INTRODUCTION

Management by objectives(MBO) is a systematic and organized approach that allows

management to focus on achievable goals and to attain the best possible results from available
resources. The concept of Management by Objectives was first given by Peter Drucker in 1954.

He states that it is soundly based on “a concept of human behaviour and human

motivation and that it applies to managers at all levels, in all functional areas and to any kind
and size of organization.”

MBO is a process which ideally begins at the top of the organization with the
establishment of specific organizational objectives. Then at second level of the organization,
managers working with their bosses, establish objectives for their departments that are
consistent with the organization’s objectives. This procedure is repeated to the lowest level
managers.

The value of MBO is that it communicates the mission, goals and objectives of the
organization to the lower levels. The lower level managers work out their plans and targets in
consultation with their subordinates. These are then sent to higher levels for considerations.
MBO thus allows employees to participate in planning and control of their own work. This
involvement of employees increases their motivation and commitment to their work.

MBO is a performance management approach in which a balance is sought between the

objectives of the employees and objectives of an organization. The essence of Peter Drucker’s
basic principle: Management by Objectives is to determine joint objectives and to provide
feedback on the results. Setting challenging but attainable objectives promotes motivation and
empowerment of the employees. By increasing commitment, managers are given the
opportunity to focus on new ideas and innovation that contribute to the development and
objectives of organization.

The essence of is MBO is participative goal setting, choosing course of actions and
decision making. An important part of the MBO is the measurement and the comparison of the
employee’s actual performance with the standard set. Ideally when, employees themselves
have been involved with the goal setting and the choosing the course of action to be followed
by them, they are more likely to fulfill their responsibilities.
DEFINITION

“A process by which the superior and subordinate managers of an enterprise jointly

identify its goals, define each individual’s major areas of responsibility in terms of the results
expected of him, and use these measures as guides for operating the units and assessing the
contribution of each of its members.”

George S. Odiome

MBO is a comprehensive managerial system that integrates many key managerial

activities in a systematic manner, consciously directed towards the effective and efficient
achievement of the organizational objectives.

Heinz Weihrich and Harnold Koontz

MBO is a process in which there is a periodic agreement between the superior and a
subordinate on the subordinate’s objectives for a particular period and periodic review of how
well the subordinate achieved those objectives.

Wendell L French

CONCEPTS OF MBO

The key concepts of the MBO process are:

 SMART method
 Core concept
 Managerial focus

SMART method

The objective setting process is a difficult one for most individuals, particularly those
who've never been asked to set objectives. The process seems daunting. The S.M.A.R.T.
method is one way to help you remember how to walk through the process of setting your first
MBO objectives.

S for Specific: There are several key factors which should be present in the objectives that are
set in order for them to be effective. They should be specific. In other words, they should
describe specifically the result that is desired. Instead of "better customer service score," the
objective should be "improve the customer service score by 12 points using the customer
service survey."

M for Measurable: The second example is much more specific and also addresses the second
factor—measurable. In order to be able to use the objectives as a part of a review process it
should be very clear whether the person met the objective or not.

A for Achievable: The next important factor to setting objectives is that they be achievable.
For instance, an objective which states "100 percent customer satisfaction" isn't realistically
achievable. It's not possible to expect that everyone must be 100 percent satisfied with their
service. A goal of "12 percent improvement in customer satisfaction" is better—but may still
not be achievable if it's assigned to the database developer. They aren't likely to have enough
influence over the customer interaction process to improve satisfaction by 12 percent.

R for Realistic: This leads into the next factor realistic. Realistic objectives are objectives that
recognize factors which cannot be controlled. Said another way, realistic goals are potentially
challenging but not so challenging that the chance of success is small. They can be
accomplished with the tools that the person has at their disposal.

T for Time-based: The final factor for a good objective is that it is time-based. In other words,
it's not simply, "improve customer service by 12 percent," it's "improve customer service by
12 percent within the next 12 months." This is the final anchor in making the objective real and
tangible. This final factor is often implied in MBO setting. The implied date is the date of the
next review, when the employee will be held accountable for the commitments that they've
made through their objectives.

