Management By Objectives

MBO – MANAGEMENT BY OBJECTIVES

Its strange ... that although we come across many little things daily yet we do not notice their importance. It was a pleasant surprise to see Mandi sir coming to class with a magnet ! His question was- Why does a magnet attract? Everyone knows this, We’ve studied this since primary classes. But the little part that was much more important was ALIGNMENT of the molecules that was responsible for the force of attraction and repulsion.

Just like a magnet can align the innate dipoles with its power  a manager can also align his human resources to get his work done. Its the power of setting the poles right i.e.  positive with positive that creates a synergy and pieces start to fall and set in place

So here comes the analogy of Management by Objectives, also known as Management by results. The term "management by objectives" was first popularized by Peter Drucker in his 1954 book The Practice of Management.It is a process of defining objectives within an organization so that management and employees agree to the objectives and understand what they need to do in the organization in order to achieve them.

The process of an MBO can be descibed in four stages i.e. PDCA :

                           

1.       PLAN : 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. After fixing the objective, the superior and subordinate managers make an action plan.

2.       DO : 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.

3.       CHECK : the subordinate monitors i.e. evaluates or measures his own performance. He compares his performance with the planned targets or objectives.

4.       ACT : This is the final stage in the MBO process.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.

To conclude : Its the skill set of the people that need to nurtured and managed effectively. Understanding between the superiors and subordinates is a must for the achivement of the goals i.e. individual and organisational. A consensus match between the two will act like a catalyst in the sucess of the organisation.

PROBLEMS AND THEIR SOLUTIONS

PROBLEMS AND THEIR SOLUTIONS

Our next class had a very practical and a viable topic that is problem solving and decision making. The fact is that in our day to day life we come across so many problems and at each step we have to make a decision which is purely based on our choice. So in this session Mandi sir taught us the importance of scientific decision making with respect to the organisation.

The first question is What is Problem Solving? Problem-solving is a mental process that involves discovering, analyzing and solving problems. 

The ultimate goal of problem-solving is to overcome obstacles and find a solution that best resolves the issue. This leads to the next step i.e.

DECISION MAKING. Decision making can be regarded as the cognitive process resulting in the selection of a course of action among several alternative scenarios. 

 It is the process of selecting a course of action among several options. In an organization, there are four possible situations in decision making and its implementation.

1.       Individual Decision, Individual Implementation

2.       Individual Decision, Group Implementation

3.       Group Decision, Individual Implementation

4.       Group Decision, Group Implementation

Individual decision making is decision made by an individual or a single person whereas in Group decision making, as the name itself suggests it is decision making by consensus or majority technique in a group. As one can see individual decision making is fast and simple whereas the later one is more  systematic and  time consuming.

STEPS IN PROBLEM SOLVING & DECISION MAKING :

The four step approach to problem solving and decision making are as follows :

1.       PROBLEM/SITUATION IDENTIFICATION : In this first step we do valuing of the options and then prioritize then i.e. what is important and what is not.

2.       PROBLEM ANALYSIS : This involves defining of the problem statement after all the data has been gathered both from internal sources and external sources.

3.       PLAN DEVELOPMENT : first we need to get ideas. this can be from brain storming sessions. then we need to make a decision. by nature, both these are contradictory. idea getting is an expanding or selection process while the decision making process is a contracting or eliminating process. usually we use the dialectical method to reach a decision.

4.       IMPLEMENTATION : in this step the most important one the idea is put to affect and hence implemented. One needs to check the implementation part time and again for proper analysis.

Thank you for reading J

Importance of Social Business in Development

"Is Poverty in the person or Is it Imposed on the person from outside? But seeing the reality of the Day I'm Totally convinced that it is SYSTEM that creates the poverty not the POOR."

These influential words are spoken by Mr. Yunus during a speech at Emory University. 

 This Blog is dedicated to  economist and Nobel Peace Prize recipient Mr. Muhammed Yunus for putting forward an amazing theory of Social Business. But first, Who is Muhammed Yunus?

Life Before Grameen Bank

The third of nine children, Yunus was born on 28 June 1940 to a Muslim family in the village of Bathua, by the Boxirhat Road in Hathazari, Chittagong, in the British Raj (modern Bangladesh). After his graduation, Yunus joined the Bureau of Economics as a research assistant to the economics researches of Professor Nurul Islam and Rehman Sobhan. Later, he was appointed lecturer in economics in Chittagong College in 1961. During this time, he also set up a profitable packaging factory on the side. In 1965, he received a Fulbright scholarship to study in the United States. From 1969 to 1972, Yunus was assistant professor of economics at Middle Tennessee State University in Murfreesboro.

How Grameen Bank Started

In 1976, during visits to the poorest households in the village of Jobra near Chittagong University, Yunus discovered that very small loans could make a disproportionate difference to a poor person. Village women who made bamboo furniture had to take usurious loans to buy bamboo, and repay their profits to the lenders. Traditional banks did not want to make tiny loans at reasonable interest to the poor due to high risk of default. But Yunus believed that, given the chance, the poor will repay the money and hence microcredit was a viable business model. Yunus lent US$27 of his money to 42 women in the village, who made a profit of BDT 0.50 (US$0.02) each on the loan. Thus Yunus is credited with the idea of microcredit alongside Dr. Akhtar Hameed Khan, founder of the Pakistan Academy for Rural Development (now Bangladesh Academy for Rural Development), whom Yunus greatly admired.Thus Grameen Bank Project was born in the village of Jobra, Bangladesh, in 1976. 

