Planning is considered as a very important part of management. With the help of the process of planning, the managers can anticipate the problems the organization may have to face in the future and then they can analyze these problems and also evaluate the impact of these problems on the organization. The process of planning continuously takes place and each and every level of management. Some of the important characteristics of the process of planning are:-

1. Planning is an intellectual process: the process of planning involves mental work. The relevant facts in this regard are elated with the knowledge and experience of the manager. It is also very important that the manager visualizes the situations that may develop in the future. Therefore, the manager should be capable of deciding the most appropriate course of action that needs to be adopted in the future with a view to implement the plans. The decisions made by the managers are not based on any guesswork but it is a mental exercise in which the managers are required to anticipate the advantages as well as the disadvantages of all the alternative is that may be available to them. After considerable thinking, the managers have to opt for the best alternative. This is not an easy process and sometimes, some managers tried to avoid this work as it needs creative thinking by the managers. Depending on the capabilities of a manager, the process of planning can be difficult or easy for some persons. The main questions that the manager has to consider while planning involve the question that what needs to be done, how it has to be done, when it has to be done and who will do it. A decision that will be made by the manager in this regard will also depend on the capabilities of the manager making the decision. However if the manager considers all the practical aspects of the decision, the manager will be able to make the right choice at the right moment.

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A plan can be described as the commitment of the organization to a particular course of action in order to achieve the desired. This also means that several plans have to be followed by the organization in order to achieve different objectives. Generally, it has been seen that manages make the mistake of considering only the major programs as the plans. However, there are several future courses of action that also need to be considered as plans. Therefore, the starting of the production of a new product or the establishment of a new factory also needs to be considered as plans. The classification of the plans can be made on the basis of the origin, purpose, used on the type of plans. There are certain plans that are present in the form of standing plans and at the same time, some other plans are single use plans. As the name suggests, the single use plans are only used on one occasion only and are not used again. On the other hand, the standing plans can be used by the organization repeatedly, on more than one occasion. Some of the examples of standing plans include the objectives, policies, procedures and rules and strategies etc. therefore once they have been formulated, the organization uses these plans for a long time and on more than one occasion. But at the same time there are plans like budgets and programs that are only used on one occasion and once they have been used, the organization is required to formulate these plans all over again. Therefore, different types of plans can be described as follows:-

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MBO is an effective motivational technique which is commonly used by managers and organizations. To attain maximum benefit from MBO the following steps could be helpful:

1. Support and commitment from top level management: It is essential that MBO should have the support and commitment of the top management without this support, MBO can never be a success. The superior must be willing to relinquish and share the authority with the subordinates. They should consider the subordinates as part of the team for decision making.

2. Clear Goal and objectives: The objectives should be clearly formulated must be realistic and achievable. They should be clearly understood by all concerned. The targets should neither be very high nor very low.

3. Participation of subordinates in Goal Setting: The objectives and goals should be set with the active participation of the subordinates. There should be effective two way communication between the superior and the subordinates for setting the goals, and for discussing their problems. These objectives must be properly communicated and clearly understood and accepted by all. MBO works best when the goals are willingly accepted.

4. Overall Philosophy of Management: MBO should be treated as an overall philosophy of management and the entire organizations. It should not be simply performance appraisal technique or a divisional process. It should change and replace all the old systems rather than just being added to them.

5. Delegation: MBO will not be effective if the manager is not willing to delegate sufficient authority to the subordinates. The subordinates who have been given challenging assignments through discussion with the superior must be given adequate authority to accomplish their goals otherwise they will not be willing to accept new assignments and they will resist the setting of clearly defined goals.

6. Revision and Modification Goals: The goals must be continuously reviewed and modified as the changed conditions require avoiding inflexibility. The review technique should be such that all deviations are caught early and corrected.

7. Orientation and Training of executives: As the philosophy of MBO is to be implemented by the executives, they must be given format training in understanding the basis as well as the contents of the program. They must be adequately oriented about the value of MBO. They should be trained in how to set the goals, the method and tools to achieve these goals, methods of reviews and evaluation of performance and provision to include and feed back that may be given.

Integration of MBO Program: MBO cannot be implemented as an isolated program. It should be accepted as a style of managing and should be synthesized with the organizational climate. All personal involved should have a clear understanding of their role, authority and their expectations. The system should be absorbed wholly by all departments and members of the organization.