Core concept

The core concept of MBO is planning, which means that an organization and its
members are not merely reacting to events and problems but are instead being proactive. MBO
requires that employees set measurable personal goals based upon the organizational goals. For
example, a goal for a civil engineer may be to complete the infrastructure of a housing division
within the next twelve months. The personal goal aligns with the organizational goal of
completing the subdivision.

MBO is a supervised and managed activity so that all of the individual goals can be
coordinated to work towards the overall organizational goal. You can think of an individual
personal goal as one piece of a puzzle that must fit together with all of the other pieces to form
the complete puzzle: the organizational goal. Goals are set down in writing annually and are
continually monitored by managers to check progress. Rewards are based upon goal
achievement.

Managerial focus

MBO 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. MBO is about getting yourself objectives and then breaking these down into
more specific goals or key results.

PURPOSES OF MBO

 To translate mission statement into operational terms.

 To give direction and set standards for the measurement of performance.
 To set both long term and short term objectives.

OBJECTIVES OF MBO

 To measure and judge performance.

 To relate individual performance to organizational goals.
 To clarify both the job to be done and the expectations of accomplishments.
 To foster the increasing competence and growth of the subordinates.
 To enhance communication between superior and subordinates.
 To serve as a basis for judgement about salary and promotion.
 To stimulate subordinate’s motivation.
 To serve as a device for organizational control.

CHARACTERISTICS OF MBO

 MBO is an approach and philosophy to management and not merely a technique.

 On the other hand, MBO is likely to affect every management technique. MBO employs
several techniques but it is not merely the sum total of these techniques but it is not
merely the sum total of these techniques. It is a way of thinking about management.
 MBO is bound to have some relationship with every management technique. Certain
degree of overlapping is there. In fact, often MBO provides the stimulus for the
 introduction of new techniques of management and enhance the relevance and utility
of the existing ones.
 The basic emphasis of MBO is an objective. MBO is also concerned with determining
what these results and resources should be. This MBO tries to match objectives and
resources.
 The MBO is characterized by the participation concerned managers in objective setting,
the performance reviews and his performance.
 Periodic review of performance is an important feature of MBO.
 Objectives in MBO provides guidelines for appropriate systems procedures.

WHERE TO USE MBO

The MBO style is appropriate for knowledge based enterprises when the staff is
competent. It is appropriate in situations where the managers wish to build employees
management and self-leadership skills and tap their creativity, tacit knowledge and initiative.
MBO is also used by chief executives of multinational cooperates for their country managers
abroad.

PRINCIPLES OF MBO

The principles involved in the process are:

Preliminar Setting
subordinat
y objective e
settings objectives

Matching
PRINCIPLES OF
MBO goals and
resources

Review
and
appraisal Recycling
of objectives
perfomanc
e
Preliminary Objective Setting:

The top management should be very clear in itself about the purpose the goals and
objectives which an enterprise has to achieve in a given period. The period can be any, say a
quarter year, a half year, a year or five years but in most cases it is made to coincide with the
annual budget or the completion of a major project. Certain goals should be scheduled for
accomplishment in a shorter period and others for a much longer period. As one goes down the
line in an organization, the length of time set for accomplishing goals tends to get shorter. The
objectives should be specific and realistic, measurable and attainable.

Setting Subordinates Objectives:

In any type of organisation, it is its human resource i.e. the individuals who are
responsible for achieving its objectives. Therefore, each individual must be clearly told as to
what the organisation expects from him. In setting objectives for the subordinates in the light
of preliminary objectives and resources available, each subordinate is asked (a) what goals he
can achieve (b) in what time and (c) with what resources. The superior’s role at this point is
very important.

Here, he can set his subordinates objectives by consultation and agreement. In fact, a
superior’s responsibility in setting objectives for his subordinates is to state objectives in terms
that invite confidence. Hence everybody gets involved in the process of goal setting.