In 1983 it was transformed into a formal bank under a special law passed for its creation. It is owned by the poor borrowers of the bank who are mostly women. It works exclusively for them. Borrowers of Grameen Bank at present own 95 percent of the total equity of the bank. Remaining 5 per cent is owned by the government.

MICROCREDIT

The word "microcredit" did not exist before the seventies. Now it has become a buzz-word among the development practitioners. No one now gets shocked if somebody uses the term "microcredit" to mean agricultural credit, or rural credit, or cooperative credit, or consumer credit, credit from the savings and loan associations, or from credit unions, or from money lenders.

Instead of just saying "microcredit" we should specify which category of microcredit.

Classification of microcredit :

A)           Traditional informal microcredit (such as, moneylender's credit, pawn shops, loans from friends and relatives, consumer credit in informal market, etc.)

B)            Microcredit based on traditional informal groups (such as, tontin, su su, ROSCA, etc.)

C)            Activity-based microcredit through conventional or specialised banks (such as, agricultural credit, livestock credit, fisheries credit, handloom credit, etc.)

D)           Rural credit through specialised banks.

E)            Cooperative microcredit (cooperative credit, credit union, savings and loan associations, savings banks, etc.)

F)            Consumer microcredit.

Grameen Bank Vs Conventional Banking

Grameen Bank methodology is almost the reverse of the conventional banking methodology. Conventional banking is based on the principle that the more you have, the more you can get. In other words, if you have little or nothing, you get nothing. As a result, more than half the population of the world is deprived of the financial services of the conventional banks. 

Conventional banking is based on collateral, Grameen system is collateral- free. Grameen Bank starts with the belief that credit should be accepted as a human right, and builds a system where one who does not possess anything gets the highest priority in getting a loan. Grameen methodology is not based on assessing the material possession of a person, it is based on the potential of a person. Grameen believes that all human beings, including the poorest, are endowed with endless potential.

Conventional banks look at what has already been acquired by a person. Grameen looks at the potential that is waiting to be unleashed in a person.

Conventional banks are owned by the rich, generally men. Grameen Bank is owned by poor women.

Grameen Bank Today

As of October, 2011, it has 8.349 million borrowers, 97 percent of whom are women. With 2,565 branches, GB provides services in 81,379 villages, covering more than 97 percent of the total villages in Bangladesh.

Total amount of loan disbursed by Grameen Bank, since inception, is Tk 684.13 billion (US $ 11.35 billion). Out of this, Tk 610.81 billion (US $ 10.11 billion) has been repaid. Grameen Bank finances 100 per cent of its outstanding loan from its deposits. Over 56 per cent of its deposits come from bank’s own borrowers. Loan recovery rate is 96.67 per cent.

Total revenue generated by Grameen Bank in 2010 was Tk 17.74 billion (US $ 252.05 million). Total expenditure was Tk 16.98 billion (US $ 241.29 million).

Grameen Bank has taken up a special programme in 2002, called Struggling Members Programme exclusively for the beggars. Over 111,296 beggars have joined the programme. Total amount disbursed stands today at Tk. 162.60 million. Of this amount of Tk. 130.89 million (80% of the amount disbursed) has already been paid off. 19,678 beggars have left begging and are making a living as door-to-door sales persons. 10,185 beggars have joined Grameen Bank groups as main-stream borrowers. 

Up to October'11, scholarships amounting to Tk 205.03 million (US$ 3.00 million) have been awarded to 1,33031 children. Students who succeed in reaching the tertiary level of education are given higher education loans, covering tuition, maintenance, and other school expenses.

In 2008 Mr. Yunus founded Grameen America, which provides loans, savings programs, financial education, and credit establishment to women who live in poverty in the United States. All loans must be used to build small businesses.

Social Business - Creating a World Without Poverty

In his Speech Mr. Yunus raises a question: What if we could harness the power of the free market to solve the problems of poverty, hunger, and inequality? To some, it sounds impossible. Much more could be done, he believed, if the dynamics of capitalism could be applied to humanity's greatest challenges.

Now, in Creating a World Without Poverty, Mr. Yunus goes beyond microcredit to pioneer the idea of social business a completely new way to use the creative vibrancy of business to tackle social problems from poverty and pollution to inadequate health care and lack of education. Mr. Yunus in partnership with some of the world's most visionary business leaders has launched the world's first purposely designed social businesses. From collaborating with Danone to produce affordable, nutritious yogurt for malnourished children in Bangladesh to building eyecare hospitals that will save thousands of poor people from blindness, these examples are a glimpse of the amazing future Yunus forecasts for a planet transformed by thousands of social businesses. This offers a pioneering model for nothing less than a new, more humane form of capitalism.