Management by objectives (MBO) has certain limitations and weakness. While some of these limitations are inherent in MBO, some limitations arise at the time of introduction and implementation of the process of MBO. Some of these limitations and problems associated with MBO are as follows:–

1. Lack of Support from Top Management: As the authority is vested in the top management in traditional organizations and it flow from top to bottom but in the process of MBO, the subordinates are also given an equal opportunity of participation, which is sometimes not liked by the top management. MBO cannot be successful without full support from management at the top most level.

2. Resistance by Subordinates: The subordinates can also be resentful towards the system of MBO. Sometimes, while setting the goals, they may be under pressure to get along with the management and the objectives which are set may be unrealistically high or far too rigid. The subordinates, generally, feel suspicious of the management and believe that MBO is another play of the management to make them work harder and become more dedicated and involved.

3. Problems in enumerating goals and objectives: The MBO can be successful if the goals can be established in proven terms. But if these are hard to enumerate and evaluate, it may not be achievable to fathom the performance of the employees. Moreover, MBO does not have any subjectivity in performance appraisal. It rewards only productivity without giving any consideration to the creativity of the employees.

4. MBO is time consuming and costly process: MBO could be a time consuming and costly process. A lot of paper work is required and a lot of meetings and reports need to be prepared, which add to the responsibilities and burden of the managers. Because of these reasons managers generally resist of the MBO.

5. Emphasis is on short term goals: Goals under MBO are set only for a short period ranging from six months to one year. The reason could be that goals are quantitative in nature and thus it could be difficult to go in for long range planning in MBO. Since the performance of the subordinate is to be reviewed after every six months or one year, they tend to concentrate on their immediate objectives without caring for the long range objectives of the organization. This emphasis on short term goals goes against the organizational efficiency and effectiveness and is not beneficial for the organization.

6. Lack of training and adequate skills: Most of managers lack adequate skills knowledge and training required in interpersonal interaction which is required in the MBO. Many managers tend to sit down with the subordinate, dictate the goals and targets with no input permitted from the subordinates and then demand that goals be achieved in a specified time. Whether the goals are realistic or not does not enter the picture. In this type of environment, there is a lack of two way communication and objectives are imposed on the subordinates. This could have an adverse impact on the morale, initiative and performance of the employees.

7. Poor Integration: Generally, there is poor integration of MBO with the other system such as forecasting and budgeting. This lack of integration makes the overall functioning of the system very poor.

8. Difficulty in Follow up: Under the system of MBO, the superior must get in touch with the subordinate at the appropriate time and at that time, the subordinate will inform the boss exactly what has been accomplished and how. If the superior delays the meeting, it will create hurdles in the successful implementation of MBO as the subordinate will also start taking the program casually.

9. Difficulty in Achievement of group Goals: When the achievement of the goals of one department depend upon the goals of another department, cohesion is difficult to maintain. In such cases, the achievement of goals will also become very difficult.

10. Inflexibility: MBO could result in a rigid organization structure. As the goals are set after every six months or one year, the manager may not like to review the goals in between, even if the need arises, due to fear of resistance from the subordinates. The managers must learn to handle this situation, because sometimes revision of short term goals is necessary for the achievement of long range objectives.

11. Limited Application: MBO is useful largely for the managerial and professional employees. It is not appropriate for all levels and for everyone because of the heavy demands made by it. It can be made applicable only when both the subordinates and manages feel comfortable with it and are willing to participate in it.

12. Gestation Period: It takes a lot of time, sometimes 3-5 years to implement the MBO program properly and fully and some research studies have shown that these programs can lose their impact and potency as a motivating force over a long period of time.

The concept of management by objectives is a logical extension of Goal Setting theory. The Goal Setting theory studies the processes by which people set goals for themselves and then put in efforts to achieve them. Evidence proves that 90 percent of the time, performance improves with goal setting. Comparatively high achievers set comparatively more difficult goals and they are more satisfied with intrinsic rewards than extrinsic rewards. Management by objectives is an extension of Goal theory as it involves systematic and programmatic goal getting throughout an organization.

