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Background of Peter Drucker
Peter Ferdinand Drucker is the real name for Peter Drucker and he was an Austrian-born American. He was known as a management consultant, educator and author that had contributed to the philosophy and practical foundations of the modern business organization. He was born on 19 November 1909 at Vienna, Austria. At that time, his mother was a medicine student while his father was a lawyer and high-civil servant. His mother is Caroline Bondi and his father is Adolf Drucker.
After graduates from Döbling Gymnasium, Drucker moved to Hamburg, Germany and working as an apprentice at an established cotton trading firm. That was his first working experience. Then, he moved to Frankfurt and worked as a journalist at the Daily Frankfurter General-Anzeiger. With the organization, Drucker had written for the Der Österreichische Volkswirt (The Austrian Economist). In 1931, he got a doctorate in international law and public law from the University of Frankfurt.
Two years after that, Drucker worked for an insurance company in London in 1933 before he worked as the chief economist at a private bank. Then, he got married with his wife on 1934, which is a year after that. After got married, both of them stayed at United States and Drucker was a university professor as well as a freelance writer and business consultant.
Drucker got the authority to be the citizen of United States on 1934. At that time, he was a professor of politics and philosophy at Bennington College until 1949. From 1950 until 1971, Drucker had working as the Professor of Management for twenty-two years at New York University.
Drucker was the developer of one of the country’s that offered MBA programs for working professionals at Claremont Graduate University when he was at the California in 1971. From 1971, he was the Clarke Professor of Social Science and Management at Claremont until he dies. Claremont Graduate University’s Management School was known as the Peter F. Drucker Graduate School of Management before it was changed. Then, it was renamed again as Peter F. Drucker and Masatoshi Ito Graduate School of Management.
In 1999, at Claremont Graduate University, Drucker has established the Drucker archives, and it became the Archives Drucker Institute after seven years, in 2006. Drucker taught his last class in 2002 at age 92 but he still active as a consultant to businesses and non-profit organizations. At the age of 95 years old, on 11 November 2005, he died in Claremont, California due to natural causes.
Well-known strategy: Management by objectives(MBO)
Management by objectives(MBO) is the theory by Peter Drucker. The term "management by objectives" was first popularized byPeter Druckerin his bookThe Practice of Management, 1954. Management by Objectives(MBO) also known asManagement by Results(MBR). According to Drucker, it is the procedure of setting objectives and monitoring progress towards them should permeate the entire organization. In the other way, it is a process of defining objectiveswithin an organization so thatmanagement and employees agree to the objectives and understand what they need to do in the organization in order to achieve them.
Behind the principle of Management by Objectives (MBO), employees must have a clear understanding of the roles and responsibilities expected of them. Then they can understand how their activities relate to the achievement of the organization's goal and the importance on fulfilling the personal goals of each employee.
The features of Management by Objectives (MBO) are superior-subordinate participation, joint goal setting and support from superiors.
Superior-subordinate participation means management and subordinates need to understand that in Management by Objectives (MBO), they must work together to come up with goals and objectives. They must jointly agree on exactly how the job duties should be handled in order to attain those goals.
For the joint goal setting, the cooperation level is required in the Management by Objectives (MBO) process. All sides must realize that the goals that are being set should be tangible, verifiable and measurable. In order it to be a successful venture, management and subordinates need to agree on objectives that are realistic and attainable. That is relating with the previous duties from both superior-subordinate participation that have to come out with the goals that are achievable by the organization.
The third features is, superiors should have to make he available to the employee in term of giving them full of support. Superiors should offer advice and guidance to every individual that is working towards the organizational goals that have been set. This is exactly how Management by Objectives (MBO) works in maintaining a high level of communication and cooperation between management and employees.
Management by Objectives (MBO) consists of five steps which are goal setting, manager-subordinate involvement, matching goals and resources, implementation of plan and review and appraisal of performance.
The first step is goal setting. The organizational objectives have to be crystal clear before any other steps can be considered. These are usually decided upon by top executives after consulting with the entire management team and the final decisions are them passed on to the rest of the organization, with the main focus on Key Result Areas (KRA). Key Result Areas are the targets or goals set by an entity in their strategic plan. It is used in many areas of business including customer service and human resources for examples are the duties and responsibilities of a person are to carry out in their job and their performance on each one.
Second step is manager-subordinate involvement. Once the bigger organizational details have been decided, management and subordinates get to work on setting individual goals, with everyone within the organization involved. This joint consultation is important because people become highly motivated in achieving objectives that were set by them to start with. The goals of subordinates are specific and short range in order easier for subordinate’s unit to achieve within the specific period of time that already had been decided.
Matching goals and resources is the next step. It is means nothing if not matching goals and resources. At this point, management must look at providing their people with all the tools and materials they need to meet those goals. If the goals are precisely set, then the resources requirement can also be precisely measured thus making the resources allocation easier. The allocation of resources should be done in consultation with the subordinates.
Once all the objectives have been decided and resources put in place, the employees can start their work and responsibility according to the plan. They can call on management at any time if they need further assistance. As long as it is within the frame work of organizational policies, there should be minimum interference by management. This is the fourth step, which is the implementation of plan.
The last step is review and appraisal of performance. It is important that managers and subordinates meet regularly to evaluate performance and progress. The same fair and measurable standards should be used during this process as they were in the planning stage. By review and appraisal of employee’s performance, it can improve the morale of subordinates since the manager shows an active interest in the subordinate’s work and progress. It will attract and motivate employee to do their work better and getting better after that.
