Four Stages or Steps in the MBO Process
Generally, there are four stages or steps in the MBO process.
Stage 1. Collectively fixing objectives
The superior and subordinate managers collectively fix the objectives. The objectives are fixed for the Key Result Areas (KRAs). KRAs are those areas which are very important for the long-term success of the organisation. For e.g. R & D, Production, Finance, Marketing, etc. Definite and measurable objectives should be fixed for each KRA. The time limit for achieving the objectives should also be fixed. The objectives should be achieved by the subordinate manager.
For e.g. The objective for the marketing managers may be to increase the sales of product XYZ by 50% for the year 2010-2011.
Stage 2. Collectively making a plan
After fixing the objective, the superior and subordinate managers make an action plan. This plan will be used by the subordinate manager to achieve the objective.
Stage 3. Subordinates implements the plan
The subordinate manager implements the plan. That is, he puts the plan to action. He makes optimum use of the resources. If required, he takes guidance from the superior managers.
Stage 4. Collectively monitoring performance
This is the final stage in the MBO process. Here, the subordinate monitors (evaluates or measures) his own performance. He compares his performance with the planned targets (objectives). If there are any deviations, then the superior and subordinates managers fix new objectives. In this stage, the superior acts like a coach and guide. He does not act like a judge.