Management by Objectives (MBO)

Another approach to goals setting has been advanced by Odiorne, Peter Drucker, and others in early 60s, known as Management by Objectives. According to Odiorne MBO is a process whereby the superior and subordinate managers of an organization jointly work on common goals, define each individual ’s major areas of responsibility in terms expected of him, and use these measures as guide for opening the unit and assessing the contribution of each of its members.


1) MBO emphasizes on participative set of goals that are tangible, verifiable and measurable.
2) MBO focuses attention on what must be accomplished (goals) rather than how it is to be accomplished).
3) MBO, by concentrating on key results, translates the abstract philosophy of management into concrete phraseology. the technique can be put to general use. Further, it is dynamics system which seeks to integrate the company’s need to clarify and achieve its profit and growth goals with the manager’s need to contribute and develop himself.
4) MBO is a systematic and rational technique that allows management to attain maximum results from available resources by focusing on achievable goals. It allows the subordinate plenty of room to make creative decisions on this own.

Goal setting process: A comprehensive View

The current view of the goal setting process is that top management sets the goals in consultation with influential groups taking multifarious factors into account. These could include:

1) Environmental forces: reflecting the interest of various stakeholders in the organization
2) Enterprise resources: Including human, physical and material resources.
3) Internal Coalition: taking care of powerful groups within the company, exerting lot of pressures in allocation of resources and distribution of rewards.
4) Value system of top management: Reflecting the values, beliefs and aspirants of top management.

Change in objectives:

Organizational objectives are not inflexible guides to behavior. Although organizations seek stability goals changes over time and they change continuously. Goal changes mean the goal priorities are periodically re-evaluated keeping the ongoing changes in the external environment of the organization. The reason why goals change are not far to seek. Basically an organization is not static, and a set of objectives cannot be static if it is to succeed. Managers may feel that there is scope for further expansion and instead of concentrating only on audio sets ( as in the case of an electronics firms). The production of video sets may also be undertaken. Or they may look at what competitors or other organizations have achieved and decide to match or exceed these levels . At times demands form coalition groups that make up the enterprise may change and the organizations may be forced to change its goals. New government or labor leaders, for example , may force a change in the way a business sets its goal priorities .The mission can also change in a crisis. For example, the foundation for Infantile Paralysis was committed to the objective of developing a cure for polio and it succeeded. It no longer had a legitimate goal for its operation. Now the efforts of the Foundation were directed towards a new goal, fighting birth defects and arthritis. Finally as the organization progresses and undergoes cyclical changes, objectives also change.

Normally goal changes are expressed in two forms: (1) goals displacement and (2) goal succession. Goal displacement generally takes place when goals are expressed in an ambiguous manner. The official goals are ignored, an inversion of means and end chain takes place. In a hospital for example patient care may be the official goal. Because of space constraint, lack of resources and adequate support from the governments the official goal may be scarified in favor of the real goal, that is, taking care of rich and influential parties only . When old goals outlive their utility it will be disastrous for organizations. When the organization is confronted with receding sales, cut throat competition, shortage of funds, the only way to survive is to find out new goals which can inject a fresh lease of life to an otherwise decaying institution.