A careful study of the above definitions bring out the following features of MBO.
Management by Objectives is a philosophy or a system, and not merely technique.
It emphasizes participative goal setting.
It clearly defines each individual responsibilities in terms of results.
If focuses attention on what must be accomplished (goals0 rather than on how it is to be accomplished.
It converts objective needs into personal goals at every level in the organization.
It establishes standards or yardsticks (goals ) as operation guides and also as basis of performance evaluation.
It is a system intentionally directed toward effective and efficient attainment of organizational and personal goals.
MBO process (or management by Objective cycle or key elements of management by Objectives or minimum requirements of management b y objectives.
There are four important and essential steps or elements in the management by Objectives process as follows :
Goal-setting or objective setting is a multistage process. It starts with the examining of the current stat3e of affaires, level of efficiency, threats, and opportunities. Then the key result areas are identified, such as product markets, improved services, lowered costs, work simplification, employee motivation, profitability innovation and social responsibility. The performance of these areas is critical for organization in the sense that failure in these areas may result in failure of the organization. And this is why they are known as “key” result areas. Peter says, objectives are important in every area where performance and results directly affect the survival and prosperity of business.
Thereafter interacting or joint goal setting takes place. Subordinates are actively involved in formulating goals at every level in the organization such goals are finished with reference to the overall objectives of the organization. Care is taken to establish goals that are measurable and contribute to the element also. Such goals may be long rang, medium rang, or short range. Further, resources availability also becomes an important consideration in goal setting. There is always need to decide priorities among the different objectives keeping in view the environment within which business operates as well as possible further changes in it.
Developing Action Plans.
Set objectives must be translated into action plans. It requires assignment of specific responsibilities to different departments, division, and individuals. It also requires allocation of necessary resources needed to perform the assigned responsibilities. Time dimensions are also to be decided in order that targets are reached without any unwarranted delays.
Periodic Review or Monitoring The Progress.
After setting objectives and developing action plans, it is necessary to establish a proper monitoring system with a view to regularly keeping the activities. He progress is monitored without day path leading to the ultimate objective. It is ensured that the deviations found, if any, are thoroughly discussed and immediate corrective actions are taken to set them right on the course. Such a regular monitoring and periodic review not only provide feedback which is essential for completion of work in time. But also motivates the managers accountable for performance. Periodic review and monitoring are done at departmental level generally.
This is the last phase of MBO program that evaluates performance annually. The annual review or appraisal is comprehensive and is done at the organization level. The actual annual results are evaluated against the set objectives. Such assessment is also used for determining targets for next year, for modification in standards (goals0 if needed, and for taking corrective actions in order to avoid deviations form predetermined objectives.