1. Management by objectives (M.B.O.) Dr. Subhodip Mitra Dept.
Of Hospital Administration KMC, Manipal
2. What is an objective? Earlier defined as the important ends
toward which organizational and individual activities are directed.
An objective is verifiable when at the end of the period one can
determine whether or not it has been achieved. May be long term,
short term, broad or specific. Emphasis is on verifiable objectives
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3. What is MBO? It is a systematic and organized approach that
allows management to focus on achievable goals and to attain the
best possible results from available resources. Otherwise known as
shared responsibility or participatory management Term was
introduced by Peter F. Drucker in the year 1954 and popularized by
George Odiorne and John Humble. Basically is a process where by the
senior and junior managers of an enterprise jointly identifies its
common goals, define each individuals major area of responsibility
in terms of the results expectedand use these measures as a guide
for operating the unit and access the contribution of each of its
members. Rests on a philosophy of management that emphasizes an
integration between external control (by managers) and self-
control (by employees). 24-06-2015 Dr. Subhodip Mitra 3
4. Hierarchy of objectives Objectives form a hierarchy from,
ranging from broad aims to specific individual objectives. Zenith
is the purpose or the mission. Social purpose can be contributing
to the welfare of the people by providing goods and services at a
reasonable price. Mission or purpose of the business may be to
furnish convenient, low-cost transportation for the average
person.. Key result areas (KRA) is the more specific contain more
specific objectives and is the area in which the performance is
essential for the success of the enterprise. 24-06-2015 Dr.
Subhodip Mitra 4
5. 24-06-2015 Dr. Subhodip Mitra 5
6. What can the KRAs be? 1. Market standing 2. Innovation 3.
Productivity 4. Physical and financial resources 5. Profitability
6. Manager performance and development 7. Worker performance and
attitude 8. Public responsibility 9. Service and quality 24-06-2015
Dr. Subhodip Mitra 6
7. 24-06-2015 Dr. Subhodip Mitra 7
8. Principles of MBO Cascading of organizational goals and
objectives Specific objectives for each member Participative
decision making Explicit time period Performance evaluation and
feedback 24-06-2015 Dr. Subhodip Mitra 8
9. Setting objectives Board of directors and top level managers
: determining the purpose, the mission and the overall objectives
of the firm. Middle level managers : setting of KRA objectives,
division objectives and departmental objectives. Lower level
managers : setting the objectives of the departments and units as
well as their subordinates. 24-06-2015 Dr. Subhodip Mitra 9
10. Approaches Top-down approach : Upper level managers
determine the objectives for subordinates and the proponents
suggest that total organization needs direction through corporate
objectives provided by the top managers. Bottom-up approach:
Subordinates initiate setting of objectives for their positions and
present them to their superior and the proponents suggest that top
mangers need to have information from the lower levels in the form
of objectives.They also argue that subordinates are likely to be
highly motivated by, and committed to the goals that they initiate.
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11. Multiplicity of objectives Goals are likely to be multiple
at every level of the hierarchy. People think that a manager cannot
effectively pursue too many objectives. Too many objectives tend to
dilute the drive for their accomplishments. Relative importance of
each objective should be preferably stated. The number of
objectives managers can set depends upon how much they can do for
themselves and how much they can assign to their subordinates.
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12. GoalSetting Determined by top management in consultation
with the other managers. In setting objectives, it is necessary to
identify the KRAs (key result areas). Make it known to all the
members. Groups who set goals have better outputs than those who do
not. 24-06-2015 Dr. Subhodip Mitra 12
13. How to set objectives? No individual or group can perform
effectively and efficiently unless there is a clear aim. What is
not measured, cannot be managed. 24-06-2015 Dr. Subhodip Mitra
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14. 24-06-2015 Dr. Subhodip Mitra 14
15. Qualitative and quantitative objectives Objectives must be
verifiable in order to be measurable. At the end of they day, the
manager should know if the objective has been accomplished. An
objective of making reasonable profit does not state how much
profit is to be made and what is reasonable to a subordinate may
not be at all acceptable to a superior. A return of investment of
12% at the end of the current fiscal year. 24-06-2015 Dr. Subhodip
Mitra 15
16. What are the objectives? Work objectives Targets
Tasks/Projects Behaviour parameter Values Performance improvement
Developmental objectives 24-06-2015 Dr. Subhodip Mitra 16
17. Guidelines for setting objectives Not an easy task Requires
intelligent coaching by the superior and extensive practise by the
subordinate List of objectives should not be too long but it should
cover the main features of the job The quality desired and the
projected cost of achieving the objectives should be indicated.
