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Management by objectives (MBO) is a system which was first described by Peter Drucker in 1954. Since then, MBO has attracted enormous interest from the business world, and its principles have been applied in many of the world’s largest companies.

P. Drucker emphasized that an organization and its staff must have clear goals. Each individual must understand the goals of the enterprise he/she works for, and must make contribution to them. It is also vital that the individual knows what his/her manager expects of her. An individual must know what sort of results he/she is expected to achieve.

If an organization uses MBO approach, it must pay careful attention to planning. A special feature of MBO is that the subordinate participates with the manager in developing objectives.

Various kinds of MBO systems are used in organizations. Here is an example of how a programme might work in a company. The programme consists of several stages. First, the subordinate’s job is defined. Next, his/her current performance is evaluated. Then, new objectives are developed by the subordinates and their managers. Finally, the programme is put into action. Later, there are periodic reviews of the person’s performance, and his/her progress is checked.

The subordinates and the manager discuss the objectives and make plans for achieving them. The manager may help in some way, perhaps by providing more training for the subordinate or buying more modern machines. From time to time, the subordinate and the manager meet to discuss progress. It is vital that the manager receives feedback from the subordinate on performance and achievements.

There are many benefits of MBO. The system helps the subordinates to see clearly their role in the organization. They have a say in how their job is performed, and what goals should be. Workers feel more responsible and motivated. MBO is a good technique for assessing and individual’s performance. People are judged on results, rather than on the personal feelings and prejudices of the managers.

The main limitations of the system are that it is time-consuming and may create a lot of paperwork. In practice, MBO programmes are often fully supported by managements. This could be because managers are not always skilled at interviewing and giving guidance.


1. Who is the ‘father’ of MBO?

2. What are the principles of the system?

3. How does the programme work?

4. What are the benefits and limitations of the system?



T E X T 5


Read the text. What is the main idea of the text? Divide it into logical parts. Define the key-sentence of each part.

No school, professor or book can make you a manager. Only you can do this, and you can become a manager only by managing. Of course, you can learn the skills that are extremely helpful, particularly in such clearly defined areas as accounting, statistics, law, and finance. But this will not make you a manager. Experience is the only teacher. Experience is, however, is not the uniformly effective teacher. An old aphorism criticizes the person who has worked for 20 years but has only reexperienced the first year 20 times. Learning is not automatic. What schools can do, and what books can do is to provide you with some insights and intellectual tools to be applied against your experience. Most of you are practical people; certainly most managers are. You are concerned about doing things than about thinking about them. You are more concerned with action than with contemplation. Most business students and managers are uneasy about theory. It is abstract and difficult, too unrelated to real problems, it seems, ‘too academic’ and just ‘too theoretical’. But theory is very important because you and all men and women of action are also theorists. No matter how pragmatic you consider yourself, no matter how rooted in reality a manager views himself, you and he operate on theories. You all possess your own theories about motivation, authority, objectives and change. You will need them – and you will have them whether you know it or not. You will be a better manager if you are aware of your assumptions and you examine them periodically and modify them when necessary. Nothing is as practical as a good theory. A great deal of management theory and practice must be described as ‘common sense’. For the objectives of management may be defined as the formulation of priorities and plans.



T E X T 6

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