April 8, 2015

Goal Setting for MBO

Obejctives are the important ends toward which organizational and individual activities are directed. In the context of MBO, objectives are synonymous with goals.

Objectives have to be verifiable. An objective is verifiable when at the end of the period one can determine whether or not it has been achieved.

Objective have hierarchy. Social purpose of the business is the highest level. Next comes purpose of the business. Key result areas come next. The hierarchy goes up to the level of individual managers and their key result areas are specified. For each period, goals for these key result areas are to be determined by the manager in the job and his superior. The goals of all managers of an organization have to fit together to achieve the goal of the organization.

Weihrich and Koontz gives a table that give guidelines of setting objectives by individual managers.

1. Do the objectives cover the main features of the job?
2. Are the objectives verifaible?
3. Do the objectives indicate

quantity (how much)
quality (how well)
time (when)
cost (at what cost)

4. Are the objectives reasonable and challenging?
5. Are priorities assigned to objectives?
6. Do they specify improvement objectives of processes and outputs?
7. Are they coordindated with other departments concerned?
8. Do the objectives fit with the premises of the organization?
9. Do the short time objectives fit with long term objectives?

Who will set the objectives?

Boss or the subordindate.

Normal management theory says boss sets the objective. But in an ongoing organization, the managers in specific jobs are given the premises and are asked to set objectives. They are discussed with their superiors and adjustments are done based on reasoning. Then there is better commitment to the objectives by the incumbent manager. 

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