Management By Objectives (MBO)
“MBO refers to a formal set of procedures that begins with goal setting and contributes through performance review”. The key of MBO is that it is a participative process actively involving managers and subordinates at every organizational level. It encourages performance appraisal through a process of shared goal setting and evaluation. MBO is a technique designed to increase the precision of the planning process at the organizational level & reduce the gap between the employee and organizational goal.
The key elements of MBO are
1. Effective planning and goal setting by top management.
2. Setting of inidividual goals related to organizational’s goals by managers and subordinates.
3. Considerable autonomy in developing and selecting means for achieving objectives.
4. Regular review of performance in relation to objectives.
MBO can be viewed as goal setting applied to the macro organizational level. It follows the series of systematic steps.
- Individual objectives : Once the overall organizational objectives have been set and performance system developed; individual objectives are set which are determined by each superior’s subordinate pair.
- Feedback & appraisal : Individuals will be given feedback and appraised on the basis of their performance in accordance with the objectives. This process takes place on a periodic and annual basis and is diagnostic rather than purely evaluative.
- Periodic review : They are conducted in order to evaluate progress towards the attainment of objectives and give the opportunity to make necessary changes. At the annual review session an overall diagnosis and evaluation is made according to results attained; and the system starts all over again.
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