hrm

1. HRM and Organization Behaviour
Module 2

2. Objectives
• Planning
– Forecasting, Manpower Planning
• Organizing
– Structures, Selection
• Staffing
– Induction, Transfers, Promotions, T&D
• Motivating
– Comp and Ben, Health and Safety, Collective bargaining
• Controlling
– Appraisal, security, Culture and attitude

3. Acquisition Function
• Process of identifying and employing people
possessing required level of skills
– Job Analysis
– HRP
– Recruitment
– Selection

7. Process of selection
Preliminary Interview
Selection tests
Employment Interview
Reference & background
Selection Decision
Medical Examination
Job Offer
Employment Contract
Evaluation

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7–8
Basic Features of Interviews
• An interview
– A procedure designed to obtain information from
a person through oral responses to oral inquiries
• Types of interviews
– Selection interview
– Appraisal interview
– Exit interview
• Interviews formats
– Structured
– Unstructured

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7–9
Types of Interviews
• Selection interview
– A selection procedure designed to predict future job
performance on the basis of applicants’ oral responses to
oral inquiries.
• Appraisal interview
– A discussion, following a performance appraisal, in which
supervisor and employee discuss the employee’s rating
and possible remedial actions.
• Exit interview
– An interview to elicit information about the job or related
matters to the employer some insight into what’s right or
wrong about the firm.

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7–10
Formats of Interviews
• Unstructured or nondirective interview
– An unstructured conversational-style interview in
which the interviewer pursues points of interest
as they come up in response to questions.
• Structured or directive interview
– An interview following a set sequence of
questions.

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7–11
Interview Content: Types of
Questions
• Situational
– A series of job-related questions that focus on
how the candidate would behave in a given
situation.
• Behavioral
– A series of job-related questions that focus on
how they reacted to actual situations in the past.
• Job-related
– A series of job-related questions that focus on
relevant past job-related behaviors.

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7–12
Interview Content: Types of
Questions
• Stress
– An interview in which the interviewer seeks to
make the applicant uncomfortable with
occasionally rude questions that supposedly to
spot sensitive applicants and those with low or
high stress tolerance.
• Puzzle
– Recruiters for technical, finance, and other types
of jobs use questions to pose problems requiring
unique (“out-of-the-box”) solutions to see how
candidates think under pressure.

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7–13
Personal or Individual Interviews
• Unstructured sequential interview
– An interview in which each interviewer forms an
independent opinion after asking different
questions.
• Structured sequential interview
– An interview in which the applicant is interviewed
sequentially by several persons; each rates the
applicant on a standard form.
• Panel interview
– An interview in which a group of interviewers
questions the applicant.

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7–14
Personal or Individual Interviews
• Panel (broad) interview
– An interview in which a group of interviewers
questions the applicant.
• Mass interview
– A panel interviews several candidates
simultaneously.

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7–15
Computerized Interviews
• Computerized selection interview
– An interview in which a job candidate’s oral and/or
computerized replies are obtained in response to
computerized oral, visual, or written questions and/or
situations.
• Characteristics
– Reduces amount of time managers devote to interviewing
unacceptable candidates.
– Applicants are more honest with computers
– Avoids problems of interpersonal interviews
– Mechanical nature of computer-aided interview can leave
an applicant dissatisfied.

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7–16
Factors Affecting Interviews
• First impressions
– The tendency for interviewers to jump to
conclusions—make snap judgments—about
candidates during the first few minutes of the
interview.
– Negative bias: unfavorable information about an
applicant influences interviewers more than does
positive information.

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7–17
Factors Affecting Interviews
(cont’d)
• Misunderstanding the job
– Not knowing precisely what the job entails and
what sort of candidate is best suited causes
interviewers to make decisions based on incorrect
stereotypes of what a good applicant is.
• Candidate-order error
– An error of judgment on the part of the
interviewer due to interviewing one or more very
good or very bad candidates just before the
interview in question.

