SESSION

STRATEGIC MANAGEMENT

By:
Zahid Hussain
MS/ Mphil-Total Quality Management
Lead Auditor 5-S
IRCA Lead Auditor ISO-9001-2000
IRCA Lead Auditor ISO-14000-2004
IRCA Lead Auditor OHSAS 18000-2007
B. Sc Engineering (Chemical)
MANAGEMENT BY
OBJECTIVES

MBO
 The Concept
 Goal
- Goal is open ended statement which an organization want to accomplish
without time / quantity or both. Goals are broad and is general intentions
 Objective
- And an objective is a more specific target set in order to achieve the goal
on a larger front. Objectives are narrow and are precise.

Goal Objective
Goal is to increasing the sales of Objective would be increasing the sales of
the company remarkably. the company from 20% to 40% in 4 years.
Goal Objective
Goal is to knows about the human Objectives is to name all of the bones in the
body. human body as stated in the medical
textbook “The Human Body” within one day.
 What is MBO?
 Management by objectives (MBO) is a
systematic and organized approach that
allows management to focus on achievable
goals and to attain the best possible results
from available resources. It aims to increase
organizational performance by aligning goals
and subordinate objectives throughout the
organization.
 Ideally, employees get strong input to identify
their objectives, time lines for completion,
etc. MBO includes ongoing tracking and
feedback in the process to reach objectives.
 What is MBO?
 Management by Objectives
(MBO) was first outlined by Peter
Drucker in 1954 in his book 'The
Practice of Management'. In the
90s, Peter Drucker himself
decreased the significance of
this organization management
method, when he said: "It's just
another tool. It is not the great
cure for management
inefficiency... Management by
Objectives works if you know the
objectives, 90% of the time you
don't."
 Core Concepts of MBO
 According to Drucker managers should
"avoid the activity trap", getting so involved in
their day to day activities that they forget their
main purpose or objective. Instead of just a
few top-managers, all managers should:
- participate in the strategic planning process,
in order to improve the implementability of the
plan, and
- implement a range of performance systems,
designed to help the organization stay on the
right track.
 Managerial Focus
 MBO managers focus on the result, not the
activity. They delegate tasks by "negotiating
a contract of goals" with their subordinates
without dictating a detailed roadmap for
implementation.
 Management by Objectives (MBO) is about
setting yourself objectives and then breaking
these down into more specific goals or key
results.
 Main Principle of MBO
 The principle behind MBO is to make sure
that everybody within the organization has a
clear understanding of the aims, or
objectives, of that organization, as well as
awareness of their own roles and
responsibilities in achieving those aims. The
complete MBO system is to get managers
and empowered employees acting to
implement and achieve their plans, which
automatically achieve those of the
organization.
 Where to Use MBO
 The MBO style is appropriate for knowledge-
based enterprises when your staff is
competent. It is appropriate in situations
where you wish to build employees'
management and self-leadership skills and
tap their creativity, tacit knowledge and
initiative.
 Setting Objectives
 In Management by Objectives (MBO) systems,
objectives are written down for each level of the
organization, and individuals are given specific
aims and targets. "The principle behind this is to
ensure that people know what the organization is
trying to achieve, what their part of the
organization must do to meet those aims, and
how, as individuals, they are expected to help.
This pre-supposes that organization's programs
and methods have been fully considered. If they
have not, start by constructing team objectives
and ask team members to share in the process.
 Setting Objectives
 "The one thing an MBO system should provide is
focus", says Andy Grove who practiced MBO at Intel.
So, have your objectives precise and keep their
number small. Most people disobey this rule, try to
focus on everything, and end up with no focus at all.
 For MBO to be effective, individual managers must
understand the specific objectives of their job and
how those objectives fit in with the overall company
objectives set by the board of directors. "A manager's
job should be based on a task to be performed in
order to attain the company's objectives... the
manager should be directed and controlled by the
objectives of performance rather than by his boss."
 Setting Objectives
 The review mechanism enables leaders to
measure the performance of their managers,
especially in the key result areas: marketing;
innovation; human organization; financial
resources; physical resources; productivity;
social responsibility; and profit requirements.
Balance Between
Management and Employee Empowerment
 The balance between management and employee
empowerment has to be struck, not by thinkers, but
by practicing managers. Turning their aims into
successful actions, forces managers to master five
basic operations:
 setting objectives,
 organizing the group,
 motivating and communicating,
 measuring performance, and
 developing people, including yourself.
 Individual Responsibility
 MBO creates a link between top management's
strategic thinking and the strategy's implementation
lower down. Responsibility for objectives is passed from
the organization to its individual members. It is
especially important for knowledge-based organizations
where all members have to be able to control their own
work by feeding back from their results to their
objectives.
 MBO is achieved through self-control, the tool of
effectiveness. Today the worker is a self-manager,
whose decisions are of decisive importance for results.
 In such an organization, management has to ask each
employee three questions:
 What should we hold you accountable for?
 What information do you need?
 What information do you owe the rest of us?
The Five-Step MBO Process
 MBO Principles
 Cascading of organizational goals and
objectives
 Specific objectives for each member
 Participative decision making
 Explicit time period
 Performance evaluation and feedback
 Types of Objectives
 Routine objectives
 Innovation objectives
 Improvement objectives

The objectives must be focused on a result, not

M Measurable Quality Resources Quantity Time

A Aligned / Achievable

R Realistic/Relevant

T Timed
Key Points

• Sequence to develop Objectives

M A R S T

• Consider:
– Develop Milestones
– Monitor Performance
Key Points

Self-
Outcome Management
focused tool

Objectives

SMART
Appraisal
tool
 MBO Strategy : Three Basic Parts
 All individuals within an organization are
assigned a special set of objectives that they try
to reach during a normal operating period.
These objectives are mutually set and agreed
upon by individuals and their managers.
 Performance reviews are conducted
periodically to determine how close individuals
are to attaining their objectives.
 Rewards are given to individuals on the basis of
how close they come to reaching their goals.
 Six MBO Stages
 Define corporate objectives at board level
 Analyze management tasks and devise
formal job specifications, which allocate
responsibilities and decisions to individual
managers
 Set performance standards
 Agree and set specific objectives
 Align individual targets with corporate
objectives
 Establish a management information system
to monitor achievements against objectives
MBO Advantages & Disadvantages
 Advantages
 MBO programs continually emphasize what should
be done in an organization to achieve organizational
goals.
 MBO process secures employee commitment to
attaining organizational goals.
 Disadvantages
 The development of objectives can be time
consuming, leaving both managers and employees
less time in which to do their actual work.
 The elaborate written goals, careful communication of
goals, and detailed performance evaluation required
in an MBO program increase the volume of
paperwork in an organization.
 Examples of SMART Objectives

•Smart Objectives
• Mile Stones
• Objective monitoring sheet

Developed by Deans Consulting for AEPL