Management by Objectives (MBO) is a dynamic system which seeks to integrate many key managerial activities in a systematic manner and is consciously directed toward the effective and efficient achievement of organizational and individual objectives. It is a demanding and rewarding style of managing a business with an effective planning tool to help the supervisor set objectives.

Learn about:- 1. Introduction to Management by Objectives 2. Meaning and Definitions of Management by Objectives 3. Need 4. Features 5. Process 6. Approaches 7. Assumptions, Concepts and Techniques 8. Prerequisites of a Successful MBO 9. Benefits and Disadvantages 10. MBO In India.

What is Management by Objectives (MBO): Meaning, Definition, Features, Process, Approaches, Benefits, Peter Drucker and More…

Management by Objectives (MBO) – Introduction

Management by Objectives starts with the goals of a worker’s boss. Often these are called “key results”. The boss’s key results are examined and the ways that a worker should con­tribute to them is identified. These are developed into key results for the worker. If he or she has subordinates, the worker’s key results are examined to identify the subordinate’s key results and so on. MBO is therefore a top-down system that ensures clear areas of responsi­bility where everyone is linked, directly or indirectly, with organizational goals.

For example, an organization’s tactical plan may give a production manager a key result of making 100 machines per month. If there are four production lines, the production manager will discuss this requirement with each of the four first-line managers. Taking other factors such as the quality of the equipment and the availability of operatives into account, the production manager and first-line managers will agree individual targets.


For example, the four first-line managers may agree to produce 30, 30, 25 and 15 machines, respectively. The first-line managers with the higher targets may have agreed an above-average contribu­tion because they are in charge of the production line with the most up-to-date equipment and the most experienced staff. The first-line manager with the lowest target may be the one who manages a production line staffed by trainees and where much machine maintenance is needed. However, as a group the four first-line managers will produce the 100 units of machinery the production manager needs to achieve his or her key result.

When the key results have been agreed the production manager and each first-line manager consider the methods by which they can be achieved. Each first-line manager will then have similar meetings with his or her supervisors. The supervisors will then have equiv­alent meetings with operatives.

At the end of the month each manager and subordinate meet to discuss performance. Any shortfall is examined and the reason identified. The shortfall may not be the fault of the subordinate. It could be that the initial target was too ambitious – in which case it will be reduced. It could be the shortfall was caused by an unreliable supplier – in which case the purchasing department would be asked to improve the supply chain.

It could be that the subordinate did not have the experience to deal with a problem – in which case training would be arranged. Finally, it could be that the manager omitted to communicate a key piece of information – in which case the manager would seek to improve his or her com­munication skills.


Management by Objectives (MBO) is a dynamic system which seeks to integrate many key managerial activities in a systematic manner and is consciously directed toward the effective and efficient achievement of organisational and individual objectives. It is a demanding and rewarding style of managing a business with an effective planning tool to help the supervisor set objectives.

MBO gained recognition in 1954 with the publication of Peter Drucker’s book The Practice of Management. The concept of MBO provides a simple but systematic way of creating values and established systems and targets and such other means whereby the efforts of each managers are harnessed to achieve the objectives. All such objectives are the sub-components of a total network, all of which aggregate to the achievement of overall objectives of the unit.

According to Peter F. Drucker, “the only principle that can give full scope to individual strength and responsibility, common direction of vision, effort and teamwork is management by objectives”.

MBO is based on the assumption that people perform better when they know what is expected of them and can relate their personal goals to the organisational objectives. It also assumes that people are interested in the goal-setting process and in evaluating their performances against the target.

Management by Objectives (MBO) – Meaning and Definitions

Management by Objectives (MBO) is comparatively a recent development in the arena of management. Several management experts have contributed to this concept. This concept was developed during 1960s. Initially, MBO was developed, in the main, by J. Humble of Urwick Orr and Partners who called planning by objective setting on a total organisation and individual basis as ‘Management by Objectives.’


Although it was applied for the purpose of assessing managerial performance, it made a great impact on planning. Later on, George S. Odiorne, Tosi and Carroll, Harry Levinson, etc. also laid emphasis on MBO. However, Peter F. Drucker has the credit for popularising this concept widely. MBO is also known as ‘goals management’ or ‘management by results’. Now-a-days, MBO is practised throughout the world.

This concept has been viewed by several experts in several ways. Some view it as a philosophy of management while others view it as an appraisal tool; as a system of managing; as a planning and control device; as a tool of assessing managerial performance; as a motivational technique; as a system of planning and appraisal; as a process of management, and so on.