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7–18
Factors Affecting Interviews
(cont’d)
• Nonverbal behavior and impression
management
– Interviewers’ inferences of the interviewee’s
personality from the way he or she acts in the
interview have a large impact on the interviewer’s
rating of the interviewee.
– Clever interviewees attempt to manage the
impression they present to persuade interviewers
to view them more favorably.

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7–19
Factors Affecting Interviews
(cont’d)
• Effect of personal characteristics:
attractiveness, gender, race
– Interviewers tend have a less favorable view of
candidates who are:
• Physically unattractive
• Female
• Of a different racial background
• Disabled

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7–20
Factors Affecting Interviews
(cont’d)
• Interviewer behaviors affecting interview
outcomes
– Inadvertently telegraphing expected answers.
– Talking so much that applicants have no time to
answer questions.
– Letting the applicant dominate the interview.
– Acting more positively toward a favored (or similar
to the interviewer) applicant.

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7–21
Designing and Conducting the
Interview
• The structured situational interview
– Use either situational questions (preferred) or behavioral
questions that yield high criteria-related validities.
– Step 1: Job Analysis
– Step 2: Rate the Job’s Main Duties
– Step 3: Create Interview Questions
– Step 4: Create Benchmark Answers
– Step 5: Appoint the Interview Panel and Conduct
Interviews

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7–22
How to Conduct an Effective
Interview
• Structure your interview:
1. Base questions on actual job duties.
2. Use job knowledge, situational, or behaviorally oriented questions
and objective criteria to evaluate the interviewee’s responses.
3. Train interviewers.
4. Use the same questions with all candidates.
5. Use descriptive rating scales (excellent, fair, poor) to rate answers.
6. Use multiple interviewers or panel interviews.
7. If possible, use a standardized interview form.
8. Control the interview.
9. Take brief, unobtrusive notes during the interview.

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7–23
How to Conduct an Effective
Interview (cont’d)
• Prepare for the interview
– Secure a private room to minimize interruptions.
– Review the candidate’s application and résumé.
– Review the job specifications
• Establish rapport
– Put the person at ease.
• Ask questions
– Follow your list of questions.
– Don’t ask questions that can be answered yes or no.

24. Development Function
• Process of improving, moulding and changing
the skills, knowledge and ability of an
employee
– Employee Training
– Management Development
– Career Development

25. Advantages of Training and
Development
Increase in Efficiency
Increase in Morale of
Employees
Better Human Relations
Reduced Supervision
Increased Organizational
Viability
and Flexibility.
Training
Basic aim of Training
• Suitable change in the
individual concerned.
• Should be related both in
terms of organization's demand
and that of individual’s.
Various Methods for identifying
Training Needs
• Organizational Analysis.
• Task Analysis.
• Man Analysis.

26. Steps in T and D Process
• Evaluate T&D Programs
• Implement T&D Programs
• Select T&D Methods
• Establish Specific Objectives
• Determine T&D Needs

27. Motivation Function
• Process of integrating people into a work
situation in a way that it encourages them to
perform / deliver to the best of their ability
– Understanding needs
– Designing motivators
– Monitoring

28. Maintenance Function
• Process of providing employees the working
conditions that help maintain their motivation
and commitment to the organisation
– Satisfaction Levels
– Retention

29. Objectives of Performance
Appraisal
• Review the performance of the employees over a given period of
time.
• Judge the gap between the actual and the desired performance.
• Help the management in exercising organizational control.
• Helps to strengthen the relationship and communication between
superior –subordinates and management –employees.
• Diagnose the strengths and weaknesses of the individuals so as to
identify the training and development needs for the future.
• Provide feedback to the employees regarding their past
performance.

30. Steps in Performance Review

31. Objectives of Comp & Ben
• It tries to give proper refund to the employees for their contributions to
the organization.
• It discovers a positive control on the efficiency of employees and
motivates them to perform better and achieve the specific standards.
• It creates a base for happiness and satisfaction of the workforce that limits
the labor turnover and confers a stable organization.
• It enhances the job evaluation process, which in return helps in setting up
more realistic and achievable standards.
• It is designed to abide with the various labor acts and thus does not result
in conflicts between the employee union and the management. This
creates a peaceful relationship between the employer and the employees.
• It excites an environment of morale, efficiency and cooperation among the
workers and ensures satisfaction to the workers.

