Management by Objectives (MBO) Peter Drucker
Distinction between Aims and Objectives • Aims – long term vision. Sometimes called ‘mission’. Example: to be the No. 1 Grocery retailer in the UK • Objectives – specific items that will help achieve aims. Example: to increase customer satisfaction through availability and online shopping facilities.
THE NATURE & PURPOSE OF MBO • MBO is concerned with goal setting and planning for individual managers and their units. • The essence of MBO is a process of joint goal setting between a supervisor and a subordinate. • Managers work with their subordinates to establish performance goals that are consistent with higher organisational objectives. • MBO helps clarify the hierarchy of objectives as a series of well-defined means-ends chains.
THE MBO PROCESS • If MBO is to be successful, it must start at the top of the organization top managers must communicate why they have adopted MBO, what they think it will do, and that they are committed to it. • Employees must be educated about what MBO is and what their role in it will be. • Managers must implement MBO in a way that is consistent with overall organizational goals.
THE MBO PROCESS • Collaborative goal setting and planning are the essence of MBO. This involves several steps: • Managers tell their subordinates what organisational and unit goals and plans top management has established. • Managers meet with their subordinates on a one-to-one basis to arrive at a set of goals for each subordinate that both develop and to which both are committed. • Goals are refined to be as verifiable as possible and achievable within a specified period of time.
THE MBO PROCESS • Goals must be written and very clearly stated. • Plans developed to achieve the goals must directly relate to each goal managers must play the role of counselors in the goal-setting and planning meeting. • The meeting should specify the resources that he subordinate will need to implement his/her plans and work effectively toward goal attainment.
THE MBO PROCESS • Conducting periodic reviews as subordinates are working toward their goals is advisable. • At the end of the period, the manager meets with each subordinate to review the degree of goal attainment. The reasons for both success and failure are explored. The employee is rewarded on the basis of goal attainment.
Kingsbrook MBO? • Review what you see as MBO for Kingsbrook. • Work down the hierarchy and try to imagine what the goals are for each sub-ordinate.