4. Continuous activities:
MBO is a regular and continuous process because it evaluates the performance of employees regularly. It involves improving the performance of employees and the modification of the goals. But, the performance is occasionally revised annually.
It also provides the basis for future planning & control and corrective actions.
5. Top management support:
The goals of the organization are framed by the top level of managers in consultation with subordinates. This creates the chain of command in the form of hierarchical analysis. Every objective of the organization is created with the support of middle and lower levels of employees.
Goals of every level of organization are interlinked with each other and a part of a big goal.
Process of Management by Objectives (MBO)
The following sequence of steps is categorized in the process of MBO in management:-
1. Develop overall goals:
Overall organizational goals are totally related to the purpose of the organization. Earning an extra 20% amount on capital is the example of the goal of the organization. These goals are formulated in front of the company’s strength, weakness, threats, and opportunities (whether it is internally or externally). They are the definite goals and define the purpose of organizational existence.
They are based on the growth of organizational goals, whether vertical integration and horizontal integration, trading or services, expansion or diversification, etc…
2. Establish specific goals:
Specific or definite goals are set for sub-units, departments, and individuals in the organizational level of the hierarchy. Goals are formulated by managers for respective departments like production, sales, marketing, and so on).
These goals are made so that the manager can recognize his work and do it well. In this process, they also give suggestions to our superiors for framing the overall objectives. These goals are also helping to create the relationship between the superiors and subordinates.
3. Formulate action plans:
“Action plan is an explanation of what is to be done, when, where, and by whom, in order to achieve the objective”. These plans formulate to achieve the goals. There are various key areas in management which determine the optimum utilization of available resources.
These areas also refelt the expectations of stakeholders and their working performance. These areas are (i) Market Value, (ii) Profitability, (iii) Worker performance, (iv) Productivity, (v) Public responsibility, and so on.
In this point, the plans are formulated at lower levels with the respect of superiors. They solve the problems in achieving the goals, ways to overcome the problems and allocate the overall areas for the purpose of the achievement of objectives.
MBO is fully focused on the development of self-control or indulgence. Self-control is very necessary for establishing the main objective of the organization because if your control is right on your mind then you will take good decisions and establish purposive goals.
5. Appraisal of performance:
The success of plans is totally based on the whole review of performance where problems are easily solved by the managers or executives and reflect the next stage of MBO cycle. After the establishment of organizational or individual goals, managers periodically trace the performance of juniors to ensure that actual and planned performance.
The MBO always encourage the effectiveness of self-appraisal, where subordinates analyze their performance under the guidance of top-level managers.
Appraisal also includes better recognition for positive recognition and performance of areas where subordinates need to develop their knowledge and skills. Thus, an appraisal is occasionally used for recycling the MBO process because if the goals are successfully achieved, they form the path for the next step of MBO cycle.
Other Related Question-
Q.1: What are the process of management by objectives (MBO) in management?
Ans: The steps are given below…
- Develop overall goals.
- Establish overall goals.
- Devise action plans.
- Appraisal of performance.