Management by Objectives and Styles of Management

Introduction

Excellent management is typically defined by achieving intended goals. Management by Objectives (MBO) is a technique that assists managers in achieving their goals efficiently.

According to MBO, a manager must be very clear about his objectives before beginning work. If a manager is unsure of his target, he is unlikely to arrive, and he may not even know if he is on the correct road or if he has arrived.

Management by objectives (MBO) is as old as management itself. In truth, management must constantly be guided by and with the help of objectives. Unfortunately, most managers are unsure of what they want to achieve. They are frequently unsure what their organisation, department, or division should accomplish in a given time frame. MBO, when correctly implemented, can give the energy, purpose, and trust required for good management. It’s similar to expanding a tube that has gone somewhat flat.

Core Concepts of MBO

Management by Objectives (MBO) was first outlined by Peter Drucker in 1954 in his book The Practice of Management. This systematic and organized approach allows management to focus on achievable goals and attain the best possible results from available resources.

MBO aims to increase organisational performance by aligning goals and subordinate objectives. Managers focus on the result, not the activity. They delegate tasks by “negotiating a contract of goals” with their subordinates without dictating a detailed roadmap for implementation. Management by Objectives (MBO) is about setting yourself objectives and then breaking these down into more specific goals or key results. Ideally, employees get substantial input to identify their objectives, timelines for completion, etc. MBO includes ongoing tracking and feedback in the process of reaching goals.

According to Drucker, managers should “avoid the activity trap” by getting so involved in their day-to-day activities that they forget their primary purpose or objective. Instead of just a few top managers, all managers should:

1. Participate in the strategic planning process to improve the implementability of the plan and
2. Implement various performance systems to help the organisation stay on the right track.

Setting Objectives

In Management by Objectives (MBO) systems, objectives are written down for each level of the organisation, and individuals are given specific aims and targets. “The principle behind this is to ensure that people know what the organisation is trying to achieve, what their part of the organisation must do to meet those aims, and how, as individuals, they are expected to help. This presupposes that the organisation’s programs and methods have been fully considered. If they have not, start by constructing team objectives and ask team members to share in the process.”

For Management by Objectives (MBO) to be effective, individual managers must understand the specific objectives of their job and how those objectives fit in with the overall company objectives set by the board of directors. “A manager’s job should be based on a task to be performed to attain the company’s objectives… the manager should be directed and controlled by the objectives of performance rather than by his boss.”

Characteristics of Management by Objectives

The characteristics of management by objectives are as follows.

1. MBO emphasises participation in setting tangible, verifiable, and measurable goals.
2. MBO focuses on what needs to be accomplished (goals) rather than how it will be accomplished (methods).
3. MBO, by focusing on key result areas, translates management’s abstract philosophy into concrete phraseology. The approach has broad applicability (non-specialist technique). Furthermore, it is a “dynamic system that seeks to integrate the company’s need to increase profit and sales with the manager’s need to clarify and increase profit and sales with the manager’s need to contribute and develop himself.”
4. MBO is a systematic and rational technique that enables management to maximise available resources by focusing on attainable goals. It gives the subordinate plenty of leeway to make creative decisions independently.

Process of MBO

The MBO Process

Setting the Goal

Any MBO programme must begin with enthusiastic support from top management and be congruent with the management philosophy. First, the organization’s long-term goals must be established, such as: What is the organization’s core aim? What are we doing, and why are we doing it? What are the long-term prospects for other industries? Following establishing these long-term goals, management must identify specific targets to be attained within a defined time frame.

Setting goals is a practical approach to motivating others. Goals provide a clear picture of what we are attempting to accomplish. Goals enable us to track our progress. We may plan what we must do to reach these goals in terms of people, time, money, etc. Companies should develop SMART goals while keeping all of this in mind. S stands for Specific, M stands for Measurable, A stands for Achievable, R stands for Realistic, and T stands for Time-based.

Action Plan

The action plan is the means through which a goal is attained. The action plan directs organisational actions and assures their unity of purpose. It will specify precisely what is to be done, how the subordinate will advance, what steps will be taken, and what activities the subordinate will engage in as they move. It answers the question, ‘What should be done?’ precisely. Questions like who is in charge of each activity, what resources are required, and how much time is required would also be addressed.

Example: Nitin Albert and his sales manager may agree on the following performance standards for Nitin:

1. Raise mobile phone sales in the Southern region by 10% by the end of the current year and
2. Reduce travel expenses over the preceding year.