32. Types and Components
• Types
– Direct
– Indirect
• Components
– Wages and Salaries
– Allowances (RA, DA, TA etc..)
– Incentive and Performance based Pay
– Fringe Benefits

33. Organization behavior
Robbins, Luthans and Internet

34. Hawthorne Experiments

35. Experiments Conducted
• Illumination Experiment
• Relay Assembly Test Experiments
• Relay Assembly Room #2
• Mica Splitting Test Group
• Plant Interview Group
• Bank Wiring Observation Group

36. HAWTHORNE EXPERIMENT
Conducted between 1924-1932
Conducted at WESTERN ELECTRIC
COMPANY, Chicago, USA
Conducted by,
 Elton Mayo
White Head
Roethlisberger

37. Western Electric Company
•Gray and Barton, a telephone industry supply
company founded in 1869 by Elisha Gray and Enos
Barton
•In 1872, the company changed its name to the
Western Electric Manufacturing Company
•In 1881, when the annual sales had already grown
to nearly $1 million, the firm was purchased by the
American Bell Telephone Company, it was renamed
the Western Electric Company and became Bells
manufacturing arm

38. Airplane View of Hawthorne Works.

39. CONCLUSION
•The Hawthorne studies have had a remarkable impact on
management in organizations and how workers react to various
situations.
•The research carried out at the Western Electrics Hawthorne plant
during the 1920’s and early 1930’s helped to initiate a whole new
approach to human behaviour studies.
•The final result was “the organization of teamwork-that is, of
sustained cooperation leads to success”.

40. The Basic Motivation Process
• Motivation is a process that starts with a
physiological or psychological deficiency or
need that activates a behavior or a drive that
is aimed at a goal or incentive.
• It consists of three interacting and
interdependent elements:
– Needs
– Drives
– Incentives

41. Primary Motives
• Criteria for a motive to be included in the
primary classification:
– It must be unlearned.
– It must be physiologically based.
• The most commonly recognized primary
motives include hunger, thirst, sleep,
avoidance of pain, sex, and maternal concern.

42. Table 6.1 - Examples of Key
Secondary Needs
Source: Adapted from Gary Yukl, Skills for Managers and Leaders, Prentice Hall, Upper Saddle River, N.J., 1990, p 41. The examples of need for status were not
covered by Yukl.

43. Intrinsic versus Extrinsic Motives
• Extrinsic motivators:
– Are tangible and visible to others.
– Include pay, benefits, and promotions.
– Include the drive to avoid punishment, such as
termination or being transferred.
– Are usually contingency based.

44. Intrinsic versus Extrinsic Motives
(Continued)
– Are necessary to attract people into the
organization and to keep them on the job.
– Are often used to inspire workers to achieve at
higher levels or to reach new goals, as additional
payoffs are contingent on improved
performance.
– They do not explain every motivated effort made
by an individual employee.

45. • Intrinsic motivators
– Are internally generated.
– Include feelings of responsibility, achievement,
and accomplishment.
Intrinsic versus Extrinsic Motives
(Continued)

46. Figure 6.2 - The Theoretical
Development of Work Motivation

47. Maslow’s Hierarchy of Needs
There is a hierarchy of five needs. As each need is substantially
satisfied, the next need becomes dominant.
Assumptions
– Individuals cannot
move to the next
higher level until all
needs at the
current (lower)
level are satisfied
– Must move in
hierarchical order
7-47
Self-Actualization
Esteem
Social
Safety
Physiological
Lower Order
External
Higher Order
Internal

48. Maslow’s Hierarchy of Needs
A Hierarchy of
Work Motivation

49. McGregor’s Theory X and Theory Y
• Two distinct views of human beings: Theory X (basically
negative) and Theory Y (positive).
– Managers used a set of assumptions based on their view
– The assumptions molded their behavior toward employees
• No empirical evidence to support this theory.
Theory X
• Workers have little
ambition
• Dislike work
• Avoid responsibility
Theory Y
• Workers are self-
directed
• Enjoy work
• Accept responsibility
7-49

