Management by results

From CEOpedia | Management online

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

Fig.1. Managers and employee roles in 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:

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.

Examples of Management by results

  • Management by results can be seen in large companies that focus on the objective and not the tasks. Companies that use this method have diversified production and a broad product range. For example, in the automotive industry, a company may set an objective to increase the overall sales of their vehicles. They will then focus on achieving this goal, rather than focusing on the tasks that need to be done in order to do so.
  • Another example of management by results is in the retail industry. A retailer may set an objective to increase the profitability of their stores. They will then focus on achieving this goal, rather than focusing on the tasks that need to be done in order to do so. This could include things like increasing the number of customers, improving customer experience, and increasing the average sale.
  • A third example is in the banking industry. A bank may set an objective to increase the number of customers it has. Again, the focus is on the goal rather than the tasks that need to be done in order to achieve it. This could include things like introducing new products and services, providing better customer service, and improving the bank's reputation.

Other approaches related to Management by results

Apart from Management by results, there are numerous other approaches that can be used to obtain good results in organizational performance. These include:

  • Performance Management: This approach involves setting up objectives for the employees and providing feedback on their performance against these objectives. This helps to identify areas that need improvement and to provide employees with the motivation and direction to increase their performance.
  • Total Quality Management: Total Quality Management is an approach to management that focuses on continuous improvement of processes and products. It encourages employees to take ownership of their work and to identify and address any issues that arise.
  • Lean Management: This is an approach that focuses on reducing waste and improving the efficiency of processes. It encourages employees to identify and address any areas of inefficiency and to find ways to create value through their work.
  • Six Sigma: Six Sigma is a set of principles and tools that are used to improve business processes. It involves measuring and analyzing data to identify areas of improvement and making changes to improve processes and products.

In summary, there are various approaches to obtaining good results in organizational performance, such as Performance Management, Total Quality Management, Lean Management and Six Sigma. Each of these approaches has its own set of principles and tools that can be used to improve processes and products.

Management by resultsrecommended articles
Internal benchmarkingOperational controllingCost of poor qualityTotal quality controlQuality costThreshold productivityStrategic cost managementManagerial controllingActivity-based management


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  • Maheshwari, B. L. (1990). Management by Objectives. New Delhi.