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MANAGEMENT BY OBJECTIVES.

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Covers concepts of Peter Drucker & George Odiorne & explains MBO approach. Examines the procedure for implementing a MBO program in a sale organization.... More...
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Paper Abstract:
Covers concepts of Peter Drucker & George Odiorne & explains MBO approach. Examines the procedure for implementing a MBO program in a sale organization.

Paper Introduction:
This report examines the management technique known as Management by Objective (MBO), with particular consideration of the procedure for instituting an MBO program in a sales-oriented organization. Management by Objectives, or MBO, means, in its simplest terms, exactly what the name implies: so managing as to direct organizational efforts towards the achievement of specific goals. So stated, it sounds both simple and obvious, but it is often difficult to put into practice, as suggested by the popular saying that "when you're up to your neck in alligators, it's difficult to remember that your objective was to drain the swamp". All too often, managers find themselves neck-deep or deeper in immediate problems and crises, and overall objectives, which seem so distant, get lost sight of. The art of Management

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All too often, managers find themselves neck-deep or deeper inimmediate problems and crises, and overall objectives, which seem sodistant, get lost sight of. GeorgeOdiorne, a major figure in MBO's evolution as a management concept, furtherdeveloped the concept that goal-setting should be a joint task, with eachperson in the work team given specific personal responsibilities, andmeasurable goals to achieve (p. Osigweh, C.A.B. Everyone in an MBO organization has aspecific and necessary contribution to make towards achieving theobjectives, so everyone must be individually motivated and guided towardsthese objectives. Individual motivation is a particularly difficultproblem today, when employees are more demanding and less accepting ofmanagement directives than they were a few decades ago (Mali, 1986, p.424ff). When the Iron Curtain came down, the results became shockingly visible:East Germany, for example, long regarded as the "economic powerhouse" ofthe East Bloc, was revealed as an economic and environmental basket case,in need of billions of dollars of investment from the West to bring itseconomy up to what we would regard as even minimal standards. Does MBO work? The need for specifically formulated concepts of MBO grewout of the rapid progress of industry after World War II, and particularlyout of the growth of major industrial projects, following in the footstepsof the World War II Manhattan Project which developed the atomic bomb.Earlier, the need for defining objectives was perhaps less obvious. (199 ). As noted earlier, the first element of MBO is strategic planning.This can be applied to sales as much as to other activities. 212-213). 32). Management by Objectives, or MBO, means, in its simplest terms,exactly what the name implies: so managing as to direct organizationalefforts towards the achievement of specific goals. 6 ). Individual motivation. Strategic planning. There is no use setting objectives if we cannottell if we have achieved them or not, or how close we are to achievingthem. Total management. That is in some ways difficult to answer, sinceorganizations can claim to have implemented MBO when in fact they havesimply stated a set of "New Year's resolutions." This question can best beanswered by looking at organizations where it is not applied--notably thecentrally-planned economies of the Soviet Union and Eastern Europe, whosefailure and collapse became so obvious at the end of the 198 s. The portable MBA. Theseeconomies are bureaucratic, but that is also true that much of the mostdynamic element of advanced Western economies is provided by bureaucraticorganizations, not by the lone-wolf entrepreneurs of popular businessromance. That is whathappens when organizations are managed without meaningful objectives. These objectives must not simply be actions, but goals,and they must be measurable in time and result, not the vague equivalent ofNew Year's resolutions to be announced and then forgotten. Motivation in sales is insome respect simpler than in other types of work, since people who go intosales tend to be successoriented and highly motivated. 25-26). The mark of a successful sales person is not making morecontacts, but achieving more closed sales, and that should be the definedobjective. No ancient Egyptian inscribed management theory inhieroglyphics, but the proof is simple: someone established a goal,directed an organization to achieve that goal, and did in fact achieve it.The Pyramids are proof of this, standing there for all to see. What was lacking in the centrally planned economies, for alltheir formal quotas, was a lack of goal consciousness at all levels, and alack of recognition for results achieved (Osigweh, 1989, pp. Organizational science abroad. Establishing time constraints is a vital element of MBO.Without a time factor, goals become vague and measurement of progressimpossible. Developing missiles or computer systems, however, required morefocused attention to the problems of setting goals and ensuring that theorganization moved-steadily and efficiently towards achieving those goals. The whole MBO process begins with establishingthe basic strategic goals of the organization-whether to perfect and applya new technology, to establish itself as the market leader in a givenindustry, or to evolve from a local or regional into a successful nationaloperation. In summary, it might be said that MBO is a philosophy which seeks tomake management an active rather than a passive process. As a first example, consider the case of goals. This report examines the management technique known as Management byObjective (MBO), with particular consideration