The document presents an overview of Management by Objectives (MBO), a management philosophy introduced by Peter Drucker in 1954, aimed at improving managerial performance and effectiveness. It covers the need for MBO, its evolution, key concepts, the MBO process, benefits, limitations, and applications in various organizational contexts. The conclusion emphasizes the importance of proper planning, top management support, and training for successful MBO implementation.
The document presents an overview of Management by Objectives (MBO), a management philosophy introduced by Peter Drucker in 1954, aimed at improving managerial performance and effectiveness. It covers the need for MBO, its evolution, key concepts, the MBO process, benefits, limitations, and applications in various organizational contexts. The conclusion emphasizes the importance of proper planning, top management support, and training for successful MBO implementation.
The document presents an overview of Management by Objectives (MBO), a management philosophy introduced by Peter Drucker in 1954, aimed at improving managerial performance and effectiveness. It covers the need for MBO, its evolution, key concepts, the MBO process, benefits, limitations, and applications in various organizational contexts. The conclusion emphasizes the importance of proper planning, top management support, and training for successful MBO implementation.
The document presents an overview of Management by Objectives (MBO), a management philosophy introduced by Peter Drucker in 1954, aimed at improving managerial performance and effectiveness. It covers the need for MBO, its evolution, key concepts, the MBO process, benefits, limitations, and applications in various organizational contexts. The conclusion emphasizes the importance of proper planning, top management support, and training for successful MBO implementation.
MS41101 Management Principles and C.S.D. Topic: Management by Objectives
Presented by: Under the supervision of : ● Shriyansh Srivastava ● Pawan P. Upadhyay Dr. Tripti Singh Outline of the Presentation
• Introduction to MBO • Need for MBO • Evolution of MBO • Key Concepts in MBO • Major Ingredients of MBO Process • Benefits and Limitations of MBO Process • Organisations with MBO Experience • Applications of MBO • Case Study Introduction
“Management by Objectives” (MBO) as a
philosophy of management was first introduced by Peter F. Drucker in his book “The Practice of Management” in 1954.
Management By Objectives (MBO) is a tool by
which managers can improve their performance and increase their effectiveness. Dr. Peter Drucker on MBO
What the business enterprise needs is a principle of
management that will give full scope to individual strength and responsibility, and at the same time give common direction of vision and effort, establish teamwork, and harmonize the goals of the individual with the commonweal. The only principle that can do this is management by objectives and self-control ……………. But management by objectives and self-control may legitimately be called a “philosophy” of management. [1] Process
Need for MBO
Business Enterprise managers are not
automatically directed towards a common goal.
Business by its very nature contains powerful
factors of misdirection. 3 Powerful Factors of Misdirection
Specialised work of most managers.
Hierarchical Structure of Management.
Differences in Vision and Work at
various Levels of Management. Evolution of MBO
MBO has evolved from an essential
philosophy to a complete practice of management. As a management approach, it has been further developed by many management theoreticians, among them Douglas McGregor, George Odiorne, and John Humble. Evolution of MBO
George Odiorne (U.S.A.) propounds MBO as
a "guide for operating the unit and assessing the contribution of each of its members".
John Humble of U.K. visualises MBO as a
"system which integrates the company's need to achieve its goals with the managers need to contribute and develop himself" Key Concepts in MBO
Key Result Emphasis Participatory
Areas on Objective (KRAs) Results Setting
Periodic Review System Identifying KRAs Those results or outputs whose achievement is critical to the survival of the specific managerial position. These can also be defined at the level of a division, a unit and the entire organisation.
What is the unique contribution of my job or
the organisation? KRAs are SMART (Specific, Measurable, Achievable, Result-Oriented and Timely). Examples of KRAs
02 Marketing Manager buy product after being attracted to the company through marketing.
● Decrease employee turnover.
● Improve job vacancy by advertising 03 H.R. Manager to attract more qualified candidates.
Customer Service ● Efficiently and appropriately
04 handle customers’ complaints. Representative Major Ingredients of MBO Process
Objective Action Performance
Formulation Planning Review Objective Formulation
Well-communicated hierarchy of objectives.
Participatively determined objectives.
SMART Objectives. Hierarchy of Objectives
Overall Objectives Objectives of the of the Organisation Department. Objectives of the Division Objectives of the 4
Unit Individual Objectives:
● Performance ● Personal Development Participatively determined Objectives
Every manager should responsibly participate in
the development of the objectives of the higher unit of which he is a part.
Each manager should develop and set the
objectives of his unit himself. Higher manager may approve or disapprove those objectives. SMART Objectives
Specific Concrete and use of action verbs.
Measurable Numeric or clearly descriptive
Achievable Limited in scope
Results-oriented Focus on Output not Activities
Timely Identifies Target Date
Example of a SMART Objective
35% of the subscribers of OTT platform GetFlix do
not renew their subscription. SMART Objective:
The Customer Service Department will develop a
process for conducting a survey and write a survey instrument, based on the 2019 survey, by September 31, 2021. Action Planning [3]
Planning enables the objectives to be turned into reality.
Four broad steps involved in every action plan: 1. Choosing strategies which are appropriate to the objectives. 2. Assigning responsibility for achieving the objectives. 3. Allocating resources for achieving the objectives. 4. Scheduling specific activities to achieve maximum utilisation of resources. Action Planning
● Wherever objectives are specified for a group of people
working together towards a common goal, a team plan is required.
● Use of proper techniques such as Activity Networks,
Decision Trees, Milestone Charts, Programme, Evaluation and Review Technique (PERT), and Critical Path Method (CPM). Performance Review [3]
Implement Plan Corrective Corrective Action Action Desired Analyse Performance Deviation
Compare Actual Identify Performance with Performance Deviation Objectives
System of Performance Review in an organisation using MBO
Benefits of MBO Limitations of MBO
● Directs managers’ ● Problems in joint
attention towards results. objective setting among ● Directs members of the unequals. organization to commit ● Improper understanding themselves to specific and implementation of the achievements. MBO Philosophy. ● Facilitates their thinking in ● MBO assumes a stable terms of their environment in which the organization’s future needs objectives once set will and the setting of hold good till they are objectives to meet those achieved. needs. Organisations with MBO Experience[3] Applications of MBO [4]
● MBO is appropriate for knowledge based enterprises
and systems such as:
❖ Performance Management System
❖ Project Management ❖ University Management System ❖ Quality Management (Six Sigma) Conclusion [3]
● Management by objectives helps improve managerial
performance and effectiveness.
● For successful implementation, proper planning and
preparation are required.
● To achieve success with MBO it is necessary to have the top
management's full support and commitment, a realistic time frame for implementation, adequate training of people who would be involved in the process, and a proper understanding of the role of MBO. References 1. “The Practice of Management”, Peter Drucker 1954, Chapter 11, Page 135. 2. Thomson, Thomas M. http://home.snu.edu/~jsmith/library/body/v20.pdf 3. I.G.N.O.U, Decision Making, Chapter 8, Management by Objectives. https://egyankosh.ac.in/bitstream/123456789/64329/2/Unit-8.pdf 4. Principles of Management, NPTEL, Coordinated by IIT Roorkee https://nptel.ac.in/courses/110/107/110107150/
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