In this way, the concepts and applications of MBO vary widely. In the words of Koontz and Weihrich,”… MBO, to be effective, has to be viewed as a comprehensive system. In short, it must be considered a way of managing, and not an addition to the managerial job.”


According to George S. Odiorne, “The system of Management by Objectives can be described as a process whereby the superior and subordinate managers of an organisation jointly identify its common goals, define each individual’s major area of responsibility in terms of results expected of him, and use these measures as guides for operating the unit and assessing the contribution of each of its members.”

According to Koontz and Weihrich, “Management by objectives is a comprehensive managerial system that integrates many key managerial activities in a systematic manner and that is consciously directed toward the effective and efficient achievement of organisational and individual objectives.”

The concept of MBO has finely been explained by Peter F. Drucker. According to Drucker, “It (MBO) rests on a concept of the job of management. It rests on an analysis of the specific needs of the management group and the obstacles it faces. It rests on a concept of human action, human behaviour and human motivation. Finally, it applies to every manager, whatever his level and function, and to any business enterprise whether large and small. It insures performance by converting objective needs into personal goals. And this is genuine freedom, freedom under the law.”

The approach of MBO is based on the setting of (i) quantifiable objectives, (ii) qualitative objectives, and finally, (iii) verifiable objectives.


Thus, it answers the four basic questions:

(i) How much? That is, quantifiable objectives.

(ii) How well? That is, qualitative objectives.

(iii) At what time and cost? That is, the time and cost aspects.


(iv) With what result? That is, verifiable objectives.

The final conclusion which may be drawn can be expressed as—




MBO stands for Management by objectives

AP stands for Agreed Plans.

AO stands for Agreed Objectives.

APER stands for Agreed Performance.

Management by Objectives (MBO) – Need for MBO

Why should an organisation, which has been performing well all these years, now turn its attention to MBO and go through all the problems involved with its introduction? The answer to this lies in the very nature of an organisation which tends to draw attention away from, rather than towards, the common organisational goals. Specifically there are four factors inherent in each organisation which is barriers towards the achievement of the organisational goals.

These are – specialization of work; misdirection of effort by the boss: hierarchical structures of management; and misdirection by compensation’s. Thus there is need to unify the efforts of individuals towards achievement of corporate goals. This unifying force is provided by MBO.


Today’s technological sophistication requires specialized knowledge, specialized skills and specialized workers. The danger is that these specialized workers, in their quest for perfection within the narrow confines of their specialized function, often tend to lose sight of the organisational goals. They forget they are working for an organisation, and that their specialized function has to operate within specified parameters. MBO helps to mesh together the various functional specialists for the achievement of the firm’s overall objectives.

The compensation and appraisal system tends to act as a deterrent towards achieving organisational goals. This is because there is a tendency for people to ‘please the boss’ even in the most objectively designed appraisal system. People tend to take even the most casual observation or remark of the boss seriously and work to please him because they know that the boss plays an important role in their promotion and organisational goals are relegated to the back seat.

In every organisation there are various hierarchical levels of management. Each level has its own vision and own set of narrow objectives to fulfill. Often these levels are totally insulated from each other. This creates barriers towards harmonious working together for achieving the organisational goals. For instance, the machine operator would like to maximize his production and minimize the number of rejects and his interest is limited to the machine he operates.

The shop floor supervisor is concerned with all the machines and is interested in maximizing the total output with maximum utilization of various inputs. In achieving this objective, the supervisor may like to minimize the operation of an inefficient machine. However, the operator of that particular machine would not like that. If there is agreement about the overall organisational goals which have to be achieved, this kind of conflicting pressure can be avoided.

Finally, the compensation system can often create situations in which people work towards maximization of their compensation, often to the detriment of achieving the organisational goals. If the machine operator’s compensation is tied to the output which he produces on the machine he would obviously like to produce the maximum numbers, disregarding the factor of inefficiency, wastage, rejects, etc.

Similarly, a salesman would like to book maximum orders irrespective of the fact whether the payment is made promptly or not. But at the organisational level, the concern is not only with output and orders booked, but equally with the costs incurred and realization of payments. Only when ‘objectives are specified for each person, drawn from and contributing towards the organisational goals, with emphasis on team work, can these forces of separatism be minimized.

Management by Objectives (MBO) – 9 Prominent Features

On the basis of the definitions, the MBO has the following prominent features:

1. All Activities are Goal-Oriented:

The first important feature of the MBO is that under it all the activities happen to be goal-oriented. It means that all the activities performed in an organisation are in the context of the attainment of goal or objective.