Matching Goals and Resources:

The objectives in themselves do not mean anything unless we have resources and means
to achieve these objectives. When the goals are carefully set in a network of verifiable
measures, they also indicate the resource requirement.

The resources are needed at every level to attain goals. However, just like goal setting,
the allocation of resources should also be done in consultation with the subordinates.

Recycling Objectives:

Goals are neither set at the top nor brought to bottom, nor they are started at the bottom
and go up. In fact, there is a degree of recycling. Goal setting is not only a joint process but
also an interaction which requires recycling because in the goal setting the contribution of
subordinates comes into the picture.
 In recycling, subordinates at every level are involved in goal setting and they influence
it considerably. Thus people set goals for themselves which create the feeling of commitment
which is necessary for attaining goals. Odiorne has indicated that “The power of commitment
is what makes MBO work, and the absence of such commitment can cause it to fail”.

Review and appraisal of performance:

There should be periodic reviews of progress between manager and the subordinates.
These reviews would determine whether the individual is making satisfactory progress. It will
also reveal if any unanticipated problem has developed. It also helps the subordinate to
understand the process of MBO better. It also improves the morale of subordinates since the
manager is showing active interest in the subordinate’s work and progress.

FEATURES OF MBO

(given by Ivancevich, Donnelly, and Gison 2007)

 The superior and subordinate meet to discuss and set goals for the subordinate for a
specified period of time.
 Both the supervisor and subordinate attempt to establish goals that are realistic,
challenging, clear and comprehensive.
 The standards for measuring and evaluating the goals and objectives are agreed upon.
 The superior and subordinate establish some intermediate review dates when the goals
will be reexamined.
 The superior plays more of a coaching, counseling, and supportive role.
 The entire process focuses on results and on the counseling of the subordinates, and
supportive role.
 The entire process focuses on results and on the counseling of the subordinates and not
on activities, mistakes and organizational requirements.

The principle behind MBO is to create empowered employees who have clarity of the roles
and responsibilities expected from them, understand their objectives to be achieved and
thus help in the achievement of organizational as well as personal goals.

 Clarity of goals: with MBO, came the concept of SMART goals i.e. goals are:
Specific
Measurable
Achievable
 Realistic and
Time bound

The goals thus set are clear, motivating and there is linkage between organizational
goals and performance targets of the employees.

 Motivation: involving employees in the whole process of goals setting and

increasing employee empowerment increases employee job satisfaction and
commitment.
 Better communication and coordination: frequent reviews and interaction
between superiors and subordinates helps to maintain harmonious relationships and
also solve many problems faced during the period.

MBO PROCESS

The practical importance of objectives in management can best be seen by summarizing

how successful managing by objectives works in practice.

The 6 steps of the MBO process are;

 Define organizational goals

 Define employee objectives
 Continuous monitoring performance and progress
 Performance evaluation
 Providing feedback
 Performance appraisal
 define
organizatio
nal goas
define
perfomance
appraisal employee
objectives

MBO
PROCESS Continuous
monitoring
providing of
feedback perfomance
and
perfomance progress
evaluation
and review

Define Organizational Goals

Goals are critical issues to organizational effectiveness, and they serve a number of
purposes. Organizations can also have several different kinds of goals, all of which must be
appropriately managed. And a number of different kinds of managers must be involved in
setting goals. The goals set by the superiors are preliminary, based on an analysis and judgment
as to what can and what should be accomplished by the organization within a certain period.

Define Employees Objectives

After making sure that employees’ managers have informed of pertinent general
objectives, strategies and planning premises, the manager can then proceed to work with
employees in setting their objectives.

The manager asks what goals the employees believe they can accomplish in what time
period, and with what resources. They will then discuss some preliminary thoughts about what
goals seem feasible for the company or department.

