Concept and Nature of

Objectives
 Unit 3
• Types of objectives, Importance of objectives,
Setting objectives
• Management by Objectives, Benefits and
Weaknesses of MBO.
 What are Objectives?
• Objectives are specific, actionable targets that need to be achieved
within a smaller time frame, such as a year or less, to reach a
certain goal.
• Objectives describe the actions or activities involved in achieving a
goal. For example, to achieve the goal of increasing revenues, a
company can have an objective like “Add three new products by the
end of October this year.”
• Following are some examples of objectives:
– Earn a minimum of 15% return on investment in a fiscal year
– Increase the company’s market share to 7% by the end of next fiscal
year
– Cut down the operating costs by 10% within two years
– Reduce the response time for sales inquiries to 12 hours by the end of
this quarter
 Objectives should meet the following
criteria:
• Measurable: What specifically will be achieved
and when will it be achieved?
• Suitable: Does it fit as a measurement for
achieving the goal?
• Feasible: Is it possible to achieve?
• Commitment: Are people committed to achieving
the objective?
• Ownership: Are the people responsible for
achieving the objective included in the objective-
setting process?
 Nature of Objectives
• Challenging
• Attainable
• Specific and Measurable
• Time Limit
• Supportive
• Priority
• Flexible
 Importance of Objectives
• Basis for Managerial Functions
• Basis for Organizational Existence
• Basis for Various types of plans
• Standards of Performance
• Unity of Action
• Motivation
• Basis for Co-ordination
• Basis for decision making
Types of Objectives
Economic Objectives,

Social Objectives,

Human Objectives
 Economic Objective
• Business is an Economic
Activity and its objectives
are mainly economic in
nature.
• Profit Earning, Survival
and Growth can be the
Economic objectives of a
Company.
• Creation of Customers,
Innovation and optimum
Utilization of Resources
can also form a part of
economic Objective
 Social Objective
• Social objectives refer to the
objectives, which are desired to be
achieved for the benefit of the
society. Business makes use of scarce
resources of the society. So, society
expects something in return for its
welfare. Social objective deals with
fulfilling obligations towards the
society.
• Supply of quality goods at fair prices,
Avoidance of unfair trade practices,
generation of employment
opportunities, Protection of
Environment etc can be some of the
social objectives
 Human or Individual Objectives:
• Human or individual objectives refer to the
objectives related to the individual needs of
the employees of an organisation. As
employees are one of the most valuable
resources for an organisation, satisfaction of
their objectives is very important.
• Some can be as under:
– To provide healthy and safe working conditions.
– To pay fair and competitive salaries and perks.
OBJECTIVE SETTING
 Objective Setting:
Moving from general to specific objectives
• Generally top management determines the overall objectives
of the organisation. The objectives must not only provide
profits to the firm but also cater to interest of the society.
• The objective generally represent the value system of
managers, organisational strengths and weaknesses and
various factors of the external environment.
• These objectives are general in nature. They are broad
objectives that shows direction in which organisation will
move.
• Survival, growth, profits, contribution to national image and
social interest are some more of the general or broad
objectives. These are often difficult to transform into action.
 Setting Objectives
• Managers Thus, determine the specific objectives
within the framework of general objectives which
are attainable by the organisational members.
• They are usually short run in nature and have to
be achieved within a definite time period.
• The may relate to expansion in existing market
within the same product or new product, cost
reduction product differentiation et cetera.
 Setting Objectives
• Specific objectives should contribute to general
objectives
• They should set objectives and tangible standards
for measuring performance and exercising
control.
• They provide guidelines for action.
• They are short range in character and set specific
targets to be achieved in specific time period.
Setting Objectives
Setting Objectives
MANAGEMENT BY OBJECTIVE
 Management by Objective
• Management is goal oriented. Goals provide direction to
managerial activities. The term objective emphasises on
four aspects:
– Goal. Success of organisation depends on its goal. The goal gives
direction to planning, organising another managerial activities it
is the target which managers aim to achieve.
– Definiteness. The goal should be definite that is clear and
precise it should not be interpreted differently by different
people.
– Scope: it defines the area of operations, the boundaries within
which organisation activities are performed
– Direction. All organisational activities are directed towards
stated goals it is thus essential that objectives are rationally
framed within the constraints of the organisational resources
 Management by Objective
• The setting up of goals or objectives
became so important in business
world that the concept of
management by objectives
propounded by Peter Drucker came
into limelight in the year 1954.
• It is also known as results
management, goals management,
management by results or
management by mission.
• Basic principle underlying the
theory of MBO is the participative
style of management. It aims at
setting goals through participation
of superiors and Subordinates.
 Management by Objective
• MBO integrates organisational objectives with managerial activities.
It begins with setting objectives and ends with appraisal of
performance.
• If objectives are not clear, accomplishment may fall short of its
intended mark, as the scope and direction towards which activities
shall be headed will be narrowly defined.
• Those who frame the objectives and those who work towards their
accomplishments should jointly formulate objectives which are
specific, understandable, measurable, concise, realistic, flexible and
acceptable to all.
• Setting goals collectively by managers and subordinates is the
essence of MBO.
• Drucker believed that organisation should provide scope to assume
responsibility, establish teamwork and harmonize individual goals
with organisational goals.
 Examples of MBOs
• Human resources
• Human resources would set one to three goals,
such as maintaining an employee satisfaction
index of 85%. They would discuss how to make
this happen. Once HR has created a plan, they will
speak with their employees. Through feedback,
they will figure out new ideas to help in achieving
this goal. HR will ensure employees are doing
their part as well. HR will then monitor employee
performance to ensure the goal is benefiting the
business.
 Examples of MBOs
• Marketing
• Marketing would set one to three goals. One of
these might be to triple social media following
within one year. Once marketing decides on an
action plan, they would share this plan with
employees and listen to their input about whether
this plan is realistic. They would also listen to the
employees’ goals. Through feedback, they will
work with new ideas and make these objectives
happen. Marketing will evaluate performance
and ensure the goal is being achieved.
 Examples of MBOs
• Sales
• The sales department might set a goal to achieve 30
new bookings per month. Sales might decide this can
be achieved by distributing fliers.
• Upon talking to employees, they determine they have a
better chance of achieving and even exceeding their
goal if pens are given out with the fliers. With
feedback, they discover that the flier-pen combination
has landed the business 70 new bookings per month.
• Since they have exceeded their goal, sales can focus on
a new goal.
 Merits of MBO
1. Helps in setting realistic goals.
2. Makes planning effective
3. Effective communication network
4. Employees involvement
5. Improves employer employee relationship.
6. Promotes the system of self appraisal
7. Facilitates control
8. Personality development
9. Basis of change
 Limitations of MBO
• Resources (time money and effort)
• Illusionary approach
• Improper use
• Lack of knowledge
• Ignores the long run perspective
• Zeigarnik effect
• Conflict of opinion
• Lack of top management support
• Flexibility to change
• Not a panacea