2. Integration among Organisational, Departmental and Personal Objectives:

The basis of the MBO is the setting of objectives jointly by the supervisors and subordinates and their effective realisation.

Under the MBO the objectives are decided in the following order:

a. Organisational Objectives

b. Departmental Objectives

c. Personal Objectives

First of all the objectives of the organisation are determined. The Departmental objectives are decided in the context of the objectives of the organisation. In order to achieve the objectives of the department, the objectives of each individual are determined. In other words, an effort is made so that there is no clash or opposition at any level so far as the objectives are concerned.

3. MBO Views Organisation as Dynamic Entity:

The third feature of the MBO is that it considers organisation as a dynamic entity. Every organisation is affected by a number of external and internal factors. It is because of this reason that the organisation is considered a dynamic unit. The dynamic nature of the organisation does affect the objectives. It is quite possible that the objectives determined today may not be possible to realise. In case of such a situation, it is advisable to change the objectives.

4. MBO is a Participative Attempt:

The MBO considers that involvement leads to commitment. It means that if we involve an individual even before the commencement of the work, he will get dedicated to his job even more intensely. Here it means that he is involved in the setting of objectives (that is what is meant by involvement before the commencement of work). In conclusion, it can be said that if an employee is involved in the determining of the objectives, he is encouraged to perform splendidly.

5. MBO Matches the Objectives and Resources:

Under the MBO the objectives are decided only in the context of the resources available so that no job or activity is left incomplete because of the lack of resources. Apart from this if the resources are more than the requirements the possibility of their profitable in use is found out.

6. MBO is a Philosophy and not a Technique:

MBO is not a technique of management but (it is) its philosophy. It is important to understand the difference between technique and philosophy. A management technique can only be applied to a particular department and its effect in the other departments is almost negligible.

For example- the inventory control technique can be used only in relation to stock and not in case of the recruitment and selection process or in another process. On the other hand, the philosophy of management affects all the departments of the company. MBO affects the entire organisation at a time. That is why it is called the philosophy of management and not a technique.

7. MBO gives More Weightage to Review and Performance Appraisal:

Occasional appraisal or evaluation of the work performance of the workers is an important characteristic of the MBO. Under it, it is observed whether all the individuals are performing at the expected level and whether there is any hindrance in their work performance. If need be the objectives and the work methods can be reconsidered and, if needed, changes can be brought about in them.

8. MBO Provides More Freedom to Subordinates:

Under the MBO the subordinates are not only associated with the task of laying down the objectives but they also get complete freedom in the performance of their work. They have the right to take decision related to their designation. This raises their importance consequently they work with an added interest and they get absolute job satisfactions.

9. MBO gives More Weightage to Results and not to Work:

Under the MBO result is given more attention. The technique which is to be used to reach the final result is left to the discretion of the subordinates. The subordinates are expected to give the best results irrespective of the technique employed.

Management by Objectives (MBO) – MBO Process

The process of MBO is explained below:

1. Defining Organisational Objectives:

Initially, organisational objectives are framed by the top level employees of an organisation. Then, it moves downwards. The definition of organisational objectives states why the business is started and exists. First, long-term objectives are framed. Short-term objectives are framed taking into account the feasibility of achieving the long-term objectives.

2. Goals of Each Section:

Objectives for each section, department or division are framed on the basis of overall objectives of the organisation. Period within which these objectives should be achieved is- also fixed. Goals or objectives are expressed in a meaningful manner.

3. Fixing Key Result Areas:

Key result areas are fixed on the basis of organisational objectives premises. Key Results Areas (KRA) are arranged on a priority basis. KRA indicates the strength of an organisation. The examples of KRA are profitability, market standing, innovation etc.

4. Setting Subordinate Objectives or Targets:

The objectives of each subordinate or individual are fixed. It is preferable to fix the objectives at lower level in quantitative units. There should be a free and frank discussion between the superior and his subordinates. Subordinates are induced to set standards themselves by giving an opportunity.

If subordinates are allowed to do so, they may set high standards and the chances of their accomplishment are higher. In this way, the objectives or targets of the subordinates are fixed.

5. Matching Resources with Objective:

The objectives are framed on the basis of availability of resources. If certain resources (technical personnel or scarce raw material) are not adequately available, the objectives of an organisation are changed accordingly. So, there is a need for matching resources with objectives. Next, the available resources should be properly allocated and utilized.

