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Management by Objectives
Management by Objectives
17 July 1970
1. FINANCE OBJECTIVES :
a) Reduce by 2 days - 6-day time lag in preparation of
division cost reduction reports using an agreed upon follow-through system.
b) Achieve an average age of accounts receivable not
to exceed 25 days.
c) Restrict bad debt losses to less than 3% of
reporting non-defence sales.
d) Improve margin by 15% with same revenues but
reduced cost of 30%.
e) Increase 15% the working cash required in each of
three banks at the end of the year by holding inventory levels at 80% capacity.
f) Complete training of three replacements for key
positions in accounting section by next June.
g) Complete study and construct index of expense
trends for all departments for the past 5 years and project anticipated expense
of future at annual intervals. Set 10% reduction targets from this projected
expense trends.
h) Collect ten suggested cost –reduction ideas per
month from each of six operating managers.
i) Complete write-up and acceptance of company
cost-reduction manual and distribute to all members of management within 2
months.
j) Install five suggestion boxes in five company
locations to collect employee suggestions for cost reduction in their job
procedures.
k) Collect from six operating managers’ long distance
telephone call analysis and recommendations for control of number, types, and
cost of calls.
l) Reduce dollar value of cost of returned material
credits from an average of $20,000 per month in the preceding year to $15,000
per month in the coming year.
m) Reduce current debt to tangible net worth position
to 35% for proposed creditor portfolio.
n) Reduce fixed assets to a level not to exceed
three-quarters of the tangible net worth in the next 2 years.
o) Improve profits to payroll margin from 5% to 10%
within the next four profit sharing quarters.
2. MARKETING OBJECTIVES :
a) Implement proposed system B for processing and
expediting the filling of back orders at the rate of 10 per month until 90% of
back orders are filled. Reinstate system A when back –order level is reached.
b) Increase sales revenues of a new product 15% within
12 months by concentrating existing expense levels of promotions in New
England.
c) Increase merchandise turnover in store from 4 to 6
within the current fiscal year.
d) Hold sales expense this coming year to 5% of total
sales while increasing sales manpower 10%.
e) Secure 100% distribution in markets D,E, & F of
district 3.
f) Convince three wholesalers to introduce new
merchandising under a prearranged monthly schedule.
g) Increase occupancy ratio in hotel rooms from a
yearly mean of 65 to 85% while maintaining rate structure.
h) Complete training program A for all district
representatives to assure readiness for distributing product Y at the first of
the year.
i) Reduce average handling time of customer statements
by 10%.
j) Complete painting of ten trucks with new
advertising campaign within 1 month.
k) Complete 75% follow-up calls of new inquiries
within 3 days of initial inquiry.
l) Reduce number of customer complaints on commercial
business from 22% to 10% of orders billed. Dollars of settlement should not
exceed 5% of total commercial billing.
m)Improve sales per employee to $ 25000 during the
next 5-Year profit plan.
n) Achieve percentages of sales to consumer, industry
and government from 20, 28, 52 to 30, 35, and 35 respectively.
o) Complete a strategy statement within 3 months for
giving two new segments of the market brand X image to be introduced next
session.
3. RESEARCH & ENGINEERING OBJECTIVES:
a) Decrease research effort ratio of feasible marketing
ideas to actual marketing products from 10 to 5 within the coming fiscal year.
b) Complete design and development of new prototype in
14 months within cost of $140,000 without farm-out work to vendors.
c) Complete product design specification for product M
within budgetary period.
d) Supply three new products to marketing within the
coming fiscal year with forecasted sales not less than Rs. 15 million.
e) Get approval from three departments of production,
plans for customer, costs, and schedule within 3 months.
f) Complete PERT layout for contract B within the
pre-budgetary planning schedule.
g) Complete value analysis job plan for three
engineering sections during operating quarter.
h) Increase diversification program with development
and introduction of 5 new products within the small product line.
i) Complete literature and patent search by end of
year for five patentable ideas useful in entering new markets K, L and M.
j) Reduce research investment pay-out time from 3 to 2
years.
k) Improve research know-how in section B by
increasing Ph.D. Hires by 20%.
l) Reduce the R&D budget as per cent of net sales
from 4.5 to 3.5 in the next 5-year profit plan while maintaining services and
new product development.
m)Maintain lead competitor’s position in market
with four new product introductions in the next 5 year profit plan.
4. PRODUCTION OBJECTIVES :
a) Reduce frequency of lost time injuries from 21 to 6
million man hours within 6 months of installation of new safety awareness
program.
b) Maintain overtime hours at the level of 5% of
scheduled hours while completing emergency work program A.
c) Reduce cost of pump and engine repairs from $10,000
to $5,000 per year per mechanic.
d) Maintain a once-a-day contact with all subordinates
at their work stations and hold a once-a-month work appraisal meeting in office
with all subordinates.
e) Complete construction of 5,000 sq. ft. 2-story
approved addition to existing plan within cost of $45,000 by spring of next
year.
f) Master ten techniques in work simplification as
related to machine shop operations through a 6-month by monthly cost reduction
meeting for machines shop supervisors.
g) Reduce clerical labour costs in 3 departments by
$50,000 with the installation of a data-processing system whose leasing and
operational costs are not to exceed 50% of the projected savings.
h) Reduce weld rejects of Hy-80 steels from 6% to 3%
of all plates in assembly S.
i) Maintain total heat losses at 5% of total heat
transferred when changing from system A to system B.
j) Deliver 16 units per day for less than $45.00 unit
cost to shipping point B.
k) Reduce inventory lead time from 3 weeks to 2 weeks
while maintaining customer services.
l) Reduce obsolete items and all adjustments to
inventory to 6% of commercial sales dollars.
m) Complete master schedule of sales and
inventories for fiscal year 19xx to reduce stock –out frequency rate to 2½.
n) Complete by next year a vendor rating system to
maintain price, delivery, and reliability at or below an index established for
the past 5-year record.
o) Achieve for the machine shop a process layout by
19xx to reduce material-handling costs to 22% of manufactured costs.
5. PERSONNEL OBJECTIVES :
a) Select five candidates in the third quartile from
25 trainees successfully completing supervisory training, These candidates to
be temporarily appointed for 6 months at the new division.
b) Reduce cost of recruiting each engineer from Rs.
200 to Rs. 1000 while meeting requisition totals and dates.
c) Complete preparation for labour negotiations by
apprising all management personnel of needed contract changes; hold bi-monthly
meetings for discussions and conduct two simulated labour bargaining sessions
to gain insights on strategy.
d) At a cost not to exceed $15,000 conduct a sampling
survey of the company’s hiring image in three adjacent labour markets.
e) Complete for distribution at the end of month x a
20-page, 10 topic industrial relations policy manual for newly hired employees.
f) Decrease termination rate of clerical employees
from 25 to 14 per cent.
g) Increase outside correspondence answered from 25 to
75 per cent within 24 hours.
h) Read 12 new books in management by the end of a
year at the rate of 1 per month.
i) Complete course in statistics within the next
semester with a grade of B or better.
j) Set up and validate 5 standards of qualifications
for new hourly employees.
k) Complete within 3 months an attitude survey of
labour management relations among all employees within cost of $ 1800.
l) Reduce frequency of grievances by the end of the
year from an annual average of 35 to 20.
m) Complete planning, organization, and
installation of an employee suggestion system at the start of next year’s
cost-reduction program.
n) Complete training by December 19xx of 600
supervisors in 2-day seminars on managing by objectives.
o) Reduce absenteeism record for next year from 8 to 5
per cent.
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