Important Quotes to Mr. Yunus

"Once poverty is gone, we'll need to build museums to display its horrors to future generations. They'll wonder why poverty continued so long in human society - how a few people could live in luxury while billions dwelt in misery, deprivation and despair."

"To me, the poor are like Bonsai trees. When you plant the best seed of the tallest tree in a six-inch deep flower pot, you get a perfect replica of the tallest tree, but it is only inches tall. There is nothing wrong with the seed you planted; only the soil-base you provided was inadequate. Poor people are bonsai people. There is nothing wrong with their seeds. Only society never gave them a base to grow on."

Thanks for reading.

Three Monks a milestone video for Learning Management Lessons

This week I saw a small animated film "Three Monks" also referred to as The Three Buddhist Priests, a Chinese Animated Feature Film produced by the Shanghai Animation Film Studio in 1980. The movie is so much entertaining and educating that I saw it 3 times, though my course requires it to seen only once. Basic Idea is to learn Principles of Organization and Management.

The film is based on the ancient Chinese Proverb "One monk will shoulder two buckets of water, two monks will share the load, but add a third and no one will want to fetch water." When the movie starts a note appears in which first column states "one monk fetches water to drink", the second column reads "two monks carry water to drink" and the third one just states, "three monks". The video link is given below:

Although the movie gives some important lessons but more interesting is "How we can relate it to and learn to apply these lessons in Today's Organizational Structure?". 
Let me first tell the story in brief:
A monk arrives in a temple on top of a hill and upon finding a dry plant goes down the hill to get water. Then he starts to perform this task daily for his own needs and temple needs. Then one day another monk joins him. 1st monk tries to offload his work on 2nd monk but it continued only for one day. So they both share the load. On the arrival of a third monk the same process got repeated. 2nd day everyone sxpected that someone else will take on this task. Consequently, no one fetches water though everybody is thirsty and the plant dries again. At night, a rat comes to scrounge and then knocks the candle holder, leading to a devastating fire in the temple. The three monks finally unite together and make a united effort to put out the fire. They understand the old saying "unity is strength" and device a method which leads to equal load sharing between the three of them and they begin to live a harmonious life.

     


  

 Important things to be learned from this movie: 

1. Disputes often arise when more than one person is involved

When there were two monks they tried to put more weight on one another while carrying water. When there were three monks they were even fighting to let each other drink water and later on for who will get the water. 

But more important is how can we resolve these disputes in an organization. The movie showed that in the time of crises they got together and distributed the work.

Division of Labor can be the solution to this problem. the separation of a work process into a number of tasks, with each task performed by a separate person or group of persons. It is most often applied to systems of mass production and is one of the basic organizing principles of the assembly line. Breaking down work into simple, repetitive tasks eliminates unnecessary motion and limits the handling of different tools and parts. The consequent reduction in production time and the ability to replace craftsmen with lower-paid, unskilled workers result in lower production costs and a less expensive final product. Contrary to popular belief, however, division of labor does not necessarily lead to a decrease in skills—known as proletarianization—among the working population. The Scottish economist ADAM SMITH saw this splitting of tasks as a key to economic progress by providing a cheaper and more efficient means of producing goods.

 

2. Productivity

The question here is whether the two monks should get 2 buckets on alternate days or a bucket shared by both of them, I thought "Alternate Days" and after lecture it's easy to guess that it was the wrong answer because it was driven by common sense and not Productivity analysis according to which getting 1 bucket shared by the two monks is a much better proposition. Just to make it clearer, here is a table illustrating the productivity statistics in either case. Assuming 1 Man uses 1 unit of energy to lift 1 bucket.

 

Event	Output (No. of buckets)	Input(Worker Energy units)	Productivity = Output/Input
1 Man	2	2	1
2 Men	1	0.5	2

 

 3. Process Improvement and Innovation

The single monk was lifting two water buckets manually on a rod. Two monks were lifting one bucket on a rod. But after the crises 3 monks developed a new mechanized process for lifting buckets. They used a pulley at the edge of hill to tow the bucket. The work got distributed and the output of the process increased and at the same time effort was drastically reduced. In the same way by achieving process improvement and streamlining the process, we can get better co-ordination and better output.

 

Another process improvement was done when two monks used scale to set the place on rod to hang the bucket to distribute the weight properly between the two.

 

4. Creating a System
Important lesson for a manager is to take care when creating a new system in organization. A system should never be created according to the size of people as it will suffer as the number of people engaged in the system changes. A system must be created in a way that a normal variation in number of people should not affect it.

5. How to achieve Excellence?

For achieving higher excellence two factors are most important. Highly effective people and machines, and highly efficient processes.

Excellence = Efficiency x Effectiveness

From the above video analysis, important Lessons in Bullet points:

• The productivity increases with the increase in the number of persons 
• There is more than 100% increase in the production with 100% increase in resources with good co-ordination
• One monk carrying water every day will become boring after a while but two monks carrying water will not be boring and productivity will not be hampered
• Disputes and conflicts are bound to arise but they need to be minimized so as to make the most out of the available resources
• Team work and coordination is the key to success
• Synergy is very important.