6. Periodical Review Meetings:

The superior and subordinates should hold meetings periodically in which they discuss the progress in the accomplishment of objectives. The fixed standards may be changed in the light of progress. But the basic conditions do not change. The periodical review meeting is held during the period set for achieving the objectives.

7. Appraisal of Activities:

At the end of the fixed period for achieving the objectives, there should be a discussion between the superior and subordinates. The discussion is related with subordinates’ performance against the specified standards. The superior should take corrective action.

According to Earl P.Strong, “Only by bringing company objectives down from long range to short range, from company level to individual position level, from pre-performance to post-performance and by penalizing for failure and rewarding for success can the effective programme of managing by objectives be accomplished.”

The superior should identify the reasons for failure of achieving objectives. The problems faced by the subordinates should be identified and steps should be taken to tackle such problems.

8. Reappraisal of Objectives:

An organisation is living in a dynamic world. There are a lot of changes within short period. The survival and growth of a modern business organisation largely depends upon putting up with the changing conditions. So, the top management executive should review the organisation’s objectives to frame the objectives according to the changing situation.

According to Newman, Summer and Wanen, “Every manager must frequently reappraise the emphasis he gives to his various objectives. The job is like that of a captain of a large ship who is continually changing his speed and direction in relation to his present position, tides, winds mid other conditions.”

Management by Objectives (MBO)  – Top 2 Approaches: Top-Down and Bottom-Up Approaches

There are two approaches to MBO:

1. Top-down Approach

2. Bottom-up Approach

1. Top-Down Approach:

Objectives are framed by top executives and communicated to lower levels for their suggestions. Superiors arid sub-ordinates together review the suggestions and arrive at mutually accepted goals. Thus, each superior frames the objectives by inviting suggestions from sub-ordinates, assesses them and finally frames the objectives for each level of the organizational hierarchy. The objectives, in this approach, are set by top management though sub­ordinates are actively involved in the goal-setting process.

For example, top managers of the marketing department frame the objective to increase the sale by say, 80,000 units. This goal will be set by the marketing manager in consultation with regional sales managers.

Each of the four regional managers agree to increase sales in their regions (Northern, Eastern, Southern and Western) by 20,000 units each, in consultation with district sales managers. This process continues till the goals are set for each unit at different organizational levels (in this case, at the functional level, regional level and district level).

2. Bottom-Up Approach:

The individuals frame their objectives, send them to the superiors for their approval, I modification and acceptance. After making necessary changes, the superiors send them up to their superiors for approval. The process continues till the top management approves these objectives. These are, then, communicated to the departmental managers who set goals for their respective departments.

In this approach, goals are proposed at the lower level (operating goals) by the operating / lower-level managers on the basis of their capabilities and skills. Based on these goals, goals are developed at the tactical level and then at the strategic level. Though the goal-setting process starts at the lower level, it is in tune with the guidelines framed by top managers at the strategic level.

Thus, the top-down approach starts with laying objectives at the top level and their acceptance by sub-ordinates at lower levels and the bottom-up approach starts with laying objectives by the individuals at lower levels and their acceptance by the top level executives. Both these approaches are complementary to each other and can be adopted depending on nature of the organisation, nature of employees and size of the organization.

Management by Objectives (MBO) – Assumptions, Concepts and Techniques


1. People perform better when they know what is expected and can establish a relationship between individual and organisational goals.

2. People want to participate in the determination of goals.

3. People need to know how they are doing.

4. People need recognition, opportunities or growth, and a sense of achieve-ment in their work.


1. Let people know what is expected of them.

2. Allow employees to participate in setting goals.

3. Tell people how they are doing.

4. Offer reward on the basis of accomplishment.


1. Develop scientific, measurable goals at all organisational levels.

2. Involve employees in determining the standards of performance.

3. Provide periodic appraisal of performance.

4. Offer reward on the basis of results.

Management by Objectives (MBO) – Prerequisites of a Successful MBO

The MBO process seems apparently simple but to practice it requires great analytical skill and clarity of purpose on the part of the management. MBO is not a managerial technique which can simply be introduced at a moment’s notice. MBO involves people who have their own fixed ideas, attitudes, values and perception which can make the MBO implementation a very complex affair.

The prerequisites of a successful MBO are:

1. Evaluation

2. Preparation

3. Top management support

4. Time horizon

5. Proper entry point.

1. Evaluation:

The first step is to evaluate what you expect from MBO. The most commonly made mistake is that MBO is visualized either very narrowly as a just another appraisal system or as merely another way of tackling the problem of writing job descriptions or it is visualized as a solution to all problems. This leads to unrealistic expectation from MBO.

