MAN MANAGEMENT TOOLS

Management by Objectives

What Is Management by Objectives (MBO)?

Management by objectives (MBO) is a strategic management model that aims to improve the
performance of an organization by clearly defining objectives that are agreed to by both management
and employees. According to the theory, having a say in goal setting and action plans encourages
participation and commitment among employees, as well as aligning objectives across the organization.
The term was first outlined by management guru Peter Drucker in his 1954 book, The Practice of
Management.

KEY TAKEAWAYS

Management by objectives (MBO) is a strategic management model that aims to improve organizational
performance by clearly defining objectives that are agreed to by both management and employees.

According to the theory, having a say in goal setting and action plans encourages participation and
commitment among employees, as well as aligning objectives across the organization.

The strategy was formulated by Peter Drucker in the 1950s, detailing five steps that organizations should
follow.

Critics of MBO argue that it leads to employees trying to achieve the set goals by any means necessary,
often at the cost of the company.

Understanding Management by Objectives (MBO)

 Management by objectives (MBO) is the establishment of a management information system to

compare actual performance and achievements to the defined objectives. Practitioners claim
that the major benefits of MBO are that it improves employee motivation and commitment and
allows for better communication between management and employees.
 However, a cited weakness of MBO is that it unduly emphasizes the setting of goals to attain
objectives, rather than working on a systematic plan to do so. Critics of MBO, such as W.
Edwards Demming, argue that setting particular goals like production targets leads workers to
meet those targets by any means necessary, including short-cuts that result in poor quality.

In his book that coined the term, Peter Drucker set forth several principles for management by
objectives. Objectives are laid out with the help of employees and are meant to be challenging but
achievable. Employees receive daily feedback, and the focus is on rewards rather than punishment.
Personal growth and development are emphasized, rather than negativity for failing to reach objectives.
Drucker believed MBO was not a cure-all but a tool to be utilized. It gives organizations a process, with
many practitioners claiming that the success of MBO is dependent on the support from top
management, clearly outlined objectives, and trained managers who can implement it.

Management by Objectives (MBO) in Practice

 Management by objectives outlines five steps that organizations should use to put the
management technique into practice.

1. The first step is to either determine or revise organizational objectives for the entire company.
This broad overview should be derived from the firm's mission and vision.
2. The second step is to translate the organizational objectives to employees. Drucker used the
acronym SMART (specific, measurable, acceptable, realistic, time-bound) to express the
concept.
3. Step three is stimulating the participation of employees in setting individual objectives. After the
organization's objectives are shared with employees, from the top to the bottom, employees
should be encouraged to help set their own objectives to achieve these larger organizational
objectives. This gives employees greater motivation since they have greater empowerment.
4. Step four involves monitoring the progress of employees. In step two, a key component of the
objectives was that they are measurable in order for employees and managers to determine
how well they are met.
5. The fifth step is to evaluate and reward employee progress. This step includes honest feedback
on what was achieved and not achieved for each employee.

Advantages and Disadvantages of Management by Objectives (MBO)

 MBO comes with many advantages and disadvantages to a company's success. The benefits
include employees taking pride in their work with goals that they know they can achieve. It also
aligns employees with their strengths, skills, and educational experiences. MBO also leads to
increased communication between management and employees. Assigning tailored goals brings
a sense of importance to employees, bringing loyalty to the firm. And lastly, management can
create goals that lead to the success of the company.
 Though there are plenty of benefits to MBO, there are some drawbacks and limitations. As MBO
is focused on goals and targets, it often ignores other parts of a company, such as the culture of
conduct, a healthy work ethos, and areas for involvement and contribution. MBO puts increased
strain on employees to meet the goals in a specified time frame. In addition, if management
solely relies on MBO for all management responsibilities, it can be problematic for areas that
don't fit under MBO.

Think Tank

 Developed by Alex F. Osborn, an advertising executive; when his employees’ inability to develop
creative ideas individually for ad campaigns frustrated him.
 Osborn claimed that two principles contribute to “ideative efficacy” this being: (1) defer
judgement; (2) reach for quantity.
 Similar to brainstorming with the exception that in think tank, only experts from a number of
fields are convened for the purpose of combining their knowledge and experience in order to
solve complex problems. As viewed by experts a manager’s personnel problem may be one of
ergonomics, methods, work simplification, finance, or psychology

One-minute Managing

 One-minute Reprimand - Blanchard and Spenser call this tool “one-minute managing”
because they believe that it takes very little time for managers to get big results from their
subordinates. This tool has proven to be very popular with American and Japanese
managers who seek to improve productivity, profitability and performance.
 Stress Management Program - The manager tells the subordinate that he is going to let him
know how he is doing and in no uncertain terms

CON's

• Least Preferred Coworker (LPC) scale is subjective, and characteristics are relative in contexts.

• Even according to Fiedler, the LPC score is valid only for groups that are closely supervised and
does not apply to "open ones" such as teams.

• It is questionable whether Fiedler's contingency theory is valid in all situations, such as when
neither the task is well defined and no choice of leaders is to be had, except ones with bad
personalities.