50. Herzberg’s Two-Factor Theory
Hygiene
Factors
Motivators
Achievement
Responsibility
Growth
Work
Conditions
Salary
Company
Policies
7-50
Key Point: Satisfaction and dissatisfaction are not opposites
but separate constructs
Extrinsic and
Related to
Dissatisfaction
Intrinsic and
Related to
Satisfaction

51. Herzberg’s Two-Factor Theory

52. Critical Analysis of Herzberg’s
Theory
• Contributions:
– The job design technique of job enrichment.
– Extended Maslow’s needs hierarchy concept to
make it more applicable to work motivation.
– Drew attention to the importance of job content
factors in work motivation.

53. Criticisms of the Two-Factor Theory
Herzberg says that hygiene factors must be met to remove
dissatisfaction. If motivators are given, then satisfaction
can occur.
•Herzberg is limited by his methodology
– Participants had self-serving bias
•Reliability of raters questioned
– Bias or errors of observation
•No overall measure of satisfaction was used
•Herzberg assumed, but didn’t research, a strong
relationship between satisfaction and productivity
7-53

54. McClelland’s Three Needs Theory
• Need for Achievement (nAch)
– The drive to excel, to achieve in relation to a set of
standards, to strive to succeed
• Need for Power (nPow)
– The need to make others behave in a way that they would
not have behaved otherwise
• Need for Affiliation (nAff)
– The desire for friendly and close interpersonal
relationships
• People have varying levels of each of the three needs.
– Hard to measure
7-54

55. Performance Predictions for High-nAch
People
• People with a high need for achievement are likely to:
– Prefer to undertake activities with a 50/50 chance of
success, avoiding very low- or high-risk situations
– Be motivated in jobs that offer high degree of personal
responsibility, feedback, and moderate risk
– Not necessarily make good managers – too personal a
focus. Most good general managers are NOT high on nAch
– Need high level of nPow and low nAff for managerial
success
• Good research support, but it is not a very practical theory
7-55

56. A Model of Stress

57. What do you see??

58. Potential Sources of Stress
• Environmental Factors
– Economic uncertainties due to changes in the business cycle
– Change in business priorities due to changes in the political scenario
– Threat to manpower requirement due to technological
changes/innovation
• Organizational Factors
– Task demands related to the job
– Role demands of functioning in an organization
– Interpersonal demands created by other employees
• Personal Factors
– Family and personal relationships
– Economic problems from exceeding earning capacity
– Personality problems arising from basic disposition

59. Consequences of Stress
• Stressors are additive: high levels of stress can lead to the following
symptoms
– Physiological
• High blood pressure, headaches, stroke
– Psychological
• Dissatisfaction, tension, anxiety, irritability, boredom, and
procrastination
• Greatest when roles are unclear in the presence of conflicting
demands
– Behavioral
• Changes in job behaviors, increased smoking or drinking, different
eating habits, rapid speech, fidgeting, sleep disorders

60. Not All Stress Is Bad: The Proposed Inverted-U
Relationship Between Stress and Job Performance
Note: This model is not empirically supported
• Not all stress is bad: some level of stress can increase
productivity
• Too little or too much stress will reduce performance

61. Managing Stress
• Individual Approaches
– Implementing time management
– Increasing physical exercise
– Relaxation training
– Expanding social support network
• Organizational Approaches
– Improved personnel selection and job placement
– Training
– Use of realistic goal setting
– Redesigning jobs
– Increased employee involvement
– Improved organizational communication
– Offering employee sabbaticals
– Establishment of corporate wellness programs

62. Global Implications
• Organizational Change
– Cultures vary in terms of beliefs in their ability to implement
change
– A culture’s time orientation (long-term/short term) will affect
implementation of change
– Reliance on tradition can increase resistance to change
– Power distance can affect how change is implemented in a culture
– Idea champions act differently in different cultures
• Stress
– Job conditions that cause stress vary across cultures
– Evidence suggests that stress is equally bad for employees of all
cultures
– Having friends and family can reduce stress

