TOPIC:

MANAGEMENT BY OBJECTIVES (MBO)

OF PETER DRUCKER

Lecturer: Nguyễn Khánh Huy

Student group: 1. Vũ Thùy Linh
2. Nguyễn Hà Tiên
3. Lương Thúy Hiền
4. Nguyễn Bảo Ngọc
5. Nguyễn Phương Anh

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 TABLE OF CONTENTS

I. Theory of Management by Objectives

1. Definition

2. Three basic principles of Management by Objectives

3. The benefits and limitations of Management by Objectives

II. The basic operating model of Management by Objectives

III. The example of Management by Objectives

1. Examples of the MBO model in a global overview

2. Examples of the MBO model about overview and

enterprise in Vietnam

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I. Theory of Management by Objectives
1. Definition
 MBO is a management approach that focuses on setting
common goals for the organization and individuals, and then
monitoring and evaluating performance based on the
achievement of those goals. Besides that it is also an effective
management approach, however, it needs to be applied
appropriately to each organization and individual. And it
includes 5 elements:
- Objectives: The overall objectives of the organization and
the individual objectives of each employee.
- Action plan: A specific plan for achieving the objectives.
- Progress monitoring: Tracking and monitoring the progress
of the objectives.
- Performance evaluation: Evaluating the level of
achievement of the objectives and providing feedback.
- Reward: Rewarding individuals who achieve their goals.

2. Three basic principles of Management by Objectives

- Goal setting: Goals need to be specific, measurable,
achievable, relevant, and time-bound.
- Employee participation: Employees need to be involved in
the goal-setting process so that they are committed to
achieving them.

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 - Appraisal and feedback: Progress needs to be monitored
and results evaluated to provide timely feedback to
employees.

3. Benefits and Limitations of Management by Objectives

 Benefits:
- Increased efficiency: MBO helps focus employee efforts on
achieving common goals.Improved communication: MBO
- helps to improve communication between management and
employees.
- Increased motivation: MBO helps to motivate employees to
achieve their goals.
- Skill development: MBO helps employees develop
planning, organizing, and evaluating skills.
 Limitations:
- Time: MBO can be time-consuming to set up and
implement.
- Complexity: MBO can be complex for large organizations
or organizations with many departments.
- Lack of flexibility: MBO can be inflexible to adapt to
changes in the business environment

II. The basic operating model of Management by Objectives

1. Determine organization goal

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 - MBO sets goals based on the overall objectives (which are
important and comprehensive goals). In addition to the
organization's long-term goals such as vision, mission, and
development strategy, the goals set by supervisors are
temporary, based on observation and evaluation of what the
company can and needs to achieve within a certain period.
Particularly, the set goals need to be SMART (Specific,
Measurable, Achievable, Relevant, and Time-bound).
2. Determine the employees’ objectives
- After employees receive a summary of the plans, strategies,
and general objectives to aim for, managers can begin
working with their subordinates to establish individual
goals for each position. This is seen as a conversation,
sharing what they can accomplish within a specific
timeframe with the available resources, while also
providing input on feasible goals for the organization or
department.
3. Monitoring progress and performance
- To implement the organization's general development
goals, each individual must first excel in their own tasks.
That's why closely monitoring the progress, results of task
execution, and employee progress is crucial. To closely
monitor the progress of each job-related goal attached to
each staff member, managers can use various task
management tools to support task lists, progress tracking,
and quality assessment.

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4. Performance evaluation
- The MBO method helps to periodically evaluate the activities of the
organization, ensuring the involvement of all relevant management levels.
The performance evaluation process is also conducted transparently, based
on the MBO process. Additionally, regardless of whether the evaluation
results are positive or negative, measures need to be taken to motivate
employees to foster passion, effort, and set higher demands for the
established goals.
- Here are the steps involved in evaluating performance:

+ Identifying Evaluation Criteria: Determine specific criteria to evaluate

the performance of individuals or work teams.

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 + Assessing the Work Execution Process: Review how the work is being
carried out, ensuring adherence to the MBO process.
+ Comparing Results: Compare actual results with the goals set during
the MBO planning process.
+ Identifying Critical Challenges: Identify and analyze the difficulties
and obstacles encountered during the work execution process.
+ Providing Feedback and Adjustments: Based on the evaluation results,
provide feedback to individuals or work teams and adjust plans and goals for the
next phase.

5. Providing feedback
In the goal-oriented management approach, the most crucial step is
continuous feedback on results and objectives, as it helps employees
identify their strengths and weaknesses to adjust their work plans

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 accordingly. It is not advisable to wait until the end of the evaluation
period to provide feedback on results. It is necessary to regularly monitor
employees' progress to promptly detect issues and provide solutions.

6. Performance appraisal
The entire process of implementing MBO will be summarized and
reviewed to acknowledge contributions and reward outstanding personnel.
Not only does this encourage outstanding individuals, but this step also
serves as motivation for all employees to strive for the next set of goals,
leveraging their strengths to support the organization's overall objectives.

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III. The example of Management by Objectives
1. Examples of the MBO model in a global overview.
* Sales Department MBO:

 Goal Setting: The sales director sets a clear objective for

the team to increase sales by 20% over the next quarter.
 Action Plans: Each salesperson is tasked with
developing their own strategies to contribute to this goal,
such as acquiring 10 new clients or increasing sales to
existing clients by 15%.
 Review: Progress is monitored monthly through
meetings where salespeople present their results and
discuss challenges.
 Evaluation: At the end of the quarter, the sales team
reviews whether the overall 20% increase was achieved
and individual contributions are assessed.

