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Peter Drucker in 1954, in his book the practice of management proposed the approach MBO and self control suggested as basis of measuring the performance of managers Douglas McGregor , Edward Shelh, John Humble General Electric, USA all advocated the concept Called by various names viz. work planning and review, management by results, accountability management, performance results and individual development evaluation (PRIDE)
Management by objectives
MBO can be defined as a process whereby the superior and subordinates managers of an oragnisation jointly identify its common goals, define each individual's major areas of responsibility in terms of results expected of him, and use these measures as guides for operating the unit and assessing the contribution of each of its members
Contd..
A philosophy as well as a technique of management MBO philosophy assumptions : goal clarity, role clarity, periodic feedback, participation and performance improvement emphasis on converting overall objectives in to specific objectives for organizational unit and individual members a way to integrate and focus the efforts of all organization members on the goals of higher management and overall organizational strategy Managers help set objectives for those at levels higher than their own so that it gives them a better understanding of strategy of company and how their specific objectives relate to over all picture MBO works from bottom up as well as from the top down
Management by objectives
Management By Objectives (MBO)
Specific performance goals are jointly determined by employees and managers. Progress toward accomplishing goals is periodically reviewed. Rewards are allocated on the basis of progress towards the goals. Key elements of MBO:
Goal specificity, participative decision making, an explicit performance/evaluation period, feedback
Features:
Comprehensive management philosophy not merely a tool of measuring performance, overall system of management Participative approach to managements : joint authorship and implementation Goal oriented approach: Focuses on goals at all levels Concentrates on KRAs Integrated approach to management: integrates goals at all levels Uses initiative and creativity in decision making
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Benefits of MBO
Better and improved planning: plans for results rather for work,explicit objectives, goal clarity,high commitment towards goals, realistic plans, Self control: High productivity: focus on KRAs and important areas Objective performance appraisal: Executive development: greater opportunities to make personal contribution, participative decision making Motivation and morale: better interpersonal relations, greater opportunities to make personal contribution, participative goal setting, two way communication, supportive role of managers Team work:better communication, reduced conflicts, integration of goals at various levels
How to make MBO effective? Top management support: Orientation and Training of managers: Clarity of purposes: Encouragement of participants: Decentralization : Adequate time and resources: Timely feedback: