Each department sets its both long range and short range objectives with the approval of top management; this process of setting objectives is reported at lower levels of management. The major activities of every enterprise are divided on some basis of departmentalisation; the top management must determine the objectives of every department. At this stage, the top management should discuss the objectives with their departmental managers so that a statement of agreed objectives may be evolved. Action plan states what is to be done and how, when, where and by whom in order to achieve a goal. It is generally developed by subordinates in conjunction with superiors so that different action plans do not work at cross purpose. The ultimate aim of various objectives may be at any levels, should be to achieve overall business objectives.

• Research conducted at the Harvard School of Business states that over 95% of employees actively working in a company tend to stay unaware of the company’s goals, protocols and strategies.
• So far, we have discussed MBO, steps in the process of MBO, pros, and cons of MBO, principles, elements, and features of MBO in terms of theory.
• In order to set objectives of the enterprise, a detailed assessment has to be made of the various resources at its disposals.
• Ideally, managers should communicate with employees in a one-on-one meeting and clearly explain what needs to be achieved and in what timeframe.
• For this, the determined objectives should be recognizable by everyone in the organization and they should know what roles they have to perform in this.
• At the end of a definite period, the actual work done by the subordinates is evaluated on the basis of the pre-determined standards.

The sub-ordinate goals, in no way should be inconsistent with the overall objectives of all business. These goals should aim at contributing towards the overall business goals. The first step in MBO process is to analyse the purpose or mission of the organisation. The mission of the organisation will be converted into goals for a given period, it may be for a quarter, half year, a year, 5 years or more. In many cases objectives are set to coincide with the completion of a project or with an annual budget. In all these goals-setting sessions, the emphasis is on setting measurable goals.

Cascading Objectives Down to Employees

After fixing the objective, the superior and subordinate managers make an action plan. This plan will be used by the subordinate manager to achieve the objective. Clarifies the job to be done and defines expectations of job accomplishment. Every individual understands his area of work and the role he is to play in the organisation.

The management by objectives is very specific, measurable, acceptable, realistic, and time-bound and these objectives should be well understood by the employees of the company. A periodic progress review is important to ensure that action plans are working. These reviews can occur informally between managers and employees, where the organization may wish to conduct three-, six- or nine-month reviews during the year. This periodic check-up allows managers and employees to see whether they are on target or whether corrective action is necessary.

Process of Organization

The final component in MBO is to perform a performance appraisal or performance review. Including an initial evaluation, providing feedback, and rewarding good behaviors. Most 360 degree feedback tools are also responded to by each individual in self-assessment. Companies that work with MBO as a part of their strategic planning, witness better productivity as their employees have a better understanding of their goals and a better work structure to follow.

If there is a discrepancy between the objectives decided and those achieved, efforts should be initiated to determine the steps to be taken to overcome the problems responsible for the discrepancy. This sets the stage for the determination of objectives for the next time period and the entire cycle of step of mbo MBO is started again from step 1. Once a second-level subordinate knows what his objectives are, i.e., what is expected of him by the superior, he schedules a meeting with his operating and staff personnel. He informs the group the goals and the action plans that he has agreed to with his superior.

Determine Organizational Objectives

This kind of precision ensures that each employee knows the organization expects of them and prevents contradictions over overlapping roles. Managers and supervisors can implement the lessons learned over time in previous MBO cycles to improve employees’ and company performance. Some of the most effective ways to deliver feedback are written reports, PowerPoint presentations, and one-on-one conversations. Good feedback encompasses management’s view of the whole process, judgment, and recommendation. This stage involves reviewing employees’ performance in the MBO process.

The aim of this third step is to align employees’ personal goals with organizational goals. Next, take your high-level objectives and define the short-term goals that will help you reach them. For example, if one of your objectives was to successfully launch a new product next quarter, you’d need to set goals around designing the product, testing it, and marketing the launch. It’s a good idea to involve employees in the goal-setting process to increase team buy-in and instill a sense of ownership around these goals.

Definition of management by objectives

Human resource accounting deals with cost of and contribution of human resources to the organisation. An assessment centre generally measures interpersonal skills, communicating ability, ability to plan and organise etc. This method of appraising was first applied in the German army in 1930. MBO often fails due to lack of knowledge about the philosophy and process of MBO.

The manager asks what goals the employees believe they can accomplish in what time period and with what resources. They will then discuss some preliminary thoughts about what goals seem feasible for the company or department. And a number of different kinds of managers must be involved in setting goals. The goals set by the superiors are preliminary, based on an analysis and judgment as to what can and should be accomplished by the organization within a certain period.

uts added pressure on employees

MBO i.e. management by objectives is the process of setting organizaitonal goals/objectives which are agreed upon by supervisors and employees. It is a strategic management tool to increase the overall performance of the company. The process of MBO revolves around the setting up of organisational goals and the goals of various divisions and sub divisions.

Management by Objectives is a functional strategy and does not interfere in the execution processes of the set goals. It is a result-oriented strategy and focuses mainly on the end result. Then, the manager and the employee need to discuss what is being planned, what the time schedule is, and what the performance indicators should be. Thereafter, the two will meet regularly to ensure the objective is being attended to and will be delivered on time. Here are some examples of management by objective goals and approaches in various departments.

When the target is achieved, suitable rewards are given to the achiever. Suitable remedial actions are initiated where the target is under achieved. These goals are communicated to all concerned in the organization. It should be adapted to the requirements of changing business environment.

In the latter, attention is given to the areas where progress has been slow or where some unforeseen bottlenecks have occurred. These may be due to poor performance of some other subordinate’s MBO achievements. Sometimes organisational roles are not properly clarified and specific responsibility for attaining the objectives is not fixed. There should be clear cut assignment of tasks and fixation of responsibilities. In some cases the responsibility of one person for a particular task may not be fixed.

The MBO process emphasizes achieving goals and has many benefits to an organization. Below are ways in which your organization can benefit by using the MBO model. The objectives in the MBO model anchor on a given time, for example, quarterly or annually depending on the intensity of the goals and the achievability. Management by objective uses feedback, which includes critiques of the process and managers’ opinions to enable continuous improvement. The success of the process relies on well-defined and specified goals.