63. Profiles of Type A and Type B
Personalities

64. Conflict Defined
• A process that begins when one party perceives that another
party has negatively affected, or is about to negatively affect,
something that the first party cares about
– That point in an ongoing activity when an interaction
“crosses over” to become an interparty conflict
• Encompasses a wide range of conflicts that people experience
in organizations
– Incompatibility of goals
– Differences over interpretations of facts
– Disagreements based on behavioral expectations

65. Transitions in Conflict Thought
• Traditional View of Conflict
– The belief that all conflict is harmful and must be avoided
– Prevalent view in the 1930s-1940s
• Conflict resulted from:
– Poor communication
– Lack of openness
– Failure to respond to employee needs

66. Continued Transitions in Conflict
Thought
• Resolution Focused View of Conflict
– The belief that conflict is a natural and inevitable outcome
in any group
– Focuses on productive conflict resolution
• Interactionist View of Conflict
– The belief that conflict is not only a positive force in a
group but that it is absolutely necessary for a group to
perform effectively
– Current view
14-66

67. Forms of Interactionist Conflict
Functional Conflict
• Conflict that supports the
goals of the group and
improves its performance
Dysfunctional
Conflict
• Conflict that hinders
group performance

68. Types of Interactionist Conflict
• Task Conflict
– Conflicts over content and goals of the work
– Low-to-moderate levels of this type are
FUNCTIONAL
• Relationship Conflict
– Conflict based on interpersonal relationships
– Almost always DYSFUNCTIONAL
• Process Conflict
– Conflict over how work gets done
– Low levels of this type are FUNCTIONAL

69. The Conflict Process
• We will focus on each step in a moment…
14-69

70. Stage I: Potential Opposition or
Incompatibility
• Communication
– Semantic difficulties, misunderstandings, over communication
and “noise”
• Structure
– Size and specialization of jobs
– Jurisdictional clarity/ambiguity
– Member/goal incompatibility
– Leadership styles (close or participative)
– Reward systems (win-lose)
– Dependence/interdependence of groups
• Personal Variables
– Differing individual value systems
– Personality types

71. Stage II: Cognition and
Personalization
• Important stage for two reasons:
1. Conflict is defined
• Perceived Conflict
– Awareness by one or more parties of the existence of
conditions that create opportunities for conflict to arise
2. Emotions are expressed that have a strong
impact on the eventual outcome
• Felt Conflict
– Emotional involvement in a conflict creating anxiety,
tenseness, frustration, or hostility

72. Stage III: Intentions
• Intentions
– Decisions to act in a given way
– Note: behavior does not always accurately reflect intent
• Dimensions of conflict-handling intentions:
– Cooperativeness
• Attempting to satisfy
the other party’s
concerns
– Assertiveness
• Attempting to satisfy
one’s own concerns
Source: K. Thomas, “Conflict and Negotiation Processes in Organizations,” in M.D. Dunnette and L.M. Hough (eds.), Handbook of Industrial and
Organizational Psychology, 2nd ed., vol. 3 (Palo Alto, CA: Consulting Psychologists Press, 1992), p. 668. Arrows added. Used with permission.

73. Stage IV: Behavior
• Conflict Management
– The use of resolution and stimulation techniques
to achieve the desired level of conflict
• Conflict-Intensity Continuum
14-73
Source: Based on S.P. Robbins, Managing Organizational Conflict: A Nontraditional Approach (Upper Saddle River, NJ: Prentice Hall, 1974), pp. 93–
97; and F. Glasi, “The Process of Conflict Escalation and the Roles of Third Parties,” in G.B.J. Bomers and R. Peterson (eds.), Conflict Management
and Industrial Relations (Boston: Kluwer-Nijhoff, 1982), pp. 119–40.