Continuous Monitoring Performance and Progress

MBO process is not only essential for making line managers in business organizations
more effective but also equally important for monitoring the performance and progress of
employees.
For monitoring performance and progress, the followings are required;

 Identifying ineffective programs by comparing performance with pre-established

objectives,
 Using zero-based budgeting,
 Applying MBO concepts for measuring individual and plans,
 Preparing long and short-range objectives and plans,
 Installing effective controls, and
 Designing a sound organizational structure with clear, responsibilities and decision-
making authority at the appropriate level.

Performance Evaluation

Under this MBO process performance review are made by the participation of the
concerned managers.

Providing Feedback

The filial ingredients in an MBO program are continuous feedback on performance and
goals that allow individuals to monitor and correct their own actions. This continuous feedback
is supplemented by periodic formal appraisal meetings which superiors and subordinates can
review progress

Performance Appraisal

Performance appraisals are a regular review of employee performance within

organizations. It is done at the last stage of the MBO process’s toward goals, which lead to
further feedback.

BALANCE BETWEEN EMPLOYEE EMPOWERMENT AND MBO

Employee empowerment is giving employees to make decisions about their jobs. That
can mean giving employees the authority to decide values, priorities, goals, plans, schedules,
methods, hiring, training etc. in the extreme it can even mean giving employees the authority
to decide their jobs and compensation.

Employee empowerment is also a piece of effective people operations, and it’s a piece
that can be overused. For example, too much empowerment can sometimes mean too little
direction, leading to role ambiguity. Role ambiguity tend to decrease employee satisfaction and
limit worker effectiveness. Research indicates that balance between empowerment and
direction is best, and that balance that varies based on industries, culture, and the KSAOs
(Knowledge, Skills, Abilities, and other characteristics) of involved workers.

A balanced approach to empowerment often ends up looking a lot like an attempt to

apply the highly important “expectancy theory” of motivation. Expectancy theory identifies
three steps that results in higher worker output.

 An employee needs to believe that his effort will result in improved perfomance.
 The employee needs to believe that his perfomance will actually affect the intended
outcome.
 The employee needs to believe that the outcome will produce a desirable reward. An
employee that believes all three feels confident in his abilities to gain the desired
reward.

The balance between management and employee empowerment has to be struck, not by
thinkers, but by practicing managers.

Turning their aims into successful actions, forces managers to master five basic
operations.

 Setting operations
 Organizing the groups
 Motivating and communicating
 Measuring perfomance
 Developing people including yourself.

These MBO operations are all compatible with empowerment, if the managers follow the
principle of decentralization. To make the principle work well, people need to be able to
develop personally. Further different people have different hierarchy of needs and thus needs
to be managed differently if they are to perform well and to achieve their potential.

Empowerment recognize “the demise” of the command and control system, but remains
a term of power and rank. A manager should view members of his or her team much as a
conductor regards the players in the orchestra, as individuals whose particular skills contribute
to the success of the enterprise. While people are still subordinates for getting results in their
area of responsibility, where they have the requisite knowledge. In turn, these subordinates
depend on their superior for direction and above all, to define what the score if for the entire
organization, that is, what are standards and values, perfomance and results.
ADVA NTAGES OF MBO

 Develops result-oriented philosophy:

MBO is a result-oriented philosophy. It does not favor management by crisis. Managers

are expected to develop specific individual and group goals, develop appropriate action plans,
properly allocate resources and establish control standards. It provides opportunities and
motivation to staff to develop and make positive contribution in achieving the goals of an
Organisation.

 Formulation of dearer goals:

Goal-setting is typically an annual feature. MBO produces goals that identify

desired/expected results. Goals are made verifiable and measurable which encourage high level
of performance. They highlight problem areas and are limited in number. The meeting is of
minds between the superior and the subordinates. Participation encourages commitment. This
facilitates rapid progress of an Organisation. In brief, formulation of realistic objectives is me
benefit of MBO.

