Management by results

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Management by results
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Methods and techniques

Management by results is used by mostly large companies, which have diversified production and broad product range. This method consists in focusing on objectives and tasks for these organizational units, which are the biggest sources of profits for the company. The main focus is on the achievement of the result, and not on the way to achieving it and tasks which need to be performed.

Stages of management by results

  • analysis of the company's potential,
  • identifying products promising a chance to get the best results,
  • concentration of activities on those products.
  • creation of profit centres,
  • systematic monitoring of performance.

Assumptions of management by results

Cost centres can be created from any part of the business, but under condition that there is a possibility of direct calculation of the costs incurred. These are contracts with the management of the cost centres, which lay down the limit of the total costs within unit is required to function.

Profit centre - can be any part of the company having contact with the market and capable to sell product and collect money. It is created based on organizational units. These are units responsible both for the costs and profits. Designated for them is the minimum profit that should be achieved in a given billing period

They are set up for the purpose of:

  • improving the level of management,
  • increase of efficiency and flexibility,
  • enhance the competitiveness of the company.

Advantages of management by results

  • possibility to reform enterprise-wide cost accounting, objectification of the costs actually incurred by individual organizational units,
  • increase in personal responsibility of managers for the performance of a subordinate organizational units,
  • stronger binding of personal income of managers with the results of subordinate cells.

Disadvantages of management by results

  • tendency to autocratic management style expresses itself in attempts to impose to lower level managers very high desired level of performance,
  • possibility of conflict at the stage of inspection and evaluation of the results obtained, particularly during the separation of subjective to objective causes affecting the result.
  • difficulties associated with ensuring the proper functioning of cost and sales accounting,
  • excessive interest in the results at the expense of human relations.

References

  • Morrisey, G. L. (1977). Management by objectives and results for business and industry. Addison-Wesley Pub. Co..
  • Schleh, E. C. (1961). Management by Results; The Dynamics of Profitable Management.
  • Wikstrom, W. S. (1966, July). Management by objectives or appraisal by results. In The Conference Board Record (Vol. 3, No. 7, pp. 27-31).
  • Maheshwari, B. L. (1990). Management by Objectives. New Delhi.