74. Conflict Management Techniques
 Conflict Resolution
Techniques
– Problem solving
– Superordinate goals
– Expansion of resources
– Avoidance
– Smoothing
– Compromise
– Authoritative command
– Altering the human
variable
– Altering the structural
variables
 Conflict Stimulation
Techniques
– Bringing in outsiders
– Communication
– Restructuring the
organization
– Appointing a devil’s
advocate
14-74
Source: Based on S. P. Robbins, Managing Organizational Conflict: A Nontraditional Approach (Upper Saddle River, NJ: Prentice Hall, 1974), pp.
59–89

75. Stage V: Outcomes
• Functional
– Increased group performance
– Improved quality of decisions
– Stimulation of creativity and
innovation
– Encouragement of interest
and curiosity
– Provision of a medium for
problem solving
– Creation of an environment
for self-evaluation and
change
• Dysfunctional
– Development of discontent
– Reduced group effectiveness
– Retarded communication
– Reduced group cohesiveness
– Infighting among group
members overcomes group
goals
• Managing Functional
Conflict
– Reward dissent and punish
conflict avoiders
14-75

76. Negotiation
Negotiation (Bargaining)
– A process in which two or more parties exchange
goods or services and attempt to agree on the
exchange rate for them
• Two General Approaches:
– Distributive Bargaining
• Negotiation that seeks to divide up a fixed amount of
resources; a win-lose situation
– Integrative Bargaining
• Negotiation that seeks one or more settlements that
can create a win-win solution
14-76

77. Distributive versus Integrative
Bargaining
Bargaining Characteristic Distributive
Bargaining
Integrative Bargaining
Goal Get all the pie you can Expand the pie
Motivation Win-Lose Win-Win
Focus Positions Interests
Information Sharing Low High
Duration of Relationships Short-Term Long-Term
Mine
Yours
Mine
Yours
Distributive
Integrative
Source: Based on R. J. Lewicki and J. A. Litterer,
Negotiation (Homewood, IL: Irwin, 1985), p. 280.

78. The Negotiation Process
• BATNA
– The Best Alternative To a
Negotiated Agreement
– The lowest acceptable
value (outcome) to an
individual for a
negotiated agreement

79. Individual Differences in Negotiation Effectiveness
• Personality Traits
– Extroverts and agreeable people are weaker at distributive
negotiation; disagreeable introverts are best
– Intelligence is a weak indicator of effectiveness
• Mood and Emotion
– Ability to show anger helps in distributive bargaining
– Positive moods and emotions help integrative bargaining
• Gender
– Men and women negotiate the same way, but may
experience different outcomes

80. Third-Party Negotiations
• Four Basic Third-Party Roles
– Mediator
• A neutral third party who facilitates a negotiated solution by using
reasoning, persuasion, and suggestions for alternatives
– Arbitrator
• A third party to a negotiation who has the authority to dictate an
agreement.
– Conciliator
• A trusted third party who provides an informal communication link
between the negotiator and the opponent
– Consultant
• An impartial third party, skilled in conflict management, who attempts
to facilitate creative problem solving through communication and
analysis

81. Global Implications
• Conflict and Culture
– Indian and French managers view conflict differently
– Indian managers are more likely to use accommodation and
avoidance while French managers are likely to use competing
tactics.
• Cultural Differences in Negotiations
– Multiple cross-cultural studies on negotiation styles, for instance:
• American negotiators are more likely than Japanese bargainers
to make a first offer
• North Americans use facts to persuade; Arabs use emotion;
and Russians use asserted ideals
• Brazilians say “no” more often than Americans or Japanese

82. How Can Jobs be Redesigned?
Job Rotation
• The shifting of an employee from one task
to another with similar skill requirements.
Job Enrichment
• The expansion of a job by increasing the
degree to which the worker controls the
planning, execution, and evaluation of the
work.

83. Strengths of Job Rotation
Reduces
boredom
Increases
understanding
of work
contribution
Increased skills
Helps
managers in
scheduling

84. Job Enrichment – Possible Actions
Combine Tasks
Form Natural Work Units
Establish Client Relations
Expand Jobs Vertically
Open Feedback Channels

85. Alternative Work Arrangements
• Flextime
– Flextime allows employees to choose the hours
they work within a defined period of time.
• Job Sharing
– Job sharing allows two or more individuals to split
a traditional 40-hour-a-week job.
• Telecommuting
– Telecommuting allows workers to work from
home at least 2 days a week on a computer linked
to the employer’s office.