 Facilitates objective appraisal:

NIBO provides a basis for evaluating a person's performance since goals are jointly set
by superior and subordinates. The individual is given adequate freedom to appraise his own
activities. Individuals are trained to exercise discipline and self control. Management by self-
control replaces management by domination in the MBO process. Appraisal becomes more
objective and impartial.

 Raises employee morale:

Participative decision-making and two-way communication encourage the subordinate

to communicate freely and honestly. Participation, clearer goals and improved communication
will go a long way in improving morale of employees.

 Facilitates effective planning:

MBO programmes sharpen the planning process in an Organisation. It compels

managers to think of planning by results. Developing action plans, providing resources for goal
attainment and discussing and removing obstacles demand careful planning. In brief, MBO
provides better management and better results.

 Acts as motivational force:

MBO gives an individual or group, opportunity to use imagination and creativity to

accomplish the mission. Managers devote time for planning results. Both appraiser and
appraise are committed to the same objective. Since MBO aims at providing clear targets and
their order of priority, employees are motivated.

 Facilitates effective control:

Continuous monitoring is an essential feature of MBO. This is useful for achieving

better results. Actual performance can be measured against the standards laid down for
measurement of performance and deviations are corrected in time. A clear set of verifiable
goals provides an outstanding guarantee for exercising better control.

 Facilitates personal leadership:

MBO helps individual manager to develop personal leadership and skills useful for
efficient management of activities of a business unit. Such a manager enjoys better chances to
climb promotional ladder than a non-MBO type.

DISADVANTAGES OR LIMITATIONS OF MBO

 Time-consuming:

MBO is time-consuming process. Objectives, at all levels of the Organisation, are set
carefully after considering pros and cons which consumes lot of time. The superiors are
required to hold frequent meetings in order to acquaint subordinates with the new system. The
formal, periodic progress and final review sessions also consume time.

 Reward-punishment approach:

MBO is pressure-oriented programme. It is based on reward-punishment psychology.

It tries to indiscriminately force improvement on all employees. At times, it may penalize the
people whose performance remains below the goal. This puts mental pressure on staff. Reward
is provided only for superior performance.

 Increases paper-work:

MBO programmes introduce ocean of paper-work such as training manuals,

newsletters, instruction booklets, questionnaires, performance data and report into the
Organisation. Managers need information feedback, in order to know what is exactly going on
in the Organisation. The employees are expected to fill in a number of forms thus increasing
paper-work. In the words of Howell, "MBO effectiveness is inversely related to the number of
MBO forms.

 Creates organizational problems:

MBO is far from a panacea for all organizational problems. Often MBO creates more
problems than it can solve. An incident of tug-of-war is not uncommon. The subordinates try
to set the lowest possible targets and superior the highest. When objectives cannot be restricted
in number, it leads to obscure priorities and creates a sense of fear among subordinates. Added
to this, the programme is used as a 'whip' to control employee performance.

 Develops conflicting objectives:

Sometimes, an individual's goal may come in conflict with those of another e.g.,
marketing manager's goal for high sales turnover may find no support from the production
manager's goal for production with least cost. Under such circumstances, individuals follow
paths that are best in their own interest but which are detrimental to the company.

 Problem of co-ordination:

Considerable difficulties may be encountered while coordinating objectives of the

Organisation with those of the individual and the department. Managers may face problems of
measuring objectives when the objectives are not clear and realistic. hs that are best in their
own interest but which are detrimental to the company.

 Lacks durability:
 The first few go-around of MBO are motivating. Later it tends to become old hat. The
marginal benefits often decrease with each cycle. Moreover, the programme is deceptively
simple. New opportunities are lost because individuals adhere too rigidly to established goals.

 Lack of appreciation:

Lack of appreciation of MBO is observed at different levels of the Organisation. This

may be due to the failure of the top management to communicate the philosophy of MBO to
entire staff and all departments. Similarly, managers may not delegate adequately to their
subordinates or managers may not motivate their subordinates properly. This creates new
difficulties in the execution of MBO programme.

