1. 1. Management by objectives (M.B.O.) Dr. Subhodip Mitra Dept. Of Hospital Administration KMC, Manipal
2. 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 24-06-2015 Dr. Subhodip Mitra 2
3. 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. 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
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6. 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
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8. 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. 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. 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. 24-06-2015 Dr. Subhodip Mitra 10
11. 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. 24-06-2015 Dr. Subhodip Mitra 11
12. 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. 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 13
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15. 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. 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. 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
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19. 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. 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
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22. 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. 24-06-2015 Dr. Subhodip Mitra 22
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24. 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. 25. MBO in Kasturba Hospital Manipal Group MS & COO 4 Executives Subordinates Hierarchy in Kasturba Hospital 24-06-2015 Dr. Subhodip Mitra 25
26. 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. 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. 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. 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. 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 24-06-2015 Dr. Subhodip Mitra 30
31. 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 31
32. 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
33. 33. THANK YOU!!