Chapter-5

1. Chapter-5 Objectives

2. Definition of objectives: An objectives may be defined as a specific commitment to achieve a measurable result within a given time period. Anthony P. Raia, Objectives should be expressed in quantitative, measurable, concrete terms, in the form of a written statement of expected result to be achieved within a given period of time.

3. Management by objectivesFrom Wikipedia, the free encyclopedia • Management by Objectives (MBO) is a process of defining objectives within an organization so that management and employees agree to the objectives and understand what they are in the organization. • The term "management by objectives" was first popularized by Peter Drucker in his 1954 book 'The Practice of Management'.

4. Management by Objectives (MBO) MBO is a comprehensive management system based on measurable and participatively set objectives. It has come a long way since it was first suggested by peter F. Drucker in 1950 as a way of promoting managerial self-control. Weihrich and Koontz as, “The comprehensive managerial system that integrates many key managerial activities in a systematic manner and that is consciously directed toward the effective and efficient achievement of organizational and individual objectives.”

5. The MBO Cycle • The four steps or stages of the MBO process are also called the MBO cycle. The four-step cycle are:- • Setting objectives • developing action plans • periodic review • Performance appraisal

6. Features and Advantages • Unique features and advantage of the MBO process • The basic principle behind Management by Objectives (MBO) is for employees to have clarity of the roles and responsibilities expected of them. They can then understand how their activities relate to the achievement of the organization. They also provide direction for the personal goals of each employee.

7. Some of the important features and advantages of MBO are: • Motivation – Involving employees in the whole process of goal setting and increasing employee empowerment increases employee job satisfaction and commitment. • Better communication and Coordination – Frequent reviews and interactions between superiors and subordinates helps to maintain harmonious relationships within the enterprise and also solve many problems faced during the period.

8. Weaknesses of MBO • Failure to teach the philosophy of MBO which is built on concepts of self-control and self –directed that are aimed at making management professionals. • Failure to give proper guidelines to goal setters by making them well aware of the corporate goals in advance.

9. Difficulty in setting verifiable goals which help in the process of control. • Emphasis on short-run goals often jeopardizes the achievement of the long-term objectives. • Danger of inflexibility also causes a serious problem since managers may strive for goals that have been made obsolete by revised corporate objectives, changed premises, or modified policies.

10. Clarity of goals • Subordinates have a higher commitment to objectives that they set themselves than those imposed on them by their managers. • Managers can ensure that objectives of the subordinates are linked to the organisation 's objectives.

11. The use of MBO needs to be carefully aligned with the culture of the organization. While MBO is not as fashionable as it was before the 'empowerment' fad, it still has its place in management today. The key difference is that rather than 'set' objectives from a cascade process, objectives are discussed and agreed, based upon a more strategic picture being available to employees. Engagement of employees in the objective setting process is seen as a strategic advantage by many.

12. Arguments Against • MBO has its detractors, notably among them W. Edwards Deming, who argued that a lack of understanding of systems commonly results in the misapplication of objectives. Additionally, Deming stated that setting production targets will encourage resources to meet those targets through whatever means necessary, which usually results in poor quality.

13. Point 7 of Deming's encourages managers to abandon objectives in favour of leadership because he felt that a leader with an understanding of systems was more likely to guide workers to an appropriate solution than the incentive of an objective. Deming also pointed out that Drucker warned managers that a systemic view was required and felt that Drucker's warning went largely unheeded by the practitioners of MBO.

14. Management by exception (MBE) • Definition An organizational system in which managers intervene only when employees fail to meet performance standards or when plans or budgets go awry. Managers compare results with plans and take action when serious differences occur. • What type of organization is best served by a policy of management by exception? It seems as if most managers would have difficulty implementing this type of policy.

15. All organizations can use management by exception. When routine work results in acceptable performance, no management attention is required. Managers who have properly trained their subordinates should have no problems delegating authority and allowing people to manage their own work. Managers are then able to devote their expertise and attention to non routine problems. Some managers have trouble allowing their subordinates to make decisions because of control issues, but this psychological barrier will hinder their careers.

16. The essence of MBO is participative goal setting, choosing course of actions and decision making. An important part of the MBO is the measurement and the comparison of the employee’s actual performance with the standards set. Ideally, when employees themselves have been involved with the goal setting and choosing the course of action to be followed by them, they are more likely to fulfill their responsibilities.