To avoid this, it is best, first of all, to evaluate the existing organisational performance, culture, management style, systems of planning, controlling and monitoring and then decide upon the specific needs which can be fulfilled by MBO. It must be remembered that MBO is a powerful tool which can be used for improving the entire organisational performance, provided there is clarity about the expected results.

2. Preparation:

The next step is to prepare the people for accepting MBO. Human nature always resists change. The best way to overcome this resistance is to disseminate maximum information about MBO and educate the concerned key people about its expected benefits. If possible, all the managers should be given a formal training exposure to MBO. This stage of preparation is very critical as MBO can be successful only if people willingly accept and practice it.

3. Top Management Support:

For MBO to be successfully implemented it is important that it has the full backing and support of the top management. In the process of implementation, there may be some redefining of objectives which in turn may lead to jobs being redefined, restructured or even totally scrapped in some cases.

This is bound to lead to conflicts and friction and top management intervention may often be required to soothe disturbed emotions and find practical solutions. Top management needs to exhibit great patience, understanding, and perseverance to see the MBO through its teething stage.

4. Time Horizon:

MBO means change which implies upheaval and disturbances. Just as some people can accept and adapt to change quicker than others; similarly one organisation’s adaptability to change is different from that of another. Depending on its personality and attitude towards change (whether it is resistant or highly flexible) each organisation has to decide upon the rate of change which it can withstand.

How quickly is MBO to be introduced and implemented in the organisation? In phases or at one go? In certain departments or in all departments simultaneously? These are the issues best decided on evaluation of specific characteristics. There can be no hard and fast rule except that sufficient time should be allowed to give MBO a fair trial.

5. Entry Point:

If MBO is being introduced in phases, then the best point for beginning its implementation is the top management level. But the top management must really be serious about it and not merely profess to practice without actually doing so. Starting at the top has the advantages of setting an example for the rest of the people arid the relatively small number of people involved.

Management by Objectives (MBO) – Benefits and Disadvantages

MBO helps in implementing goal oriented management. It can be applied in various areas of organisation such as performance appraisal, organisational development, long range planning, and integration of individual and organisational objectives and so on.

Benefits of MBO can be stated as follows:

1. Better Management:

MBO results in improved and better managing. Better managing requires setting goals for each and every activity and individual and ensuring that these are achieved. MBO not only helps in setting objectives but also ensures balancing of objectives and resources. For establishing objectives there is a need for better and result oriented planning.

Management by objectives forces managers to think about planning for results, rather than merely planning activities or work. Managers will devise ways and means for achieving objectives. The objectives also act as controls and performance standards. So MBO is helpful in improving management.

2. Clarifying Organisation:

MBO helps in clarifying organisational roles and structures. Responsibility and authority are assigned as per the requirements of the tasks assigned. There is no use of fixing objectives without delegating requisite authority. The positions should be built around the key results expected of people occupying them. Implementation of MBO will help in spotting the deficiencies in the organisation.

3. Encouraging Personal Commitment:

The main benefit of MBO is that it encourages personnel to commit themselves for the achievement of specified objectives. In a normal course people are just doing the work assigned to them. They follow the instructions given by the superiors and undertake their work as a routine matter. In MBO the purpose of every person is clearly defined with his or her own consent.

People in the organisation have an opportunity to put their own ideas before superiors, discuss the pros and cons of various suggestions and participate in setting the final objectives. When a person is a party for setting objectives then he will make honest endeavour to achieve them. He will feel committed to reach the goals decided with his consent. A feeling of commitment brings enthusiasm and helps in reaching the goals.

4. Developing Controls:

MBO mechanism helps in devising effective controls. The need for setting controls is the setting of standards and then finding out deviations if any. In MBO, verifiable goals are set and the actual performance will help in finding out the deficiencies in results. Every person is clear about what is expected from him and these standards act as clear cut controls. So controls can easily be devised when MBO is followed.

5. Improves Communication:

The subordinates are associated for setting the objectives for future. There is a proper interaction between the superior and the subordinate while deciding about the objectives. A subordinate can talk to the superior whenever there is a need for guidance or clarification. The process in MBO improves communication among employees and it helps in improving their performance.

6. Improves Efficiency:

MBO helps in improving efficiency of workers. The workers are associated for setting their objectives and they will try that the set targets are achieved in time. The workers will regularly interact with the superiors regarding the progress of their work; it will help them in identifying the deficiency in their performance. The process of consulting superiors regularly will help in improving the efficiency of workers.