86. Social and Physical Context of
Work
• Social Context
– Some social characteristics that improve job performance include:
• Interdependence
• Social support
• Interactions with other people outside of work
• Physical Context
– The work context will also affect employee satisfaction
• Work that is hot, loud, and dangerous is less satisfying
• Work that is controlled, relatively quiet, and safe
will be more satisfying

87. Definition
Management By Objectives (MBO) can be defined
as a process whereby the employees and the
superiors come together to identify common goals,
the employees set their goals to be achieved, the
standards to be taken as the criteria for
measurement of their performance and contribution
and deciding the course of action to be followed.

88. Main Concept
• The principle behind Management by Objectives (MBO) is to
make sure that everybody within the organization has a clear
understanding of the aims, or objectives, of that organization,
as well as awareness of their own roles and responsibilities in
achieving those aims.
• The complete MBO system is to get managers and
empowered employees acting to implement and achieve their
plans, which automatically achieve those of the organization.

89. Management by Objectives
Principles
• Cascading of organizational vision, goals and objectives
• Specific objectives for each member
• Participative decision making
• Explicit time period
• Performance evaluation and feedback

90. MBO Strategy: Three Basic
Parts
• All individuals within an organization are assigned
a special set of objectives that they try to reach
during a normal operating period. These
objectives are mutually set and agreed upon by
individuals and their managers.
• Performance reviews are conducted periodically
to determine how close individuals are to
attaining their objectives.
• Rewards are given to individuals on the basis of
how close they come to reaching their goals.

91. The MBO Process
Define
Organization
al Goals
Define
Employee
Objectives
Continuous
Monitoring
Of Employee
Performance
And Progress
Performance
Evaluation/R
eviews
Providing
Feedback
Performance
Appraisals

92. Features and Advantages of MBO
• Motivation – Involving employees in the whole process of goal
setting. Increasing employee empowerment increases
employee job satisfaction and commitment.
• Better communication and Coordination – Frequent reviews
and interactions between superiors and subordinates helps to
maintain harmonious relationships within the enterprise and
also solves many problems faced during the period.
• The Smart Method

93. The Smart Method
Clarity of goals – With MBO, came the
concept of SMART goals i.e. goals that are:
• Specific
• Measurable
• Achievable
• Relevant, and
• Time bound.

94. The Smart Method
• The goals thus set are clear, motivating and there is a linkage
between organizational goals and performance targets of the
employees.
• The focus is on future rather than on past. Goals and
standards are set for the performance for the future with
periodic reviews and feedback.

95. Balance Between Management
and Employee Empowerment
• The balance between management and
employee empowerment has to be struck, not by
thinkers, but by practicing managers. Turning
their aims into successful actions, forces
managers to master five basic operations:
• setting objectives
• organizing the group
• motivating and communicating
• measuring performance and
• developing people

96. Individual Responsibility
• Management by Objectives (MBO) creates a link
between top manager's strategic thinking and
the strategy's implementation lower down.
• Responsibility for objectives is passed from the
organization to its individual members.
• It is especially important for knowledge-based
organizations where all members have to be able
to control their own work by feeding back from
their results to their objectives.

97. Individual Responsibility
Management by objectives is achieved through
self-control, the tool of effectiveness. Today the
worker is a self-manager, whose decisions are of
decisive importance for results.
In such an organization, management has to ask
each employee three questions:
• What should we hold you accountable for?
• What information do you need?
• What information do you owe the rest of us?

98. MBO: Key Advantages and
Disadvantages
Advantages
• MBO programs continually emphasize what
should be done in an organization to achieve
organizational goals.
• MBO process secures employee commitment to
attaining organizational goals.
Disadvantages
• The development of objectives can be time
consuming, leaving both managers and
employees less time in which to do their actual
work.