MBO and MBE - Quick Revision Sheet
Quick revision
Key terms
| Term | Meaning |
|---|---|
| MBO | Management by Objectives: participative goal setting by superiors and subordinates |
| MBE | Management by Exception: managers handle only deviations from the norm |
| KRA | Key Result Areas: priority areas showing organisational strength, such as profitability, market standing, innovation |
| Exception | A significant deviation of actual from planned performance, passed to senior managers |
People
| Person | Contribution |
|---|---|
| George Odiorne | Popularised MBO in the USA; joint goal setting by superior and subordinate managers |
| Prof. Reddin | Defined MBO as effective standards converted into measurable, time-bound objectives |
| Classical writers | Suggested the principle of management by exception |
Eight steps of MBO
- Defining organisational objectives
- Goals of each section
- Fixing key result areas
- Setting subordinate objectives or targets
- Matching resources with objectives
- Periodical review meeting activities
- Appraisal of activities
- Reappraisal of objectives
MBO or MBE?
| Point | Belongs to |
|---|---|
| Easy delegation, job enrichment, quick decisions | MBO advantage |
| Time consuming, heavy paper work, rigid, short-term focus | MBO disadvantage |
| Saves managers' time, wider span of control, alert to threats | MBE advantage |
| Lower-level staff demotivated, delay in passing issues | MBE disadvantage |
| 5 defects per 100 units allowed | MBE example |
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