Disadvantages of MBO:

Unfortunately MBO has at least five disadvantages:

1. MBO may distort an organisation by focusing upon the obvious, objective, but not necessarily more important, results that can be easily quantified. When MBO is introduced the performance of individuals on the narrow range of key performance indicators increases in the way indicated by Rogers and Hunter. However, the gains may be at the expense of equally important, less measurable, general activities such as setting a good example, being courteous and contributing to the common good.

Often, these activities are called “corporate citizenship”. A major criticism of MBO is that it decreases corporate citizenship. In a nutshell, when MBO is installed, the specific short-term goals set for individuals can become much more important than the wider organisational goals. MBO focuses upon quantitative results such as the number of machines produced or the number of research papers written. These aspects are easy to measure by counting. The quality of production is much more difficult and subjec­tive. When MBO is introduced workers may increase quantity at the expense of quality.

2. Implementation and operation of MBO absorbs a great deal of managerial effort. Sometimes MBO produces excessive paperwork and managers may spend more time devising criteria, drawing up action plans and preparing for appraisal meetings than actually managing their subordinates.

3. In the longer-term, MBO encourages managers to set lower goals. Initially, participative goal setting may produce positive results, but once managers realise that successive cycles of MBO will result in ever increasing targets, they become wise and manoeuvre to set themselves goals that can be achieved more easily.

4. MBO might work in countries such as the UK, USA, Netherlands and Australia where there is a high work ethic and where people are accustomed to working towards goals in an independent way. However, there is doubt whether it works in other cultures that have different values.

5. Finally, MBO does not work well in situations where rapid change is the norm. Management by Objectives was developed in the 1950s when the business environ­ment and technology changed less quickly. In those days organisations and their managers had time to prepare documentation, devise targets and review performance. Nowadays a dramatic, overnight change can make such plans obsolete.

Management by Objectives(MBO) – MBO in India

MBO was introduced in India in the early seventies. It has followed the British model, rather than the American one and consequently there is greater emphasis on corporate planning and control. By now more than fifty companies of different sizes and backgrounds, and belonging to different industries have experimented with MBO Not all have been successful, but the number of successes is larger than those of failures. MBO has been adopted in private as well as public sector companies and also in state government organizations.

The Indian company with the longest history of practicing MBO is Madura Coats. Since 1971, MBO has become an established way of management in this company. Managers meet almost every other day for objective setting and reviewing. The managing director and MBO consultants meet every month to review the various aspects of MBO. The success at Madura Coats proves the fact that top management commitment is the most critical factor for success.

In contrast to Madura Coats, which is more than a 100 years old, Bharat Bijlee is a relatively young company engaged in manufacturing and marketing various kinds of motors and lifts. MBO was initiated in 1974 with the selection of ten key result areas for improving effectiveness. These key result areas were profitability, expansion, diversification, manager development, organisation development, cost effectiveness, employee relations, plant modernization, material availability and public relations.

Specific objectives were set in each key result area with emphasis on role clarity. This was achieved by defining objectives for twenty senior managers in a simultaneous process thus ensuring integration and intermeshing of objectives.

The experience with Hindustan Copper Limited (HCL) proves that MBO can work well in a large public sector undertaking. The experience of HCL proves that MBO can become institutionalized and continue despite changes in the top management team. MBO was started in 1974 and restricted only to defining corporate objectives and covering one part of the organisation.

MBO is applicable not only to business firms but to other kinds of non-commercial organisations too. MBO has been successfully implemented in state government organisations such as the Tamil Nadu Dairy Development Corporation, Department of Stationery and Printing and Directorate of Industries and Commerce amongst others. Besides Tamil Nadu, Gujarat is the other state which has enthusiastically adopted MBO. To begin with, the Commissionerate of Industries and the Gujarat Industrial Development Corporation were selected for the MBO programme.

Some of the other companies which have successfully implemented MBO are Bharat Heavy Electricals Limited, Grindlays Bank, Blue Star, Shaw Wallace, and Glaxo Limited.

There have been cases where MBO has totally failed.

The most commonly encountered reasons for the failure of MBO are:

1. Lack of top management support and commitment

2. Lack of or inadequate planning and preparation

3. Lack of information and education

4. Very short time horizon

5. Overemphasis on appraisal

6. Poor understanding of the role of M BO and

7. Lack of clear-cut policy towards MBO.

By avoiding the above mentioned pitfalls it can be ensured that MBO is successfully implemented.