Management by objectives refers to the set of goals that are measurable, verifiable and tangible.
Management by objectives (MBO) is used for planning, organizing, actuating and controlling organizational activities.
Objectives are determined after thorough analysis of the internal and external environment relating to the organization.
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The SWOT, i.e. strength, weakness, opportunities and threats, analysis is used to formulate objectives.
MBO was coined by Peter Drucker 45 years ago, who suggested that the setting of objectives and appraising the results based thereon, leads to improvement of performance.
It is used to motivate people by providing satisfaction of achievement and rewards. The organizational objectives are translated into specific objectives of succeeding offices, viz. division, branches and so on.
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Individual objectives are decided on the basis of the departmental objectives. Each employee’s performance is compared with their respective objectives.
If employees achieve the goals they are satisfied. Moreover, they are rewarded for the achievement of the objective if the achievements are outstanding.
The objective relation to the organization’s total performance is determined through identification of various sub-objectives of marketing, production, quality, service, employees’ development and other activities.
Objectives are developed in quantitative terms so that they can be easily achieved and used for measurement. Employees are made aware of MBO.
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They are prepared and motivated to achieve the objectives. They are developed accordingly to implement the objective plans.
MBO is not fixed, but is flexible as per the requirements. Individual objects are used for motivation.
The superior- subordinate relationship is strengthened. Responsibilities, power and duties are defined accordingly to achieve objectives.
The goal setting theory is fully applicable in MBO. A hard goal results in higher performance than the easy goals.
MBO advocates specific goals, i.e. quantifiable, measurable and having a target goal. The difference between MBO and goal setting is that the former relates to the participation of employees with the management and the latter relates to the goals of the subordinates who are controlled by the superior to achieve the goal.
In MBO, superior and subordinate jointly choose the goal to be achieved by them cooperatively.
Such an objective has a specific time span within which the objectives are to be achieved with the joint efforts of subordinates and superiors.
The objective is used as a guide to direct functions at every stage. It is also used as a guide to direct functions at every stage. It is also used to provide feedback as to how the people are working.
The superiors and subordinates assess the reasons for which the objective have not been achieved.
The reasons for nonfulfillment of objectives are used to make necessary changes in objectives and their performance procedures. Objectives make MBO a living system of management.
MBO has become a common practice in all types of organizations. Business and industrial houses as well as charitable and educational institutions have been using MBO for motivating employees.
The degree of commitment to MBO decides the level of achievement. Highly committed organizations and employees get higher results because of better performances.