of the procedure forinstituting an MBO program in a sales-oriented organization. (1989). Sales would seem to be an area of organizational action in which thepractices of MBO are "built in." Sales targets and similar goals were partof the world of sales people long before Drucker coined the concept of MBOin 1954. For example,it is been observed that, typically, 2 percent of customers account for 8 percent of the business (Collins & Devanna, 199 , p. (1986). Yet carelessly drawn-up "goals" often mistakeinputs or activities for outputs. For example, a sales "target" might beset as initiating so many customer contacts in the next year. The term was first used by management consultant Peter Drucker in1954, and the concept has been continually refined since that time (Mali,1986, p. This is possibly the most distinctive singlefeature of MBO. As a consciously formulated concept, however, MBO is somewhat morerecent. This factshould alert the sales strategist to be aware that even all completed salesor all new customers are not equal. Each of these is worth abrief examination. Measurable results. Odiorne, G.S. Time. So stated, it soundsboth simple and obvious, but it is often difficult to put into practice, assuggested by the popular saying that "when you're up to your neck inalligators, it's difficult to remember that your objective was to drain theswamp". The human side of management. Once theinitial contact has been made, a team of specialists may be dispatched todiscuss factors such as range, fuel economy, payload capacity, maintenance,and so forth with their counterpart specialists working for the customer.Then executives of both parties are briefed by their specialists, lawyersare brought in to draw up the contract, and finally the deal is closed.) Sales objectives should be consistent with the sales cycle (Collins &Devanna, 199 , pp. The purpose ofmanagement in MBO is not simply to keep things running as they have run inthe past, without obvious breakdowns, but to guide an organization inspecific directions, measure progress, and continually guide theorganization until its objectives are met. Management by Objectives must, in some form at least, be nearly 5, years old at least. 92ff). References Collins, E.G.C., & Devanna, M.A. A new hire is, in effect, being hired not only for the jobfor which he or she applied, but for future jobs to which that person mightbe promotable: today's junior sales assistant may be next decade's salesmanager, and the following decade's chief sales executive (Odiorne, 1987,pp. Steelmills produced steel, railroads ran trains, week in, week out, year in,year out, with little change. Lexington, MA: Lexington. New York:Plenum.----------------------- 8 For some members of the sales team, progressmay be measured not in terms of sales themselves, but in terms ofmodifications in the product package (e.g., in our example, seatingconfigurations) which enhance the competitive viability of the product.(But note that clever engineering development produces no progress towardsorganizational goals if it does not, in fact, make the plane moremarketable.) Finally, sales is by its nature a "people" business, and MBO conceptshave wide applicability to personnel questions. 2 4). Mali, P. 32ff). In MBO, the goal of management is not simply to"keep the wheels turning," but to ensure at all levels that progress ismade in a direction consistent with the strategic plan. 212-213).(Consider, as an instance, selling a jet plane to an airline. Even the outwardly unmeasurable, must be tested, perhaps indirectly,against some yardstick (e.g., achieving smoother workplace relations can bemeasured by looking for reductions in grievances, disciplinary actions,etc.). Setting objectives. (1987). NewYork: John Wiley. MBO consists, broadly, of six elements: Strategic planning, totalmanagement, setting objective, individual motivation, measurable results,and a time constraint (Mali, 1986, p. 142-143). MBO updated. The goal often seemed simply to keep thingsgoing. 75-77)."Meeting quota" in these economies became a game of appearances, with atotal lack of real motivation, let alone strategic planning, at all levels. But customercontacts are not an output of the sales process--closed sales are.Contacts are an activity, and an input to the main sales activity of makingthe pitch. Likewise, it has been found that the selling process follows a "salescycle." This is particularly true in business sales, organization toorganization, where for example preliminary steps of the sales process maybe handled in large part by technical specialists, before upper managementmakes the final decision (Collins & Devanna, 199 , pp. one of the conceptsin MBO is that outputs (what you are getting out of work activity) shouldbe clearly distinguished from inputs and the activities themselves(Odiorne, 1987, p. The purpose of MBO is to make it possible for everyone to knowhow much progress is being made (or not being made) towards achieving thegoals. The art of Management by Objective, then, isto keep managers and the organization as a whole on track towards its goal,even when the "alligators" are snapping all about. Strategic planning can also be applied to human resourcesdevelopment. In Peter Drucker's original formulation, the function of MBO was toensure that each job performed in an organization acted to further theoverall goals of the organization--that jobs were not created or performedin a particular way simply because "we always did it that way. Nevertheless, salespeople sometimes flag, becoming "fallen stars" or "broken workhorses," andmust be recharged and re-motivated (Odiorne, 1987, pp. New York: John Wiley. However, the concepts of MBO can be applied to salesorganizations as well as other types of organization, and will bring aclear concept of goals and heightened productivity. one sale to a new "key" customer whowill provide heavy repeat business is thus worth several sales to customerswho will generate less future business.

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