Specific action plans can be created in two ways: They can be developed jointly by the management and the subordinate or alone by the subordinate. To ensure success, the superior must be willing to sit down with each subordinate and review the action plan (such as the one outlined above) once it has been created. The periodic review procedure assists the superior in monitoring progress toward target achievement. It aids in determining better and more efficient means of achieving goals, determining the feasibility of executing previous goals, identifying hurdles to achievement, and so on. If the subordinate does not appear on the correct track, the performance objective can be changed, or the subordinate steered towards more productive behaviours. The focus of periodic review sessions should be on tracking progress toward goals. If the performance is insufficient, the superior must attempt to isolate the causes of the lack of progress without criticising the subordinate and propose specific steps to take to attain the goals. Instead of denigrating subordinates, the emphasis should be on boosting performance.

Final Review

This is the final stage of the MBO programme. The actual results are compared to established standards in this step. Mutually agreed-upon objectives serve as a foundation for reviewing progress. While evaluating subordinates’ performance, the manager should sit with them and discuss their difficulties in achieving the goals. As in periodic sessions, the subordinate should not be chastised for failing to make adequate progress; the mood should not be hostile or threatening. There should be a give-and-take culture, and the appraisal should be founded on mutual trust and confidence between managers and subordinates. In practice, however, this give-and-take session is exceedingly challenging to arrange. It rarely achieves its full potential unless managers have the required interpersonal skills. Appraisal is frequently used to determine rewards and punishments, assessing the personal cost of subordinates rather than job performance. As a result, evaluation meetings become awkward and uncomfortable for participants, increasing pressure on subordinates while providing them with a limited set of objectives. Insecure subordinates may begin to dread the sessions and may not feel free to discuss honestly and openly without fear of reprisal. Appraisals can be highly beneficial, provided the individual being appraised is aware of and agrees to the criteria on which he is being evaluated.

• Advantages of Management by Objectives

MBO has been dubbed the most significant innovation in years. According to supporters, “it is the successor to Taylor’s’mental revolution’—a new way of thinking about, and acting in, communal work.” When objectives control an organisation, it is stated that it becomes performance-oriented, evolves, develops, and becomes socially beneficial in a variety of ways:

1. Clear goals: MBO creates specific and measurable performance goals. Goals are established in an environment of involvement, mutual trust, and confidence.
2. Better planning: MBO programmes improve planning. Concrete thinking produces specific goals.
3. Facilitates control: MBO aids in the development of controls. A clear set of verifiable goals is an excellent assurance for greater control.
4. Objective appraisal: Because superiors and subordinates collaboratively determine goals, MBO provides a foundation for evaluating a person’s performance.
5. Motivational factor: Both the appraiser and the appraisee are working toward the same goal. It forces managers to consider outcome-oriented planning rather than activity- or work-oriented planning.
6. Better morale: MBO promotes commitment rather than rote compliance. It is functional in terms of what upper management expects and developing in terms of the people who work there.
7. Result-oriented philosophy: MBO is a realistic, pragmatic, and result-oriented management philosophy.

• Limitations of Management by Objectives

MBO is not a cure-all for all organisational difficulties. Many organisations view MBO as an instant answer to their challenges. They fail to recognise that MBO requires thorough planning and execution.

Like all others, this approach is only as good as the people who try to use it. Some of the issues that prohibit MBO from producing its most significant outcomes are as follows:

1. Pressure-oriented: Because MBO is associated with reward-punishment psychology, it may be self-defeating in the long term. It is an evident violation of the subordinate’s personality integrity. Superior performers are occasionally discriminated against in MBO programmes. It strives to push improvement on all employees indiscriminately and, at times, may penalise the very people who are the most productive in the organisation.
2. Time-consuming: MBO requires a significant amount of time to develop objectives at all levels of the organisation carefully. Superiors may need to hold numerous meetings first to create confidence in subordinates in the “new system.” Time is also spent on formal, periodic progress and final evaluation sessions.
3. Increases paperwork: MBO programmes flood the organisation with newsletters, instruction booklets, training manuals, questionnaires, performance statistics, and reports. Managers may demand regular reports and data in writing to stay informed about what is happening in the organisation, resulting in a “gruelling exercise in filling out forms.” It has established another another ‘paper mill.’ According to Howell, the number of MBO forms is inverse to MBO effectiveness.
4. Goal-setting issues: MBO works best when primary measurable goals are agreed upon collectively. It is less effective when:

(i) Setting verifiable goals is difficult.

(ii) Goals are more important than the people who use them. MBO focuses on the final result and may promote an attitude that any behaviour is okay as long as it contributes to achieving the goals. As a result, rash decisions are made that will ultimately destroy the organisation.