The concept of MBO was introduced by Peter Drucker in 1954 as a means of using goals to improve people rather than to control them. Thus this concept of MBO is also known as Goal management. It is based upon the assumption that involvement leads to commitment and when an employee participates in goal setting as well as setting standards for measurement of performance towards that goal then the employees will be motivated to perform better and in a manner that directly contributes to the achievement of organizational objectives. Simply stated, “MBO is a process whereby both managers and subordinates work together in identifying goals and setting up objectives and makes plans together in order to achieve these objectives. Their objectives and goals should be consistent with the organizational goals”.

What are the steps involved in the process of MBO?
The basic steps that are common in all the processes of management by objective (MBO) are:-

1. Central goal setting: defining and verifying organizational objectives is the first step in MBO process. Generally these objectives are set by central management of the organization but it does so after consulting other managers. Before setting of these objectives, an extensive assessment of the available resources is made by the central management. It also conducts market service and research along with making a forecast. Through this elaborate analysis, the desired long run and short run objectives of the organization are highlighted. The central management tries to make these objectives realistic and specific. After setting these goals it is the responsibility of the management that these are known to all members and are also under stood by them.

2. Development and individual goal setting : After organization objectives are established by the central management, the next step is to establish the department goals. The top management needs to discuss these objectives with the heads of the departments so that mutually agreed upon objectives are established. Long range and short range goals are set by each department in consultation with the top management. After the department goals are established, the employees work with their managers to establish their own individual goals which relate with the organization goals. These participative goals are very important because It has been seen that employees become highly motivated to achieve the objectives established by them. These objectives for individuals should be specific and short range. These should indicate the capability of the unit of the individual. Through this process all the members of the organization become involved in the process of goal setting.

3. Revision of job description : In the process of MBO resetting individual goals involves a revision of job description of different positions in the organization which in turn requires the revision of the entire structure of the organization. The organization manuals and charts may also have to be modified to portray the changes that have been introduced by the process of MBO. The job description has to define the objectives, authority and responsibility of different jobs. The connection of one job with all other jobs of the organization also needs to be established clearly.

4. Matching goals : The establishment of objectives can not be fruitful unless the resources and means required to achieve these objectives are provided. Therefore the subordinates should be provided required tools and materials which enables them to achieve the objectives efficiently and effectively. Resource requirements can be measured precisely if the goals are set precisely. This makes the process of resource allocation relatively easy. Resource allocation should be made after consulting the subordinates.

5. Freedom implementation: The task team of manager and his subordinates should be given freedom in deciding the way to utilize their resources and the way to achieve their objectives. There should be very little or no interference by the seniors as long as the team is working with in the framework of organization policies.

6. Establishing check points: The process of MBO requires regularly meetings between the managers and their subordinates to discuss the progress achieve in the accomplishment of the objective established for the subordinates. For this purpose the mangers need to establish the standards of performance or check points to evaluate the progress of their subordinates. These standards need to be specified as for as possible quantitatively and it should also be ensured that these are completely understood by the subordinates. This practices needs to be followed by all managers and these should lead to an analysis of key results has the targets are represented in terms of the results. The analysis of key results should be recorded in writing and it generally contains information regarding :
(i) The overall objectives related with the job of subordinates.
(ii) The key results which must be achieved by the subordinate to fulfill his objectives.
(iii) The long term and short term priorities, a subordinate needs to adhere to.
(iv.) The extent and scope of assistance expected by a subordinate from his superior and other departmental managers and also the assistance, the subordinates is required to extend to other departments of his organizations.
(v.) Nature of information and the reports receive by the subordinate to carry out self evaluation.
(vi.) The standards use to evaluate the performance of the subordinate.

7. Performance appraisal : An informal performance appraisal is generally conducted in routine by the manager, a periodic review of performance of the subordinates should also be conducted. Periodic reviews are required as the priorities and conditions change constantly and need to be monitored constantly. These reviews help the mangers as well as the subordinates to modify the objectives or the methods whenever require. This significantly increases the chances of achieving the goals and also ensures that no surprises are found at the time of final appraisal. Periodic performance appraisal needs to be based on measurable and fair standards so that these are completely understood by the subordinates and there are also aware of the degree of performance required at each step.

8. Counseling : Periodic performance review helps the subordinates in improving his future performance.