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MANAGEMENT EXAM – MANAGEMENT BY OBJECTIVES (MOB)

Management by Objectives (MBO)
is a method whereby managers and employees define goals for every department, project, and person, and use them to monitor subsequent performance.
1. Set Goals
– Goal setting involves employees at all levels and looks beyond day-to-day activities to answer the question: what are we trying to accomplish?
– Most difficult step in MBO.
– A good goal should be concrete and realistic, provide a specific target and time frame and assign responsibility.
– All team members should participate in setting goals.
1. Set Goals Continued
– Goals may be quantitive or qualitative, depending on whether outcomes are measurable.
– Quantitative goals are described in numerical terms e.g. salesperson jones will obtain 16 new accounts in december.
– Qualitative goals use statements e.g. marketing will reduce complaints by improving customer service next year.
– Goals should be jointly derived.
– Mutual agreement between employee and supervisor creates the strongest commitment to achieving goals.
2. Develop Action Plans
– An action plan defines the course of action needed to achieve the stated goals.
– Action plans are made for both individuals and departments.
3. Review Progress
– A periodic progress review is important to ensure that action plans are working.
– These reviews can occur informally between managers and employees, where the organisation may wish to conduct 3, 6 or 9 month reviews during the year.
– This periodic checkup allows managers and employees to see whether they are on target or whether corrective action is necessary.
3. Review Progress Continued
– Managers and employees should not be locked into predefined behaviour and must be willing to take whatever steps are necessary to produce meaningful results.
– The action plan can be changed whenever goals are not being met.
4. Appraise Overall Performance
– The final step in MBO is to carefully evaluate evaluate whether annual goals have been achieved for both individuals and departments.
– Success or failure to achieve goals can become part of the performance appraisal systems and the designation of salary increases and other rewards.
– The Appraisal of department and overall corporate performance shapes goals for the next year.
MBO Additional Information
– The MBO cycle repeats it’s self on an annual basis.
– The specific application of MBO must fit the needs of each organisation.
– The Point of MBO is to achieve goals.
– The action plan can be changed whenever goals are not being met.
Refer to exhibit 5.5
Model of the MBO process
Benefits and Problems with MBO
Managers believe they are better orientated towards goal achievement when MBO is used.
– MBO achieves benefits when used properly, but results in problems when used improperly.
Benefits of MBO
1. Managers and Employee efforts are focused on activities that will lead to goal attainment.
2. Performance can be improved at all company levels.
3. Employees are motivated.
4. Department and individual goals are aligned with company goals.
Problems with MBO
1. Constant Change prevents MBO from taking hold.
2. An environment of poor employer employee relations reduces MBO effectiveness.
3. Strategic goals may be displaced by operational goals.
4. Mechanistic organisations and values that discourage participation can harm the MBO process.
5. Too much paperwork saps MBO energy.
Benefits of MBO Expanded
– The benefits of the MBO process can be many.
– Corporate goals are more likely to be achieved when they focus manager and employee efforts.
– Performance is improved because employees are committed to attaining the goal, are motivated because they help decide what is expected and are free to be resourceful.
– Goals at lower levels are aligned with and enable the attainment of goals at top management levels.
Problems with MBO Expanded
– Problems with MBO occur when the organisation faces rapid change.
– The environment and internal goals must be set every few months, there is no time for action plans and appraisal to take effect.
– Poor employer – employee relations reduce effectiveness because there is an element of distrust between managers and employees.
– Goal displacement occurs if employees focus exclusively on their operational goals to the detriment of other teams or departments.
– Overemphasis on operational goals can harm the attainment of overall goals.
Problems with MBO Expanded Continued
– Mechanistic organisations characterised by rigidly defined tasks and rules that may not be compatible with MBO’s emphasis on mutual determination of goals by employee and supervisor.
– MBO can become a process of filling out annual paperwork rather than energising employees to achieve goals. Once the paperwork is completed, employees forget about the goals.

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