(iii) Goals are stiff and inflexible.

(iv) There is an overemphasis on quantifiable and easily measurable outcomes rather than meaningful outcomes. Many key qualitative goals, such as job satisfaction and employee attitudes, are overlooked (attempts to set measurable goals force managers to search for a magic figure for each area).

(v) A focus on short-term objectives at the expense of long-term goals. Attempts to demonstrate results encourage managers to cut expenditures in areas where a long-term view would be more beneficial to the organisation.

5. Organizational Problems: MBO is not a cure-all for all organisational difficulties. It is not suitable for everyone. MBO causes more problems than it solves when:
   • The philosophy is not taught to all participants. Too often, MBO is rolled out across an organisation with little explanation, training, or assistance.
   • There may be an inability to limit objectives. Too many goals distort priorities and instil dread and panic in subordinates.

• It contradicts managerial concepts. Managers are compelled to change their current ways of thinking and doing under mbo programmes. Instead of planning and determining things for others, they are instructed to welcome subordinates and organise work in a participatory environment, much to their chagrin.
• The programme is used to ‘whip’ employees into submission.
• It results in a tug-of-war in which the subordinate attempts to set the lowest possible target and the superior attempts to set the highest.
• The elders might convert mbo into a fake and begin “playing games.”
• Top management’s lack of commitment and support.

Management by Exception

Management by exception is a practice in which only information indicating a considerable departure of actual results from budgeted or anticipated results is brought to management’s attention. Its goal is to free up management’s time to focus on critical tactical and strategic responsibilities. Decisions that cannot be taken at one management level are forwarded to the next higher level.

Management by exception can be used in any organisation. When everyday work yields acceptable outcomes, no management attention is necessary. Managers who adequately train their subordinates should have no difficulty delegating authority and enabling them to manage their tasks. Managers can then concentrate their knowledge and attention to non-routine issues. Because of control difficulties, some managers have difficulty enabling their subordinates to make decisions, but this psychological barrier will hinder their careers.

Styles of Management

Different management styles exist worldwide. We shall briefly explore the American, Japanese, and Indian approaches.

American Style of Management

In the individualistic approach, the American management style can be stated as managers are accountable for decisions made within their areas of responsibility. Although significant decisions may be debated in public, the ultimate responsibility for the consequences of the decision rests with the boss, and every other backer will vanish if things go wrong. But, in addition to this accountability, there are tremendous prizes that every person in this world desires. As a result, American managers are more inclined than managers in other, more consensus- or compromise-oriented cultures to dismiss subordinates’ ideas. This can rise to frustrations, which sometimes boil over in meeting scenarios.

Japanese Style of Management

Japanese management emphasises the importance of information flow from the bottom to the top of the organisation. As a result, top management takes a supervisory rather than hands-on approach. As a result, it has been observed that policy is frequently developed at the middle levels of a corporation before being passed higher for approval. The apparent strength of this method is that individuals responsible for decision implementation actively participated in policy formulation. The higher a Japanese manager advances within an organisation, the more crucial it is for him to appear humble and unaspiring. The primary responsibility of a Japanese manager is to create an atmosphere where the group can grow. To accomplish this, he must always be available and willing to share information within the group. Managers’ instructions can appear excessively imprecise to Western peers, causing uncertainty and dissatisfaction. This challenge is created, in large part, by issues with communication styles.

Indian Style of Management

India is a strongly hierarchical society, which has an evident impact on management style. It is critical that there be a boss and that the manager act like one. The manager position necessitates role-playing on the part of the boss and some adoring behaviour on the part of his subordinates. In a society still dominated by the historical traditions of the caste system, Anglo-Saxon conceptions of egalitarianism in which the boss is the primus inter pares are entirely incomprehensible.

As a result, the boss is expected to offer specific orders that will be followed precisely – even if everyone understands that the instruction is incorrect. Unclarified requests for action, with the expectation that employees will exhibit the requisite level of initiative, will likely result in inaction, as staff will be perplexed about the manager’s wishes. Managing people in India necessitates a level of micromanagement that many Western businesspeople find exceedingly unsettling but which is likely to yield the best outcomes.

McKinsey’s 7-S Model

The McKinsey 7-S Framework is a management model or framework that covers seven variables a corporation should organise effectively and holistically. According to the framework, various elements influence an organization’s ability to change and the appropriate form of change. These elements explain how a business functions. Every aspect is equally significant to the company’s manager, and these factors are interdependent. The shape of the picture has no starting point or implied hierarchy, and it is unclear which of the seven elements would be the driving force in changing a specific organisation at a given time. The variables would differ between and at different times within the same organisation.

