Management by objectives

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Management by objectives (MBO), also known as management by results (MBR), is a
process of defining objectives within an organization so that management and employees agree
to the objectives and understand what they need to do in the organization in order to achieve
them. The term "management by objectives" was first popularized by Peter Drucker in his 1954
book The Practice of Management.[1]
The essence of 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
employees actual performance with the standards set. Ideally, when employees themselves have
been involved with the goal setting and choosing the course of action to be followed by them,
they are more likely to fulfill their responsibilities.
According to George S. Odiorne, the system of management by objectives can be described as a
process whereby the superior and subordinate jointly identify its common 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 unit and assessing the contribution of each of its members.[2]

Contents
[hide]

1 Features and advantages

2 Application in practice

3 Arguments against

4 See also

5 References

Features and advantages

Behind the principle of MBO is for employees to have a clear understanding of the roles and
responsibilities expected of them. Then they can understand how their activities relate to the
achievement of the organization's goal. Also places importance on fulfilling the personal goals of
each employee.

Proponents argue that benefits of MBO include:

1. Motivation Involving employees in the whole process of goal setting and increasing
employee empowerment. This increases employee job satisfaction and commitment.
2. Better communication and coordination Frequent reviews and interactions between
superiors and subordinates help to maintain harmonious relationships within the
organization and also to solve problems.
3. Clarity of goals
4. Subordinates tend to have a higher commitment to objectives they set for themselves than
those imposed on them by another person.
5. Managers can ensure that objectives of the subordinates are linked to the organization's
objectives.
6. Common goal for whole organization means it is a directive principle of management.

Application in practice
Objectives can be set in all domains of activities, such as production, marketing, services, sales,
R&D, human resources, finance, and information systems. Some objectives are collective, for a
whole department or the whole company, others can be individualized.
In the MBO paradigm, managers determine the mission and the strategic goals of the enterprise.
The goals set by top-level managers are based on an analysis of what can and should be
accomplished by the organization within a specific period of time. The functions of these
managers can be centralized by appointing a project manager who can monitor and control
activities of the various departments. If this cannot be done or is not desirable, each manager's
contributions to the organizational goal should be clearly spelled out.[citation needed]
Objectives need quantifying and monitoring. Reliable management information systems are
needed to establish relevant objectives and monitor their "reach ratio" in an objective way.[citation
needed]
Pay incentives (bonuses) are often linked to results in reaching the objectives.
The mnemonic S.M.A.R.T. is associated with the process of setting objectives in this paradigm.
"SMART" objectives are:

Specific

Measurable

Assignable

Realistic

Time-bound

The aphorism "What gets measured gets done" is aligned with the MBO philosophy.

Arguments against
MBO has its detractors and attention notably among them W. Edwards Deming, who argued that
a lack of understanding of systems commonly results in the misapplication of objectives.[3]
Additionally, Deming stated that setting production targets will encourage workers to meet those
targets through whatever means necessary, which usually results in poor quality.[4]
Point 7 of Deming's key principles encourages managers to abandon objectives in favour of
leadership because he felt that a leader with an understanding of systems was more likely to
guide workers to an appropriate solution than the incentive of an objective. Deming also pointed
out that Drucker warned managers that a systemic view was required [5] and felt that Drucker's
warning went largely unheeded by the practitioners of MBO.
There are several limitations to the assumptive base underlying the impact of managing by
objectives,[citation needed] including:
1. It over-emphasizes the setting of goals over the working of a plan as a driver of
outcomes.
2. It under-emphasizes the importance of the environment or context in which the goals are
set.
That context includes everything from the availability and quality of resources, to relative buy-in
by leadership and stake-holders. As an example of the influence of management buy-in as a
contextual influencer, in a 1991 comprehensive review of thirty years of research on the impact
of Management by Objectives, Robert Rodgers and John Hunter concluded that companies
whose CEOs demonstrated high commitment to MBO showed, on average, a 56% gain in
productivity. Companies with CEOs who showed low commitment only saw a 6% gain in
productivity.[citation needed]
When this approach is not properly set, agreed and managed by organizations, self-centered
employees might be prone to distort results, falsely representing achievement of targets that were
set in a short-term, narrow fashion. In this case, managing by objectives would be
counterproductive.

See also

Decision making software

References
1.

Drucker, Peter F., "The Practice of Management", in 1954. ISBN 0-06-011095-3

2.

Odiorne, George S., "Management by Objectives; a System of Managerial

Leadership", New York: Pitman Pub., 1965.

3.

Deming, W. Edwards, "Out of the Crisis", The MIT Press, 1994, ISBN 0-26254116-5

4.

Demings 14 Points and Quality Project Leadership J. Alex Sherrer, March 3,

2010

5.

Drucker, Peter, "Management Tasks, Responsibilities, Practices", Harper & Row,

1973

Results-based management
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Jump to: navigation, search
Results-based management (RBM) is a management strategy which uses feedback loops to
achieve strategic goals. All people and organisations (actors) who contribute directly or indirectly
to the result, map out their business processes, products and services, showing how they
contribute to the outcome. This outcome may be a physical output, a change, an impact or a
contribution to a higher level goal. Information (evidence) of the actual results is used for
accountability, reporting and to feedback into the design, resourcing and delivery of projects and
operational activities.[1][2]
Results Based Management is an example of a strategic control mechanism. It has been shown to
have strong similarities in its design and use to the third-generation balanced scorecard.[3]

Usage of RBM
The framework is largely used in government and charitable organisations, where purely
financial measures are not the key drivers and there is no competition to benchmark against, such
as the United Nations[4] and the International Committee of the Red Cross.[5] However, it has also
started to be used in semi-commercial organisations such as the Asian Development Bank.[6] At
the United Nations, an in-depth results-based approach to programme development and
implementation across the majority of all agencies has been applied since 2000,[7] based on the
UN Secretary-General Kofi Annans reform programme of 1997.[8] Results-based budgeting,
which is the term for RBM throughout the UN Secretariat, was first applied in the planning of
the biennium 2002-2003 and in all programming cycles thereafter.[9]

Key steps
1. Assess: What is the current situation?
2. Think: What caused it? Who is involved?
3. Envision: What are we going to achieve?
4. Plan: How are we going to do it? With whom? When? With what resources?
5. Do: Get it done. How is it going? Do we need to adapt?
6. Review: What went well/badly? What can we learn for next time?[5]

References
1.

"Results-based management" United Nations Development Group,

http://www.undg.org/index.cfm?P=224

2.

"Results-based Management Handbook", United Nations Development Group,

http://www.undg.org/docs/12316/UNDG-RBM%20Handbook-2012.pdf

3.

Lawrie, Gavin; Kalff, Dirk; Andersen, Henrik (September 2005). "Balanced

Scorecard and Results Based Management - Convergent Performance Management
Systems" (PDF). Proceedings of 3rd Annual Conference on Performance Measurement
and Management Control, The European Institute for Advanced Studies in Management
(EIASM), Nice, France. Retrieved 30 June 2014.

4.

"Strategic Planning and Results-based Management", UNESCO,

http://www.unesco.org/new/en/bureau-of-strategic-planning/themes/strategic-planningand-results-based-management/

5.

"Programme/project management: The results-based approach" ICRC, May 2008,

http://www.icrc.org/eng/assets/files/publications/icrc-001-0951.pdf

6.

"An Introduction to Results Management: Principles, Implications, and

Applications", Asian Development Bank, http://www.adb.org/documents/introductionresults-management-principles-implications-and-applications