Objectives should present a challenge, indicate priorities, and
promote personal and professional development and growth 24-06-2015
Dr. Subhodip Mitra 17
18. 24-06-2015 Dr. Subhodip Mitra 18
19. MBO Process Collectively fixing objectives Collectively
making a plan Subordinates implements the plans Collectively
monitoring the performance 24-06-2015 Dr. Subhodip Mitra 19
20. Effects of MBO? Human resource planning and development
Staffing as well individual and organizational development Career
planning Building on personal strengths and overcoming weaknesses
Reward system (paying for performance) Budgeting (planning and
controlling) Other managerial activities important for a specific
position 24-06-2015 Dr. Subhodip Mitra 20
21. 24-06-2015 Dr. Subhodip Mitra 21
22. Where to use MBO? Appropriate for knowledge based
enterprises with competent staff Appropriate in situations where we
wish to build employee management and self leadership skills and
tap their creativity, tactic knowledge and initiative They are used
by the top management of MNCs for their country managers overseas.
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23. 24-06-2015 Dr. Subhodip Mitra 23
24. MBO in action It is a widely used management tool in almost
all the IT industries, the most popular being At Intel, the
managers start with a few well-chosen over riding objectives and
set their subordinates objectives that fit in with their overriding
objectives. They even allow their subordinates to set their own key
results to enable them to meet their objectives. 24-06-2015 Dr.
Subhodip Mitra 24
25. MBO in Kasturba Hospital Manipal Group MS & COO 4
Executives Subordinates Hierarchy in Kasturba Hospital 24-06-2015
Dr. Subhodip Mitra 25
26. MBO in Kasturba Hospital Objectives are usually given to
the MS and COO from the Manipal Group (both University and
Operations) and a joint decision is made as to the final objectives
The objectives are discussed with the four executives, namely: DMS
Marketing Manager HR Manager Finance Manager Objectives are agreed
upon by a collective decision by the MS & COO and the four
executives Target is for one fiscal year 24-06-2015 Dr. Subhodip
Mitra 26
27. MBO in Kasturba Hospital The deputing work is done
primarily by the marketing team who constitutes the plan of action
What the marketing team has brought in, the operations team makes
sure about the efficiency. 24-06-2015 Dr. Subhodip Mitra 27
28. MBO in Kasturba Hospital Marketing Catering to MCI
regulations Increasing the traffic Focus on high revenue areas
Intangible objectives like brand building Finance Getting funds
Insurance clearance HR Maintain healthy attrition rate Ensure no
shortage of staff Operations team Ensure smoothness in day to day
activity Increase utilization services Automation of
services24-06-2015 Dr. Subhodip Mitra 28
29. Other companies Glaxo Laboratories (India) Limited, now
GLINDIA Xerox Hewlett-Packard (HP) Springfeild Remanufacturing
corporation DuPont 24-06-2015 Dr. Subhodip Mitra 29
30. Advantages Develops result oriented philosophy Formulation
of goals Facilitates objective appraisal Raises employee morale
Facilitates effective planning Act as motivational force
Facilitates effective control Facilitates personal leadership
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31. Limitations Time consuming Failure to give guidelines to
goal setters can be problematic Develops conflicting objectives
Problem of co-ordination Lack of appreciation Reward-punishment
approach Top management must agree not to resort to unethical
practises to achieve their goals 24-06-2015 Dr. Subhodip Mitra
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32. Conclusion Also called as participative management. Active
involvement of the employees. Superiors and subordinates sit down
and discuss the objectives and targets. Nothing is ideally imposed
on the subordinates Goals are jointly discussed 24-06-2015 Dr.
Subhodip Mitra 32