The best-accepted theory of leadership today is that it depends on the situation. Different situations
require different managerial styles – autocratic, democratic, and free rein. Contingency leadership
suggests that mastery lies in knowing when to use which method.
PRO's

• The theory is extremely well researched, given the stated parameters.

• For a "thumb-in-the-wind" approach to identifying leaders, Fiedler's contingency theory can assist
enormously:

- Leaders with good personal relations are matched to a poorly structured task environment.

- For leaders who are impersonal, they are placed in well task structured environment.

• Because this is a contingency theory, it is inherently more flexible than a "one takes all" theory.

sample:

Manager A in action

DEMOCRATIC - He consults with his employees on the best way to introduce a new project in the
market

AUTOCRATIC - He directs his secretary to make a report

FREE REIN - He suggest to his assistant that it would be a good idea to look into the recent cost-
cutting strategies the organization has instituted

Zero Defect

 Expanding the job content of the subordinate with a view of making it less specialized and
presumably more interesting and challenging. The tool is used to alleviate problems of
fatigue, frustration, low morale and feeling of apathy created by specialization.

Brainstorming

 training attempts to elevate communication on a higher plane. Each person, according to

the theory, can adopt one of the distinct personality patters or ego states according to the
situation and his own personal make-up.
 Is a tool applied to problem solving by evaluating ideas freely but forward by groups of
people convened specifically for the purpose.
Autonomous Work Grouping

1. reduction of absences and increase in productivity.

2. employee does not need to use sick / leave days for personal business.

3. able to work in time with biological clock

4. working on the most productive time of the day

5. Overtime hours are often reduced with flextime

- savings for the organization

- flexitime improves labor relations

Quality Control Circle

 A man-management tool that tries to develop cost consciousness among employees and to
get them to want to achieve high standards of work excellence. It aims at the elimination of
defective operations or a reject rate of 0 percent. The emphasis however, is not to zero-in
on errors but on the prevention of mistakes at the outset of any operation.
 a tool designed to change behavior by rewarding or reinforcing correct conduct and
punishing or ignoring an incorrect one.

This technique includes, among other things, the re-examination of all work instruction for clarity,
and a period per week when the manager gets together with his subordinates to discuss suggestions
on ways of cutting down rejects. Often as a result, the nonessential activities are identified and
removed.

This is a management tool which involves workers in quality analysis and quality improvement. It is
to let a small group of approx. ten workers doing similar work to meet, to discuss and to solve work-
related problems.

The zero defect scheme is usually launched with speeches from top executives and managers,
slogans, posters, pamphlets and contests designed to reward employees who achieve error-free
production
Managerial Grid

 is an analytical and constructive tool to help analyze the manager’s style. Its proponents,
Dr. Robert Blake and Dr. Jane Moulton see an organization as a set of interdependent
networks of people. The rationale behind their tool is improving work relationships. They
define two main concepts of management: concern for people and concern for results or
production

The aim is to attain individual health and organizational well-being through applications from
medicine, psychology, organization development, and public administration.

CON's

• Minimal empirical data to support its effectiveness

• Doesn't take internal or external variables into consideration

• Doesn't take the work environment into consideration

• Flawed Self-assessment

One-minute Goal Setting

The manager and subordinate agree on 3-6 goals on the subordinate’s area of responsibility.

PRO's

• Measures your performance

• Highly used in today's organizations

• Allows for self analysis of leadership style

- enables managers and employees to deal with one another and with customers and clients when
necessary in straightforward ways that recognize the rights and needs of all individuals involved.
- provides certain specific verbal skills that a person can use to avoid being intimidated and
manipulated by others.

Flexible Working Schedule

 the group is made responsible for the assembly of a complete unit or sub-unit for moving of
certain equipment or for a complete area of work

PRO's:

1. allows an employee some degree of freedom in selecting his starting and quitting time. It consists
of a core time during which all employees are to be present and a flexible band which is
determined by the employee.

Job Enlargement

 This is an employee motivational tool which uses job redesign strategies aimed at providing
employees with some responsibility, more autonomy, and a greater sense of
accomplishment. This scheme leads to a multi-skilled work force which can do a number of
jobs, so there is no real problem if key people are absent.

Job Rotation

Career Development Program

 This tool is used for result-oriented groups of workers. They are freed from external
controls or influences for substantial periods.
 is used in some companies to provide an opportunity for employees to become familiar
with a variety of operations in the firm. It can increase job interest due to changes in
environment, skill requirement and job content. It is advantageous from a management’s
point of view because it increases the employee’s skill and flexibility.

CON's

1. requires much additional planning of work schedules

-leads to abuses of the system by the employee

This program offers the employee the opportunity to assess his skills and capabilities to evaluate his
career progress and make plans for furthering his personal career goals. This program often includes
counseling services, formal workshops or seminars and the use of various assessment techniques
and diagnostic instruments.
Networking

 a managerial tool which involves getting people to talk to each other through conferences,
phone calls, air travel. Books, papers, pamphlets, lectures, workshops, parties, grapevines,
mutual friends, tapes, newsletters, etc. it exists to foster self-help, to exchange information,
to change society, to improve productivity and work life, and to share resources.

Job Enrichment

 An operator who may previously have merely fitted wheels to the car in an assembly line
may be required to fit the tires, attach the windshield, install seats, etc.