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*Customer Service Department MBO:

 Goal Setting: The objective is to reduce customer complaint resolution

times by 25% within six months.
 Action Plans: Customer service representatives are given the authority to
resolve certain issues without escalation. They also receive additional
training to handle complaints more efficiently.
 Review: Weekly reviews are conducted to assess the average resolution
times and discuss improvements.
 Evaluation: After six months, the department checks if the resolution
time has been reduced by the target 25%.

2. Examples of the MBO model about enterprises in Vietnam.

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 1. Vinhomes

Vinhomes, a leading company in Vietnam’s real estate sector, uses MBO to

manage projects and develop products.

The application of the Management by Objectives (MBO) model at Vinhomes

can be analyzed through a structured approach that encompasses the
determination of organizational goals, setting employee objectives, monitoring
progress and performance, evaluating performance, providing feedback, and
conducting performance appraisals.

1. Determine Organization Goal

At Vinhomes, the MBO process begins with the clear definition of the
organization’s goals. These are strategically set to align with the company’s
mission and vision, focusing on growth, market leadership, and delivering high-
quality real estate projects. The goals are comprehensive, covering various

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aspects such as sales targets, customer satisfaction, innovation in construction,
and sustainable development.

2. Determine the Employees’ Objectives

Objectives for employees are SMART (Specific, Measurable, Achievable,

Relevant, and Time-bound), ensuring clarity and feasibility. This process fosters
a sense of ownership and responsibility among employees towards their tasks
and the organization’s success.

3. Monitoring Progress and Performance

Monitoring is a continuous process at Vinhomes, where the progress and

performance of each employee and department against their set objectives are
regularly tracked. This is facilitated by the use of performance management
systems that allow for real-time monitoring and reporting. Such systems enable
managers to identify any deviations from the plan early on and take corrective
actions as necessary.

4. Performance Evaluation

The performance evaluation at Vinhomes is a systematic process conducted

periodically to assess how well employees have achieved their objectives. This
evaluation considers both the outcomes and the processes used to achieve these
outcomes. It’s an opportunity to review achievements, challenges faced, and the
learning points from the set period.

5. Providing Feedback

Feedback is a critical component of the MBO process at Vinhomes, provided

regularly and constructively. It focuses on both the strengths and areas for
improvement, with the aim of helping employees grow and perform better.

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Feedback sessions are conducted in a manner that encourages open dialogue,
allowing employees to share their perspectives and suggestions for
improvements.

6. Performance Appraisal

The performance appraisal at Vinhomes is the culminating step of the MBO

process, where employees are formally evaluated on their performance over a
specific period. This appraisal is based on the predefined objectives and the
extent to which they have been met. The outcomes of the appraisal are used to
make decisions on promotions, bonuses, training needs, and other HR-related
actions. It’s also an opportunity to set objectives for the next period, continuing
the MBO cycle.

2. Vietcombank

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Vietcombank, one of Vietnam’s largest and most prestigious banking
institutions, employs the Management by Objectives (MBO) model as a strategic
framework to enhance its operational efficiency and achieve its corporate goals.

1. Determine Organization Goal

Vietcombank initiates the MBO process by setting clear and measurable

organizational goals. These goals are aligned with the bank’s vision of becoming
the top bank in Vietnam and a significant player in the Southeast Asian banking
sector. Objectives include financial performance targets, customer service
excellence, innovation in banking services, and expansion of the bank’s presence
both domestically and internationally. These overarching goals provide a
direction for the entire organization’s efforts and strategies.

2. Determine the Employees’ Objectives

Following the establishment of organizational goals, Vietcombank cascades

these down to set specific, measurable, achievable, relevant, and time-bound
(SMART) objectives for each employee.

3. Monitoring Progress and Performance

Vietcombank employs a rigorous process to monitor the ongoing progress and

performance of its employees against their set objectives. This involves regular
check-ins, the use of performance tracking software, and the analysis of key
performance indicators (KPIs). This continuous monitoring enables both the
management and employees to identify any potential roadblocks or areas for
improvement in real-time, ensuring that corrective measures can be taken
promptly to stay on course.

4. Performance Evaluation

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The performance evaluation at Vietcombank is a structured process that occurs at
regular intervals, typically annually. During this evaluation, employees are
assessed based on their achievements in relation to their objectives. The
evaluation process is comprehensive, taking into account both quantitative
targets and qualitative factors, such as customer feedback and teamwork, to
gauge an employee’s overall contribution to the bank’s goals.

5. Providing Feedback

Feedback is an integral part of the MBO cycle at Vietcombank, provided

continuously throughout the year and especially during the performance
evaluation phase. Feedback sessions are designed to be constructive, offering
both praise for achievements and guidance on areas where improvements are
needed. This feedback mechanism ensures that employees have clear insights
into their performance and understand how they can further contribute to the
bank’s success.

6. Performance Appraisal

The final step in the MBO process at Vietcombank is the performance appraisal.
This formal assessment concludes the cycle by comprehensively reviewing an
employee’s performance against their objectives. The appraisal outcomes
influence decisions related to promotions, bonuses, salary adjustments, and
professional development opportunities. Additionally, the performance appraisal
serves as a foundational step for setting new or adjusted objectives for the
upcoming period, thus perpetuating the MBO cycle.

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