McKinsey’s 7-S Framework

1. Strategy: specifies plans for resource allocation, how to achieve goals, working environment, etc.
2. Structure describes how the various organizational units are related to one another, such as a centralised, matrix, or top-down approach.
3. Shared Values: defines the company’s core values and beliefs.
4. Systems: specifies the procedures, processes, and other routines that must be followed during project preparation. That is how it should be done.
5. Personnel: the quantity and type of persons involved in the project and their occupation.
6. Style: describes how the management behaves in accomplishing the goal.
7. Skills: determines a person’s and an organization’s overall capabilities.

The hard Ss are strategy, systems, and structure. Challenging aspects are more straightforward to define or identify, and management directly controls them.

Soft aspects include shared values, personnel, style, and skills. They are more difficult to describe because they are less concrete and more culturally influenced.

This model is based on the premise that these seven factors must be aligned and mutually reinforcing for an organisation to perform well. As a result, the model can be used to determine which efforts need to be aligned or realigned to improve performance or to preserve alignment (and performance) during other sorts of change.

Whatever the type of change – restructuring, new processes, organisational merger, new systems, leadership change, and so on – the model can be used to understand how the organisational elements are interconnected and thus ensure that the wider impact of changes made in one area is considered. Once you’ve reached the desired endpoint, it’s time to alter and tune the aspects of the 7S model to ensure that your organisation operates successfully and efficiently.

The 7S Framework developed by McKinsey & Company can be used for the following purposes:

1. By considering the connections between each of the S’s, one can determine an organization’s strengths and shortcomings. No S is a strength or a weakness in and of itself; what matters is its level of support, or lack thereof, for the other S’s. Any S’s that agree with all the other S’s might be regarded as strengths and weaknesses.
2. The model illustrates how a change in any of the Ss affects all others. Complementary changes in the others must support adjustments in one S for an intended change to be effective.

Self-management

The self-concept is the accumulation of self-knowledge, such as views about personality traits, physical qualities, abilities, values, objectives, and roles. Beginning in infancy, children acquire and organise knowledge about themselves to comprehend the relationship between the self and their social environment. This process directly results from children’s developing cognitive skills and social relationships with family and peers.

The development of self-awareness does not occur in an all-or-nothing fashion, leading us to believe that the infant lacks it up to this point but has it beyond this point.

The process of self-discovery is active as long as the child is developing or discovering new potentialities, and it continues in a healthy individual for the rest of his life.

Hierarchy of Self-concepts

The organisation of the various self-concepts obtained from a wide range of experiences is hierarchical. Each new self-concept interacts with previous ones and influences those that emerge later.

The Primary or First Self-concept

The person’s social experiences influence it in his early years at home. The frequency and quality of the child’s interactions with family members will decide how essential they are in developing his primary self-concept. A person’s social experiences at home during their early years shape their primary or first self-concept. In a hierarchy, the dominant self-concept is thus a “mirror image” or social self-concept.

Secondary Self-concept

Around the age of 5 to 6 years, when the child gets mature enough to judge himself about others, he expresses his ability to picture how he would like to be, which is the beginning of the ideal self-concept. The concept formed earlier influences the ideal self-image. A person’s discontent with his mirror images and fundamental self-concept will increase if he has a highly unrealistic ideal self-concept.

Pattern of Development

The progression of one person to the next is very predictable. It can be expressed as follows:

Physical and Psychological Self-concept

Physical self-concepts are typically formed before psychological self-concepts.

Before he knows his strengths, disabilities, needs, and goals, the youngster has an image of his physical characteristics. Emotions are also crucial in the development of psychological self-concept.

Images of psychological and physical notions gradually merge. This usually occurs in late childhood, and the sentiments and attitudes accompanying the self-images are likewise fused. Physical changes occur throughout later childhood and early adulthood, but the physical self-concept remains relatively consistent.

Social Self-concept

Because the child’s relationship with the mother is the first crucial relationship in life, early social self-concept or mirror images emerge at home. Later, the young child has social relationships with other family members, and their treatment of him adds to the development of his self-concept.

Basic Self-concept

Three steps must be taken to build an essential self-concept free of the effect of mirror images:

1. He must develop psychological independence.
2. He must use his ability to think for himself and make judgments.
3. He must maintain a diverse social network to regard himself as an individual distinct from the group with which he has been intimately affiliated.

Ideal Self-concept

It begins at three and peaks between the ages of four and five. The greater a person’s dissatisfaction with himself and the poor mirror images he has established in his relationships with others, the greater his urge to develop perfect self-concepts.