Page 100 - DCOM102_DMGT101_PRINCIPLES_AND_PRACTICES_OF_MANAGEMENT

Principles and Practices of Management

Notes Introduction

We all know that good management is characterised usually by the accomplishment of desired
objectives. Management by Objectives or MBO is a technique which helps a manager to achieve
his objectives in an efficient manner.
MBO insists that a manager be very clear about his objectives before he starts a task. If a manager
is not sure about his destination, he is unlikely to arrive, and in all probability he may not even
know whether he is on the right road or not, or if he has arrived or not.

MBO is as old as management itself. In fact, management has to be always with and by objectives.
Unfortunately, however, most managers are really not sure about their objectives. They are
usually not clear as to what their organisation, department or section should achieve within a
particular period of time. If properly implemented MBO can provide the dynamism, purpose
and trust that are essential characteristics of effective management. It is like inflating back to
shape a tube which has become somewhat flat.

6.1 Core Concepts of MBO

Management by Objectives (MBO) was first outlined by Peter Drucker in 1954 in his book ‘The
Practice of Management’. It is a systematic and organised approach that allows management to
focus on achievable goals and to attain the best possible results from available resources.
MBO aims to increase organisational performance by aligning goals and subordinate objectives
throughout the organisation. It 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. 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.
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:
1. participate in the strategic planning process, in order to improve the implementability of
the plan, and

2. implement a range of performance systems, designed to help the organisation stay on the
right track.

6.1.1 Setting Objectives

In Management by Objectives (MBO) systems, objectives are written down for each level of the
organisation, and individuals are given specific aims and targets. “The principle behind this is
to ensure that people know what the organisation is trying to achieve, what their part of the
organisation must do to meet those aims, and how, as individuals, they are expected to help.
This presupposes that organisation’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.”
For Management by Objectives (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.”

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