Management by objectives, Contemporary Management Video Lecture | Contemporary Management - B Com

counterpoint management by objectives
you have to reduce costs by 10% this
quarter I'm sorry sir but I don't want
excuses I want results but sir how will
I figure it out as top management we
like to be in control how does one
exercise control in a complex
environment with dependencies and
uncertainties a good way seems to be to
establish targets for immediate
subordinates assign responsibilities and
measure the results after a defined
period this way the larger objective is
broken down into individual targets and
passed down from level to level this is
management by objectives management by
objectives is widely used because we can
pinpoint clear and measurable
accountability as well as evaluate
performance but you must have
experienced that management by
objectives is limited in its approach
and can be the hidden source of many
organizational issues and conflicts
let's take a look at the situation we
have here a certain company has multiple
sk use manufactured across plants they
implemented an operational improvement
program in all the plants the result
output increased by 25% and on-time
performance touched the high 90s however
in one month and quite unexpectedly on
time in full performance dropped in a
few plants and the overall dispatch is
decreased but how did that happen let's
step back a little as part of the
operational improvement program the sk
use within an order was scheduled to
ensure the plants will level loaded this
ensured good utilization of capacity
with improved dispatches for the company
as a whole at the same time the
Operations Director had seen a
significant increase in absolute
logistics costs as against the budget he
wanted to bring it down and issued a
directive to reduce the costs logically
they sought to improve the modules
however this decision actually reduced
dispatches and delivery performance for
the company as a whole
here's why when the Operations Director
gave the new instruction the schedulers
took the easiest way out and went back
to placing complete orders in only one
plant instead of spreading them across
units consequently the dispatches could
not be made in Thailand
and the savings on freight costs turned
out to be a small fraction of what the
company lost out on in dispatches this
occurrence is not an uncommon one in any
organization business variables are
interconnected the impact of one
variable on another is spaced out in
time and location as top management you
are in a unique position to view the
inherent connections among various
sections view the ramifications that
decisions of one can have on another
something that your managers are not in
a position to do as the objectives are
passed down the levels the managers
ability to exercise control and take
informed decisions is reduced
thus he may take decisions that help him
achieve his target but have
ramifications on other sections which he
might be unaware of so it is important
to specify not just what is to be
achieved but also how it is to be
achieved
for any change to be implemented the
following questions need to be answered
and a buy-in from all interconnected
departments needs to be sought one what
is the problem - what is the objective
outcome one wants to achieve by solving
the problem three what are the tactical
steps required to achieve the objective
four
why do we claim that these tactical
steps will lead to the stated objective
without causing negative ramifications
on any other key business outcomes
answering these four questions will help
us do the following one uncover the
inherent interdependencies between
sections to foresee the ramifications
that actions of one section might have
on another three devise a tactically
sound solution that is foolproof
and sustainable for ensure a consensus
and thus a smooth implementation across
stakeholders
this method is called management through
tactical steps that's all for now until
next time good luck