STRATEGIES TO IMPROVE MBO

 Support from all

 Acceptance of MBO programme by managers
 Training of managers
 Organizational commitment
 Adequate allocation of time and resources
 Provision of uninterrupted information feedback

Support from all:

In order that MBO succeeds, it should get support and co-operation from the
management. MBO must be tailored to the executive's style of managing. No MBO programme
can succeed unless it is fully accepted by the managers. The subordinates should also clearly
understand that MBO is the policy of the Organisation and they have to offer cooperation to
make it successful. It should be a programme of all and not a programme imposed on them.

Acceptance of MBO programme by managers:

In order to make MBO programme successful, it is fundamentally important that the

managers themselves must mentally accept it as a good or promising programme. Such
acceptances will bring about deep involvement of managers. If manages are forced to accept
NIBO programme, their involvement will remain superfluous at every stage. The employees
will be at the receiving-end. They would mostly accept the lines of action initiated by the
managers.
Training of managers:

Before the introduction of MBO programme, the managers should be given adequate
training in MBO philosophy. They must be in a position to integrate the technique with the
basic philosophy of the company. It is but important to arrange practice sessions where
performance objectives are evaluated and deviations are checked. The managers and
subordinates are taught to set realistic goals, because they are going to be held responsible for
the results.

Organizational commitment:

MBO should not be used as a decorative piece. It should be based on active support,
involvement and commitment of managers. MBO presents a challenging task to managers.
They must shift their capabilities from planning for work to planning for accomplishment of
specific goals. Koontz rightly observes, "An effective programme of managing by objective
must be woven into an entire pattern and style of managing. It cannot work as a separate
technique standing alone."

Allocation of adequate time and resources:

A well-conceived MBO programme requires three to five years of operation before it

provides fruitful results. Managers and subordinates should be so oriented that they do not look
forward to MBO for instant solutions. Proper time and resources should be allocated and
persons are properly trained in the philosophy of MBO.

Provision of uninterrupted information feedback:

Superiors and subordinates should have regular information available to them as to how
well subordinate's goal performance is progressing. Over and above, regular performance
appraisal sessions, counseling and encouragement to subordinates should be given. Superiors
who compliment and encourage subordinates with pay rise and promotions provide enough
motivation for peak performance.

IMPLICATION OF MBO IN NURSING

 Measures and judge perfomance.

 Correlates individual perfomance to organizational goals.
 Clarifies job responsibilities expected from staff.
 Fosters the increasing competence and growth of subordinates.
  Provides data base for estimating salary and promotion.
 Stimulate the subordinate’s motivation.
 Helps in organizational work control and integrating the activities.

EVIDENCE BASED PRACTICE

Management by objective (MBO): as applied to nursing service

Abstract

MBO can be viewed as a practical approach for the motivation on administrators and members
within the organization. It requires a considerable amount of time and energy in addition to
organizational support. Tossi and Caroll have demonstrated, if properly used, MBO can affect
the motivation and perfomance of individual. As an approach within a system, it provides a
major organizational advantages. It is a process that complex the administrator to visualize
parts in relation to the whole and helps all members of organization to see important
relationships.

REFERENCE

 Deepak. K, Chandran S.C., Mithun Kumar. A comprehensive text

book on nursing management. Emmes medical publication. Page no:
100-103
 Bhaskara raj. D, Venkitesan. B. management of nursing service and
education. 3rd edition. Emmes medical publication. Page no: 94-98
 Baasavanthappa. B. t. management of nursing service and education.
Jaype brothers medical publication. Page no: 108-110
 https://www.toolshero.com/management/management-by-objectives-
drucker
 http://kalyan-city.blogspot.com/2010/06/management-by-objectives-
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 seminar on

MANAGEMENT

BY OBJECTIVE

(MBO)

Submitted on:07.11.2018

Submitted to, Submitted by,

Mrs Sheeja Jimi Patrishia Jerome

Associate Professor IstYear MSc Nursing

BBCON BBCON