Important Notes

Up-to chap-6
The purpose of these notes is to read along with the
guidance of textbook as these notes are taken from
other books and journals.
 Management by Objective
MBO (Peter Drucker 1954)
• A comprehensive
managerial system that
integrates many key
managerial activities in
a systematic manner
and is consiciously
directed toward the
effective and efficient
achievement of
individual objective
 Management by Objective
MBO (Peter Drucker 1954)

• It is a control tool
• It is motivational tool
• It is used to appraise people
• It is the tool of EMPOWERMENT
• Link between top management strategic
thinking and strategy implementation
6 Elements of Management by
Objective
1. Commitment to the program
2. Top level goal setting
3. Individual goals
4. Participation
5. Autonomy in implementation of plans
6. Performance review.
• Reward system (subsystem)
 Management by Objective
ADVANTAGES
• Improvement of managing through result oriented planning
• Greater commitment and satisfaction on the part of
subordinates.
• Enforced planning and prioritizing of future activities on the
part of superiors and subordinates
• More rationale method of performance evaluation based on
contribution to organizational objectives
• Individual outshine others by self controlling,personnel
development,and creativity
 Management by Objective
• WEAKNESS:
• The time and paper work involved
• Failure to teach the philosophy of MBO
• Difficulty in setting verifiable goal with
flexibility
• Emphasis on short run goals at the
expense of long term
• Overuse of quantitative goals
• Non-ethical ways adopt to achieve
objectives
 Where to use MBO
• Used in Private,public and non profit-
sector and armed forces.
• Knowledge based enterprises where
staff is competent
• Company’s like intel
Types of plan

Strategy
Determination of the mission and the basic long term
objective of an enterprise followed by adoption of
courses of action and allocation of resources necessary

to achieve them
Strategic Plans vs Operational Plan

STRATEGIC : Look ahead several years or even decades (time horizons)

Wide range of organizational activities (scope)
Look simplistic and generic (Degree of detail)

Deals with the relationship between people at an organization

and people acting at other organization

OPERATIONAL : A Year is often relevant (time horizons)

Narrow and limited scope (scope)
More detail (Degree of detail)

Deals with people within organization

 Hierarchy of Organization Plan

• Mission Statement
• Strategic Plans
• Operational Plan
 Main elements of Strategic
Planning Process
1. Inputs to the organization
2. Industry Analysis (Porter 5 forces)
3. Enterprise Profile,
4. Present and Future External Environment (threats and
opportunity)
5. Internal Environment
6. Development of Alternative Strategies
7. Evaluation and Choice of Strategies
8. Consistency testing
9. Contingency plans
 1
Inputs to the organization(claimants)
People,capital,managerial,technical skills,In addition
Employees wanted higher pay,more benefits,job security

Consumers demands safe and reliable products at reasonable price

Suppliers wants variance that their products are purchased.

Stockholders want only high return on their investment but as security

of the money.

Federal and local governments depends on tax paid by enterprise

Community demands that enterprise be good citizen providing jobs
and emit a minimum of pollutants.

Financial institution/labor union,even competitors have a legitimate for

fair play

It is managerial job to integrate legitimate objective of the claimants

 2

Govt policy,Retaliation by the companies

5 4
3

Supply is dominated by a few suppliers Brand identity

tyre manufacturer/medicines 2

Searching for other products tat

can perform the same function as
the product of the industry.Differentiation
 3 Enterprise Profile,)
Mission (Purpose), Major Objectives, and strategic intent (obsession)

4 External environment :Threats/opportunities

Economic factors,social,political technology competition demographic
factors

5 Internal environment :Weakness/Strength

Management,and organization,operations(R&D,productivity,distribution
customer services)
 TOWS Matrix:RATIONALE

• Mostly companies identify their strength

weaknesses,opportunities and the threats
by using SWOT analysis.

• But what overlooked is that combining

these factors may require distinct strategic
choices.To systematize these choices
TOWS matrix was proposed
 6 TOWS Matrix:

It is a modern tool to analyze the situation of the

company and to develop strategies, tactics and
action for the effective and efficient attainment of
the organizational objectives and mission,

TOWS Matrix has been proposed, where T

stands for threats, O stands for opportunities, W
stands for weaknesses, and S for strengths.
DYNAMICS OF THE TOWS MATRIX
S W
O SO WO
T ST WT

PRESENT+ TI….
S W
O SO WO
T ST WT

PRESENT
S W
O SO WO
T ST WT TIME
PAST
 7 Four Alternative Strategies
1. The WT strategy aims to minimize both
weaknesses and threats(mini-mini). (try to avoid)
2. The WO strategy attempts to minimize the
weaknesses and maximize the opportunities.
(mini-maxi)
3. The ST strategy is based on using the
organization’s strengths to deal with threats in
the environment. (maxi-mini)
4. The SO strategy, which capitalizes on a
company’s strengths to take advantage of
opportunities (maxi-maxi). ((is the most desirable.)
 DECISION MAKING
Process of identifying and selecting a course of
action to solve a specific problem or take an advantage of
opportunity.

The process of sufficiently reducing uncertainty and doubt about

alternatives to allow reasonable choices to be made from among them,
 DECISION MAKING
MAIN ELEMENTS

1. It is a core f planning
2. Time and human relationship
3. Continuum of decision making process
4. It is a non linear recursive process moving back and forth
5. It effects on others dept, division or individual

.
 DECISION MAKING TOOLS

1. Women and children in decision

2. Better analytical techniques/computers
 DECISION MAKING

RATIONLE DECISIION MAKING PROCESS

DEVELOP
1 INVESTIGATE
THE SITUATION
2 ALTERNATIVES

4 3
IMPLEMENT EVLUATE
AND ALTERNATIVES
MONITOR
SELECTING
ALTERNATIVES
 DECISION MAKING
• INVESTIGATE SITUATION
Define Problem. Diagnosis and identification of
objective.

• DEVELOP ALTERNATIVES
Brainstorming ( a technique in which
group/individuals spontaneously proposing
alternatives without considering reality) Considering
the limiting factor that stand critically in the way of
goal
 DECISION MAKING
•EVALUATION OF ALTERNATIVES
Qualitative (relationship,technology,climate) and Quantitative
factor (numerical)
Marginal factor (Revenue > cost profitable. Revenue < cost less
profitable
Cost effectiveness (Ratio of benefit and cost)
SELECTING OF ALTERNATIVES
Experience
Experimentation

Research and analysis

IMPLEMENT AND MONITOR
Budget,Schedule,reports
 MODERN DECISION MAKING

Inverted pyramid

CUSTOMER

INDIVIDUAL

MANAGEMENT

1. Women and children in decision

making
2. Better techniques/computers
3. Decision through committee
 Value of Forecasting

• To compel thinking ahead

• Disclose areas where control is lacking
• Helps coordinates plan
 Premising and Forecasting

Planning premises The Forecast that are translated into

anticipated environment in which future expectancies (cost and
plans are expected to operate. revenue)
(Sales volume,political
Result of planning
environment)
Prerequisite of planning

Fore casting with the Delphi

technique