Goal - Setting Theory :Goal - Setting Theory Goal-setting theory is a relatively applied approach to motivation and is based upon

the assumption that the type as well as the challenge of the goal includes motivation in the individual to achieve such goal. The quality of performance is generally shaped by how difficult and how specifically defined the goal is. Goal-setting: Management By Objectives (MBO) :Goalsetting: Management By Objectives (MBO) A logical extension of goal setting theory is Management by Objectives which involves systematic and programmatic goal setting throughout an organization. It is a process by which managers and subordinates work together in order to achieve these objectives. These objectives and goals are consistent with the organizational goals. Elements of MBO :Elements of MBO The elements in the MBO Process: Central goal settings Manager-Subordinate Involvement Matching goals and resources. Freedom of implementation Review and appraisal of performance. Advantages of MBO :Advantages of MBO MBO it helps in a better overall management system. The managers are required to establish measurable targets and standards of performance and priorities for these targets. Both the manager and the subordinates know what is expected of them and therefore there is no role ambiguity or confusion. The subordinates feel proud of being involved in the organizational goals. This improves their morale and commitment. (contd.) :(contd.) MBO often highlights the area in which the employees need further training. MBO puts strong emphasis on quantifiable objectives, the measurement and appraisal could be more objective, specific and equitable. It improves communication between management and subordinates. Problems and Limitations :Problems and Limitations MBO can only succeed if it has the complete support of top management. MBO may be resented by subordinates. There is considerable paperwork involved and it takes too much of the managers time. The emphasis is more on short-term goals.

(contd.) :(contd.) Most managers may not be sufficiently skilled in interpersonal interaction such as coaching and counseling which is extensively required. The integration of the MBO system with other systems such as forecasting and budgeting is very poor. Group goal achievement is more difficult. It takes a lot of time, perhaps 3 to 5 years, to implement the MBO program properly and fully. Suggestions for improving the effectiveness of MBO :Suggestions for improving the effectiveness of MBO It is important to secure top management support and commitment. The objectives should be clearly formulated, should be realistic and achievable. MBO is a major undertaking and should replace old systems rather than just being added to them. The goals must be continuously reviewed and modified as the changed conditions require. All personnel involved should be given formal training in understanding the basics as well as the contents of the program.

MANAGEMENT BY OBJECTIVES :MANAGEMENT BY OBJECTIVES MBO What is MBO? :What is MBO? 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. It aims to increase organizational performance by aligning goals and subordinate objectives throughout the organization. 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. Management by Objectives (MBO) was first outlined by Peter Drucker in 1954 in his book 'The Practice of Management'. In the 90s, Peter Drucker himself decreased the significance of this organization management method, when he said: "It's just another tool. It is not the great cure for management inefficiency... Management by Objectives works if you know the objectives, 90% of the time you don't." Core Concepts of MBO :Core Concepts of MBO 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: participate in the strategic planning process, in order to improve the implementability of the plan, and implement a range of performance systems, designed to help the organization stay on the right track. Managerial Focus :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. Management by Objectives (MBO) is about setting yourself objectives and then breaking these down into more specific goals or key results. Main Principle of MBO :Main Principle of MBO The principle behind Management by Objectives (MBO) is to make sure that everybody within the organization has a clear understanding of the aims, or objectives, of that organization, as well as awareness of their own roles and responsibilities in achieving those aims. The complete MBO system is to get managers and empowered employees acting to

implement and achieve their plans, which automatically achieve those of the organization. Where to Use MBO :Where to Use MBO The MBO style is appropriate for knowledge-based enterprises when your staff is competent. It is appropriate in situations where you wish to build employees' management and self-leadership skills and tap their creativity, tacit knowledge and initiative. Management by Objectives (MBO) is also used by chief executives of multinational corporations (MNCs) for their country managers abroad. Setting Objectives :Setting Objectives In Management by Objectives (MBO) systems, objectives are written down for each level of the organization, and individuals are given specific aims and targets. "The principle behind this is to ensure that people know what the organization is trying to achieve, what their part of the organization must do to meet those aims, and how, as individuals, they are expected to help. This presupposes that organization'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." "The one thing an MBO system should provide is focus", says Andy Grove who ardently practiced MBO at Intel. So, have your objectives precise and keep their number small. Most people disobey this rule, try to focus on everything, and end up with no focus at all. Setting Objectives :Setting Objectives 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." The review mechanism enables leaders to measure the performance of their managers, especially in the key result areas: marketing; innovation; human organization; financial resources; physical resources; productivity; social responsibility; and profit requirements. Balance Between Management and Employee

Empowerment :Balance Between Management and Employee Empowerment 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 objectives, organizing the group, motivating and communicating, measuring performance, and developing people, including yourself. Individual Responsibility :Individual Responsibility Management by Objectives (MBO) creates a link between top management's strategic thinking and the strategy's implementation lower down. Responsibility for objectives is passed from the organization to its individual members. It is especially important for knowledge-based organizations where all members have to be able to control their own work by feeding back from their results to their objectives. Management by objectives is achieved through selfcontrol, the tool of effectiveness. Today the worker is a self-manager, whose decisions are of decisive importance for results. In such an organization, management has to ask each employee three questions: What should we hold you accountable for? What information do you need? What information do you owe the rest of us? The Five-Step MBO Process :The Five-Step MBO Process MBO Principles :MBO Principles Cascading of organizational goals and objectives Specific objectives for each member Participative decision making Explicit time period Performance evaluation and feedback Types of Objectives :Types of Objectives Routine objectives Innovation objectives Improvement objectives The objectives must be: focused on a result, not an activity consistent specific measurable related to time attainable MBO Strategy : Three Basic Parts :MBO Strategy : Three Basic Parts All individuals within an organization are assigned a special set of objectives that they try to reach during a normal operating period. These objectives are mutually set and agreed upon by individuals and their managers. Performance reviews are

conducted periodically to determine how close individuals are to attaining their objectives. Rewards are given to individuals on the basis of how close they come to reaching their goals. Six MBO Stages :Six MBO Stages Define corporate objectives at board level Analyze management tasks and devise formal job specifications, which allocate responsibilities and decisions to individual managers Set performance standards Agree and set specific objectives Align individual targets with corporate objectives Establish a management information system to monitor achievements against objectives 8 Key Result Areas Where Managers Must Pursue Clear Objectives :8 Key Result Areas Where Managers Must Pursue Clear Objectives Marketing Innovation Human organization Financial resources Physical resources Productivity Social responsibility Profit requirements MBO Advantages & Disadvantages :MBO Advantages & Disadvantages Advantages MBO programs continually emphasize what should be done in an organization to achieve organizational goals. MBO process secures employee commitment to attaining organizational goals. Disadvantages The development of objectives can be time consuming, leaving both managers and employees less time in which to do their actual work. The elaborate written goals, careful communication of goals, and detailed performance evaluation required in an MBO program increase the volume of paperwork in an organization.

Robbins, Bergman, Stagg, Coulter: Management 4e 2006 Pearson E ducation Australia 17 Steps in a typical MBO program 1. The organisations overall objectives and strategies are formulated. 2. Major objectives are allocated among divisional and departmental units. 3. Unit managers collaboratively set specific objectives for their units with their managers. 4. Specific objectives are collaboratively set with all department members. 5. Action plans, defining how objectives are to be achieved, are specified and agreed upon by managers and employees. 6. The action plans are implemented. 7. Progress toward objectives is periodically reviewed, and feedback is provided. 8. Successful achievement of objectives is reinforced by performance-based rewards.