There have some of the advantages of Management by Objectives (MBO). Firstly is motivation which means involving employees in the whole process of goal setting and increasing employee empowerment. Motivation in the workplace is obviously very important. Creating a motivating environment at the workplace produces happy employees, low staff turnover and absenteeism, enhanced productivity, satisfied customers and better financial performance. At the same time, this will increases employee job satisfaction and commitment towards their works.
Another advantage is better communication and coordination. Frequent reviews and interactions between superiors and subordinates help to maintain harmonious relationships within the organization and also to solve many problems. Through this, it will avoid any miscommunication and any information will be sent clearly, thus will produce effective and productive staffs. The barriers or gap between the top management and lower management team will be reducing and there is an existing tight bond of relationships within the organization.
For Management by Objectives (MBO) to be effective, individual managers must understand the specific objectives of their job and how those objectives fit with the overall company objectives set by the board of directors and it is linked to the organization's objectives. The managers of the various units or sub-units, or sections of an organization should know not only the objectives of their unit but should also actively participate in setting these objectives and make responsibility for them.
The limitation means something that bounds, restrains, or confines. There are several limitations to the assumptive base underlying the impact of Management by Objectives (MBO) which are time consuming, develop conflicting objectives and lack of appreciation.
Time consuming problem might occur in this theory. Management of Objectives (MBO) is incredibly effective, but it takes time to show the progress. The process of setting objectives is not something that tends to happen quickly and easy. It needs regular meeting in order to assess just how well the system is working and the progress from time to time.
Another limitation in Management by Objectives (MBO) is develops conflicting objectives. The goals and objectives of each individual within the organization may not be the same with the other employees, which are particularly happening when there are multiple departments. Each department will have their own ideas of success, which they may feel is different from the rest, all of which creates conflict and at the end it will give bad impact and the objectives cannot be achieved by the organization successfully.
Besides, Management of Objectives (MBO) will have the lack of appreciation as the limitation. The purpose of Management of Objectives (MBO) is to involve everyone in the goal setting of the organization, but it can still fail if the goals are not properly managed. It can also be a limitation if management do not delegate properly or motivate accordingly.
There have some criticism for Management by Objectives (MBO) for example W. Edwards Deming said, Management by Objectives (MBO) is a barrier to quality improvement. He make this when United States having industrial problem due to Japanese dramatic creation of quality product at low cost after World War II, through “Eliminate Management by Objectives”. There is no clear understanding of Management by Objectives (MBO) in relation to strategic management (Dale Krueger, 2004). Management by Objectives (MBO) does not provide full and complete strategic management and it can only be accomplished on a group basis but not the staffing and external environment.
Here are some strategies to make Management by Objectives (MBO) an effective which are by support from all, training of managers and allocation of adequate time and resources.
Support from all means executives may only implement a Management by Objectives (MBO) into the organization, but it will only work if every member of management is on board with the plan and work together in order to achieve the goals. It is not only management that has to buy in, though, with every single employee need to understand what is needed to make it work and then co-operating every step of the way. They really have to feel that Management by Objectives (MBO) is a program that benefits to all.
Training of managers is the next strategies should be implementing to make Management by Objectives (MBO) effectives. Since Management by Objectives (MBO) differs from any other management style, existing bosses must be brought up to date with the philosophy of Management by Objectives (MBO). They need to understand how the principles of Management by Objectives (MBO) can be implementing into the current company philosophy. This training is a crucial part of the process, especially since it is the manager and employees that are going to be responsible for setting the majority of goals and objectives.
Another strategy should be implement is allocation of adequate time and resources, even the best planned Management by Objectives (MBO) program requires a minimum three to five years before it will give the positive results. Managers and employees should not employ Management by Objectives (MBO) thinking that it will be a quick fix solution and it will be settle in a short time.
Peter Drucker’s idea and concept of Management by Objectives (MBO) is still stay in this 21st century. Nowadays, the economy is rapidly growth in technology development. Employees are more preferred for freedom and active participation in management. Implementation of Management by Objectives (MBO) will help the employees to have the sense of full satisfaction and motivation as it enable them in the decision making and management process actively. Management by Objectives (MBO) is suitable practicing within the management in knowledge-based organizations such as software development companies that need all their workers or employees getting involve in the management and always come out with the new ideas that are never being introduced before. The employees are given sufficient responsibility and authority to achieve their individual objectives. Accomplishment of individual objectives eventually contributes to achieving organizational goals.
- Peter Drucker. (n.d.). In Wikipedia. Retrieved Mac 23, 2014, from https://en.wikipedia.org/wiki/Peter_Drucker
- Management by Objective. (n.d.). In Wikipedia. Retrieved Mac 23, 2014, from https://en.wikipedia.org/wiki/Management_by_objectives
- The Drucker Institute. (2014). Peter Drucker’s Life and Legacy. Retrieved Mac 22, 2014, from http://www.druckerinstitute.com/
- Management by Objectives. (2012). Advantages of Goals and Objectives Management. Retrived Mac 22, 2014, from http://managementbyobjectives.com/advantages-of-goals-and-objectives-management/
- Management by Objectives. (2012). Limitations of Management by Objectives. Retrieved Mac 22, 2014, from http://managementbyobjectives.com/limitations-of-management-by-objectives/
- Management by Objectives. (2012). How To Make Management by Objectives Effective? Retrieved Mac 22, 2014, from http://managementbyobjectives.com/how-to-make-management-by-objectives-effective/
- Bob Krone, PhD. (2005). "Management by Objectives". A Controversial Classic. Retrieved Mac 23, 2014, from http://artwork.net/ks/asq711/quality5a.htm
- Dale Krueger, Ph.D. Strategic management and management by objectives, 2004, pp 1-8.